It’s time to throw out the maxim that politics is a third rail for corporations. With the 2020 election underway, brands are harnessing opportunities to reach customers and engage employees by having a political voice—and they’re doing it legally.
The new trend started on August 16, 2017. Two of President Trump’s business advisory councils abruptly disbanded following public remarks by the President addressing the 2017 protests in Charlottesville, Virginia. Two weeks later, hundreds of business leaders signed an open letter to President Trump and Congress to voice their concern about the administration’s policy toward DACA recipients. Fast-forward one year to the 2018 midterm elections, and the unprecedented—and nearly unthinkable—happened when Patagonia used its corporate brand and financial resources to endorse two candidates for the U.S. Senate.
These moves represent an unexpected, but perhaps inevitable, foray into politics by corporate America. Once seen as too divisive for the C-suite’s comfort, social and political intervention may be unavoidable as the high-stakes 2020 election approaches. Studies show that an overwhelming majority of millennial workers expect their employers to take a stand on social issues. And the sharp increase in grassroots political donations suggests that a critical mass of consumers and employees sees politics as an investment opportunity—and these people expect the brands they associate with to share their investment strategy.
Even in a post-Citizens United world, however, there are legal constraints on how, when, and where corporations can voice political views. While the Supreme Court has largely given corporations a blank check to engage in “issue advocacy”—ads and activities that tackle policy issues without identifying or supporting a candidate—corporations are barred from giving contributions directly to federal candidates. The ban on corporate contributions includes not just monetary contributions but also “in-kind” contributions made in coordination with a candidate’s campaign. This means that any time a corporation wants to host a candidate’s fundraiser in its office, let a candidate email its employee or customer list, or even provide free or discounted goods or services to certain candidates, the corporation must hew closely to the morass of federal campaign finance laws that govern this sort of activity.
And campaign finance law is indeed a mess of contradictions that only a lawyer could love. (As Justice Scalia once quipped, “campaign finance law is so intricate that I can’t figure it out.”) A politically active corporation needs to know that it can endorse a particular candidate on its website or its social media accounts without penalty but that it has committed a campaign finance violation as soon as it puts money toward targeting or promoting those same online communications. A company can allow a candidate to utilize corporate office space, catering services, and employee time if the campaign pays fair market value for those resources in advance but not if the company bills the campaign after the fact and expects payment within the customary 30 days.
Perhaps most significantly, if a corporation funds a series of TV or digital ads endorsing a candidate and does so independently of any interaction with that candidate, it is afforded the protection of Citizens United and the cases that followed in the wake of that landmark decision. But if a corporation funds those same ads in coordination with the candidate (as “coordination” is defined by the Federal Election Commission’s 2,600-plus-word rule defining that all-important term), the company could face fines greater than the cost of the ads themselves.
Other forms of corporate political activity are more traditional and less risky, but they represent missed opportunities that corporations looking to have a civic voice too often overlook. Companies can, for example, establish a corporate political action committee (PAC) to legally contribute to candidates, operate nonpartisan voter registration drives, or sponsor candidate debates by following a set of rules that are relatively straightforward and accessible.
Those companies looking to attract customers and engage employees at the next level have a choice: they can view campaign finance law as a barrier to political intervention, or they can recognize the law as one tool in the company’s overall tool kit for business success. There is little chance of avoiding the wave of change descending on brands, which face increasing demands to reflect the views of their stakeholders—and not just their shareholders. Today, the few companies already able to wield political intervention as a sword are seen as innovative, risk-taking trendsetters. By the time the 2020 election is over, those companies still hiding behind campaign finance law as a shield may well find themselves with approval ratings similar to those of the candidates who are packing up their offices and heading home from Washington.
Tyler Hagenbuch is a political attorney at Perkins Coie LLP, where he advises businesses, nonprofit organizations, and political campaigns on ethics, campaign finance, and lobbying disclosure rules.