The insurrection at the US Capitol has sparked a reckoning in the business world.
Bank of America, Coca-Cola, Facebook, Microsoft and other companies announced Monday they have suspended political donations. Airbnb, Amazon, Verizon and CNN owner AT&T vowed not to give money to the 147 Republicans who tried, unsuccessfully, to overturn President-elect Joe Biden’s victory.
The steps underscore just how toxic the Trump brand has become after last week’s storming of the US Capitol. Democracy is literally under attack — and that’s not good for business.
But the real test will come when Democrats, suddenly backed by a narrow majority in the US Senate, push raising corporate tax rates and introduce new regulation.
Companies that have raced to the sidelines may feel compelled to turn the spigots back on to influence major legislation that impacts their bottom lines. And that may include donating to some Republicans who objected to the Electoral College votes but also object to higher taxes and more red tape.
“Corporate executives are genuinely appalled. Last week changed everything,” said Greg Valliere, chief US policy strategist at AGF Investments. “Many business leaders felt a need to shame the Republicans who refused to accept the election results.”
Valliere predicted that Republican Senators Ted Cruz and Josh Hawley, who led the Senate effort to overturn the election, will be “pariahs for the rest of their careers.”
However, the debate is likely to shift later this year to how to pay for the trillions of dollars of new spending Biden is proposing to repair the US economy. And that may include a modest increase in the corporate tax rate — a step that would eat into corporate profits and share prices.
“Republicans for decades have been anti-tax and anti-regulation,” said Valliere. “Corporate America will be very reluctant to give money to Cruz and Hawley, but other Republicans who are not identified with this will do okay.”
Comcast, UPS and AT&T hit pause — for now
The 147 Republican lawmakers who objected to the Electoral College results have raised millions from Political Action Committees (PACs) directed by major companies and business groups.
For example, during the 2020 election cycle the American Bankers Association and the National Association of Realtors donated about $1.3 million apiece to those Republicans, according to OpenSecrets.
In a statement, the ABA called the riot on Capitol Hill “nothing short of an assault on our democracy.” The ABA said it regularly reviews its political activities after elections and the review this time will “certainly” consider the “troubling events of the last week.” A spokesman said the ABA will not make any political contributions until its review takes place.
Other major donors to the 147 Republicans include Koch Industries, AT&T, Comcast and UPS, according to OpenSecrets.
AT&T said in a statement on Monday that its federal PAC board decided to suspend contributions to lawmakers who voted to object to the certification of the Electoral College votes.
NBC owner Comcast said it is doing the same and called the rioting at the US Capitol “appalling.”
UPS said it has suspended all campaign contributions “for now,” suggesting that it will start spending again at some point.
“It is incredibly difficult to envision the nation’s largest corporations maintaining a campaign contribution hiatus once Congress begins advancing structural reform packages relating to taxes, infrastructure, and beyond,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, told CNN Business in an email.
Boltansky predicted that the 147 Republicans “will struggle with corporate fundraising for the foreseeable future,” but added that the “campaign finance machine will back into gear later this year for everyone else.”
Even Deutsche Bank is saying goodbye to Trump
Beyond campaign donations, some major banks are severing their ties with Trump.
Deutsche Bank will no longer do business with Trump, a step that will cut off his business from a major source of loans. Signature Bank said Monday it had started closing Trump’s personal accounts — and called for the president to resign. The lender also said it “will not do business in the future with any member of Congress who voted to disregard the Electoral College.”
In many ways, the business world’s divorce from President Donald Trump — and his allies — is an example of CEOs providing moral leadership.
Even though companies want to keep tax rates low and regulation light, they are clearly uncomfortable with Trump’s attacks on democracy.
“This is not the capital gains tax. People died,” said Valliere of AGF Investments.
Corporate America didn’t back Trump when he ran for office in 2016. But business groups enthusiastically embraced the Trump agenda after he won the White House. They were especially excited about Trump’s tax cuts, deregulation and appointments of pro-business judges.
But the tenuous relationship broke down because of Trump’s stances on climate, immigration and race. CEOs scrambled to quit Trump’s advisory councils in August 2017 after Trump initially failed to condemn white supremacists at a rally in Charlottesville, Virginia.
Yet critics say the decision to dump Trump is politically convenient now — and only comes after years of enabling him. Big business already got the deregulation, tax cuts and pro-business judges it wanted. And the public is outraged over the insurrection at the US Capitol.
Eleanor Bloxham, CEO of the Value Alliance, a firm that advises boards on corporate governance practices, said it’s critical that companies institute policies and practices to make sure they don’t “fall into the same trap again.”
That means companies and business groups must ensure that their political spending matches up with their publicly stated values — and that those values are reflective of the ones held by their employees and customers.
Bloxham said it remains an open question whether the insurrection at the Capitol delivered a lasting lesson to corporate America, or merely a fleeting one.
“We’re a nation that forgets too easily sometimes,” she said.