Will Big Business Take A Pass On the Party Conventions?

No one used to look too hard at corporations spending money on the political conventions. But now that consumers and shareholders are paying attention, do the risks outweigh the benefits?

April 22, 2016

The views expressed are the author's own and not necessarily those of the Brennan Center for Justice.

The upcoming Republican and Democratic conventions are raising a key question: are companies that spend in politics finally taking brand risk seriously?  The presidential race is wide open, but especially after New York’s primary Hillary Clinton is the front runner for the Democrat Party and Donald Trump is the front runner for the Republican Party. And companies are already skittish about associating their brand with his brand.

As I write in my forthcoming book Corporate Citizen?, getting involved with politics is risky for corporations who have a Citizen United right to spend in elections, but who may want to think twice because it could harm corporate brands if they are seen as overtly partisan. 

But both major parties will be more dependent on private money to pay for their conventions this summer because of a move by Senate Majority Leader Mitch McConnell to end public financing for the gatherings. As I explained here: public financing for political conventions was a post-Watergate reform in light of the scandal caused by I.T.T. raising hundreds of thousands for the 1972 Republican while they were embroiled in a government antitrust suit. The Republicans were sufficiently embarrassed by the revelation about I.T.T.’s funding that they moved the convention to an entirely new city. 

Now without public funds, which would have provided over $35 million, both parties have more money to raise. Corporate money could fill the gap, but at least on the Republican side, public interest groups are urging corporations to disassociate themselves from the potential Trump nomination. And Trump has predicted riots if he isn’t nominated. As an advocate from Color of Change said to The New York Times, “do they want riots brought to us by Coca-Cola?” Color of Change has also asked Google, Xerox, AT&T, Adobe Systems, and Cisco to not sponsor the Republican convention in Cleveland.

But it’s not just Republicans feeling the heat. Corporations typically sponsor both party conventions, meaning the Democrats are also struggling as companies wait to say or no. The answer may depend on who is at the top of the ticket.  And so far, Trump appears to make many corporations nervous.

Even before Trump became the GOP front runner, he was losing business partners for his statements villainizing Mexican and other immigrants. For example by June 2015, Serta, Univision, NBCUniversal, Farouk Systems, 5 Rabbit Cerveceria, Ora TV, and Macy’s had all dumped Trump.  Between June and December of 2015, a retailer called Lifestyle who sells in the Middle East to Muslim consumers also dropped business relations with Trump.

Then there are the corporate golfing rejections. The PGA of America pulled its Grand Slam of Golf from Trump’s Los Angeles course. And ESPN, a subsidiary of Walt Disney Co., decided to not hold its ESPN Celebrity Golf Classic at Trump National Golf Club in Los Angeles. And Trump’s Turnberry golf course in Scotland won’t host the British Open tournament after his political comments alienated it.  

Even NASCAR decided to distance itself from Trump’s Doral hotel in Miami by cancelling an event there. And there is a petition by customers of Amazon urging the company to drop Trump’s clothing line.

Whether publicly-traded companies should sponsor one or both conventions concerns shareholders as well. For years, investors have put corporate political spending on the front burner in corporate proxies. As Sidley Austin reported to their corporate clients, proxy questions on political spending and lobbying activities were voted on in 65 corporations in 2015 out of approximately 121 shareholder proposals submitted.

And this proxy season is no exception, with 99 shareholder proposals on corporate political spending pending at the end of March. And I'd imagine investors don't want their firms’ brands tarnished by negative associations.  So one thing corporations need to consider is not just the reactions of customers who seem poised to boycott, but also investors who are poised to ask pointed questions about why corporate resources were used in the 2016 election. With even Republican members of Congress sitting out the convention, we’ll see if corporations also sit Cleveland out.  

(Photo: Thinkstock)