Corporate America Faces an Increasingly Challenging Political Environment

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Feb 07, 2023, 11:30 ET

NEW YORK, Feb. 7, 2023 /PRNewswire/ -- 78 percent of US corporations describe today's political environment for companies as extremely challenging or very challenging, according to a new survey by The Conference Board ESG Center. This reflects a shift in sentiment toward the negative: In an ESG Center survey conducted in 2021, just 47 percent of companies described the political environment as extremely challenging or very challenging.

The new poll, which took the pulse of government relations executives and chief legal officers, also found that nearly half (42 percent) expect a more challenging landscape in the next three years. What's fueling this tough environment, both now and down the road? Topping the list are 1) extremism/polarization among policymakers; 2) anti-corporate rhetoric and actions from policymakers; and 3) use of government power to reward or punish companies for political purposes.

At the same time, corporate America is divided on the role corporations should play in improving the political environment. About 30 percent of respondents say business should take a leadership role in improving the political environment; about 30 percent say it should provide a supporting role; about 30 percent say it should play a minimal role; and just 7 percent say business should not participate at all, and instead focus exclusively on its own interests.

Government relations executives and chief legal officers (100 in total) participated in the survey between October and December of 2022. More than half are from companies with over $10 billion in annual revenue, and over one-third are from companies with over $25 billion in annual revenue.

The survey results are part of a report by The Conference Board, released today, that provides insights on the current and future political environment for corporations, the steps that companies can take to improve the environment, and ways to improve the effectiveness of corporations' PACs, direct political contributions, and government advocacy in the current climate. The insights are derived from the survey findings, a roundtable with corporate executives, and secondary research.

"The combination of a polarization among policymakers, coupled with extremely close elections, means that companies are facing potentially wide swings in government policy with each election, which is not conducive to business planning and investment," said Paul Washington, Executive Director of The Conference Board ESG Center. "At the same time, many companies are understandably hesitant to speak out about certain issues because they can be attacked for going too far or not far enough. In this environment, look for companies to focus on areas where there can be little objection: promoting voter registration and participation in elections, as well as supporting policymakers who focus on problem-solving."

Insights and findings from the report, which was produced with the support of Altria, Prudential Financial, Inc., Sempra, and Steptoe & Johnson LLP, include:

Current Political Environment for Companies
Q: How would you describe the political environment for companies in general today?

Companies are feeling the heat:

Extremely challenging: cited by 24 percent of respondents
Very challenging: 54 percent
Challenging: 20 percent

Q: What factors do you think are contributing to making the political environment for corporations challenging now? (please choose top five):

Polarization, anti-corporate rhetoric, and government favoritism are creating a challenging landscape:

Polarization/extremism among policymakers: cited by 89 percent of respondents
Anti-corporate rhetoric/action from policymakers: 75 percent
Use of government power to reward or punish companies for political purposes: 56 percent
Polarization/extremism among the electorate: 53 percent
Significant difference in policy at state level: 47 percent

Future Political Environment for Companies
Q: In the three years from now (i.e., 2025), do you think the political environment will be:

Looking ahead, the political environment will likely become more challenging:

More challenging: A plurality (42 percent) expect a more challenging environment
Less challenging: Just 1 percent anticipate a less challenging environment
Depends on the 2024 Presidential election: 27 percent

Q: Which of the following are you most concerned about increasing in the next three years? (please choose the top five):

Polarization, weakened government, and hostility toward corporations will only intensify:

Polarization/extremism among policymakers: cited by 81 percent of respondents
Anti-corporate rhetoric/actions from policymakers: 63 percent
Polarization/extremism among the electorate: 53 percent
Use of government power to reward or punish companies for political purposes: 53 percent
Weakening of government institutions: 51 percent

Q: Over the next 3-5 years, do you expect a backlash from your corporation's advocacy on social and environmental issues from any of the following? (select all that apply):

Companies can expect backlash on their advocacy of social and environmental issues from elected officials, advocacy groups, and employees:

Federal elected officials: cited by 68 percent of respondents
Advocacy groups: 60 percent
State elected officials: 59 percent
Employees: 51 percent

The Role of Business in Improving the Political Environment
Q: What kind of role do you see companies playing in improving the political environment?

Companies are divided over the role that the business community should play:

Leadership role: Cited by 33 percent of respondents

Businesses should take a leadership role in strengthening the political center, increasing trust in government, and supporting our democratic system of government.

Supporting role: 29 percent

Business should play a supporting role, but leadership should come from others.

Minimal role: 30 percent

Businesses should not focus on improving the political environment directly, but at most indirectly (e.g., by fostering economic opportunity and security, which could strengthen the political center).

No role: 7 percent

Businesses should focus exclusively on their own interests and not the political environment.

Q: Which of the following are ways that, in your view, business can improve the political environment? (please check all that apply):

Business can play a central role by encouraging voter participation and helping elect problem-solvers:

Promote voter participation in elections: cited by 65 percent of respondents
Make contributions to support candidates who are problem-solvers: 62 percent
Promote voter registration: 61 percent

Recommendations for Companies: Improving the Political Environment
"In this contentious and rapidly changing political environment, companies must have clear processes and guidelines to evaluate how they might thoughtfully respond to social issues impacting their employees and customers," said Wesley Bizzell, Senior Assistant General Counsel and Managing Director of Political Law and Ethics Programs from Altria. "Engagement can take many forms, but one way companies can leverage their policy influence and address potential risks is by working with broad-based business coalitions that are banding together to advocate for change. However, even these joint efforts need to be carefully considered by a cross-functional group of executives to ensure the company's involvement is in line with its core principles and faithful to the company's history and culture."

About The Conference Board ESG Center
The Conference Board ESG Center serves as a resource, platform, and partner to help Member companies address their priorities in corporate governance, sustainability, and citizenship. www.conferenceboard.org/esg

About The Conference Board
The Conference Board is the member-driven think tank that delivers trusted insights for what's ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.
www.conferenceboard.org

SOURCE The Conference Board