Election season raises interesting questions for corporations and other employers seeking to influence for the good of their businesses. Corporate leaders and business owners may want to support candidates who share values that help the contributor and company flourish.
It’s important to know the rules and repercussions of supporting a candidate. The Federal Elections Commission (federal rules and regulations), New York Board of Elections (state rules and regulations) and New York City Campaign Finance Board (city rules and regulations) can be difficult to understand and unwind. Failing to comply can be harmful to your business.
With that in mind, here are three big things for business owners or corporate leaders to avoid when it comes to campaign finance.
Don’t Assume You Know the Rules
Complex rules govern campaign fundraising: Who can give and how much. How a candidate can solicit. “Bundling” contributions at fundraising events. Corporations and other businesses must stay abreast of these laws or risk running afoul and facing fines or running reputation.
Here’s just a few to know:
- Corporations cannot contribute legally to federal candidates. New York state caps contributions to state or local candidates at $5,000 in a calendar year.
- Candidates must publicly report all contributions, so an owner or leader’s individual donation can become known to customers, shareholders and employees.
- Foreign nationals are prohibited from donating to candidates.
- Employers cannot donate if they contract with the government. Termed “pay-to-play,” such contributions could give the appearance of a business benefitting from the contribution.
Business owners and corporate leaders would be wise to consult experienced election attorneys to help them navigate the maze of campaign finance laws.
Don’t Reimburse For Political Contributions
The Federal Election Campaign Act prohibits “reimbursement” contribution or “contribution in the name of another,” which applies to corporations that tie any form of compensation to an obligation to donate to a political campaign.
The U.S. Department of Justice has become increasingly aggressive in prosecuting these type of violations. Two recent examples include a company reimbursing for targeted political donations through a “bonus” program and a company with an executive who solicited donations from coworkers with the promise of full reimbursement.
In one of the most public cases, Postmaster General Louis DeJoy allegedly pressured employees of his former company, New Breed Logistics, to contribute to certain candidates in exchange for bonus payments that would cover the cost of the contributions.
Don’t Forget People Are Watching
Corporations and private employers are accountable to many – customers, employees, shareholders. Increasingly, the political activities of corporations, both spending and lobbying, are coming under scrutiny.
ISS Corporate Solutions, an organization helping companies design and manage their ESG programs, collects information on shareholder resolutions. Based on those filed in the 2022 proxy season, ISS found many focused on political spending by corporations, signaling concerns that support of candidates and causes be consistent with shareholder and company values.
A number dealt with political activity:
- Report on Political Contributions
- Report on Congruency of Political Spending with Company Values and Priorities
- Report on Global Public Policy and Political Influence
- Report on Political Contributions and Expenditures
- Issue Transparency Report on Global Public Policy and Political Influence
With social issues such as racial justice, climate control, gun control, LGBTQ rights and election integrity generating intense interest around the country, the level of scrutiny will only grow. Corporate leaders should be prepared to answer for political activity and explain its relation to the business needs of the corporation.
