Collision course: The risks companies face when their political spending and core values conflict, and how to address them
The paper warns companies that their political spending may put them at risk of reputational damage and possible backlash. Their report gives specific examples, and outlines recommendations and policies that allow businesses to align their core values with political expenditures, while developing safeguards to protect their reputations.
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OVERVIEW
The report describes how numerous companies’ underwriting of political groups and trade associations can conflict with their core values and messaging. In an age of social media, companies face heightened risk, and their reputation can be compromised within minutes. The report warns that companies can be thrust into the crosshairs when their political spending appears to conflict with their core values and brands. Companies need to be aware of the risk they face when political contributions’ outcomes are perceived to be at odds with their core values, which could affect a corporation’s relationship with customers, employees, and communities.
As more companies shift from avoiding hot-button issues to taking a stand, public passions over political and social issues boil over into outrage. Companies’ vulnerability to reputational and financial risk has grown as they become more engaged in a time of intensely polarized politics. Aligning political spending with core values and brands that promote racial, gender, and sexual orientation diversity and discourage sexual harassment is recommended.
The report indicates that companies at a tipping point are vulnerable to serious risks if their political contributions or outcomes are perceived to conflict with their core values. This report identifies overlooked threats and argues that companies have an opportunity to protect their reputations by enacting corporate governance safeguards to align their political activity. Because numerous companies have gotten more engaged, their polarisation has increased, which has only added to their vulnerability.
To mitigate heightened risk, the report encourages transparency and accountability policies for political spending. Companies need to act to bring their political spending into alignment with their values, brands, and policies, particularly in an age of polarized politics. The recommendations include directors weighing each key question, such as political spending and whether to engage in it, whether to disclose that spending, and how to provide oversight. Companies also need to set clear and concise policies to address the risks posed by political spending. Companies are urged to hold their political spending to the same metrics that applied to other activities and to assess expenditures’ impacts on the corporation’s key business objectives.
