Defense companies’ pause in all political donations by their Political Action Committees (PACs) in the wake of the Jan. 6 attack on the U.S. Capitol is unlikely to disfavor disproportionately the 147 GOP congressional members who voted not to certify the Electoral College results for President-elect Joe Biden and Vice President-elect Kamala Harris.
So far, Lockheed Martin [LMT], Boeing [BA], Northrop Grumman [NOC], Raytheon [RTN], BAE Systems, and Leidos [LDOS] have been the six major defense companies to suspend such political donations (Defense Daily, Jan. 14).
No defense company has yet announced a decision to stop PAC donations just to the 147–139 representatives and eight senators. In addition, PAC giving represented just five percent of total campaign funding in the 2020 congressional elections, according to the Center for Responsive Politics, as large individual donations, Super PAC, and “dark money” donations have grown in importance.
Since the U.S. Supreme Court decision in Citizens United vs. FEC in 2010, the latter types of political spending have taken on a significant role in elections. In the 2020 election cycle, outside spending by Super PACs and “dark money” groups not required to disclose their donors hit a high of $3.2 billion, per the Center for Responsive Politics.
“Companies need to be careful not just with PAC contributions,” Bruce Freed, the president of the Center for Public Accountability, wrote in an email “Much more money is given with treasury or corporate funds. Those amounts run into the five, six and seven figure range and go to Super PACs, 527 committees like the governors associations, state legislative campaign committees and attorneys general association, trade associations which use money for election-related spending, and 501(c)4 groups. Trade associations and (c)4s are not required to report the sources of their money. That’s dark money and that raises the risk of corruption.”
Last October, CPA developed a code of conduct for corporate spending with the Wharton School of Business and the Carol and Lawrence Zicklin Center for Business Ethics Research—a code that CPA is promulgating for corporate adoption.
“The company shall review the positions of the candidates or organizations to which it contributes to determine whether those positions conflict with the company’s core values and policies,” per the 12 point CPA-Wharton Zicklin Model Code of Conduct for Corporate Political Spending. “This review should be considered by senior management and the full board of directors annually. The board of directors shall, independent of this review, consider the broader societal and economic harm and risks posed by the company’s political spending.”
The code also includes a commitment by companies to public disclosure of direct contributions and spending with corporate funds on behalf of candidates, political parties, and political organizations; disclosure of dues and other payments made to trade organizations and contributions to other tax-exempt organizations that are or expected to be used for political expenditures; a description of the political activities undertaken with such funds; and a report to the board of directors from trade associations or other third-party groups which receive company money on how it is used and the candidates receiving the funding.
Such issues may loom large this year, as shareholder groups examine company political spending and possibly devise shareholder resolutions during the 2021 proxy season ahead of corporate annual meetings.
Rep. Steve Womack (R-Ark.) was the only GOP member of the House Appropriations Committee’s defense panel (HAC-D) to certify the win of President-elect Joe Biden and Vice President-elect Kamala Harris on Jan. 6.
The other six members—the panel’s ranking member Ken Calvert (R-Calif.), Hal Rogers (R-Ky.), Tom Cole (R-Okla.), John Carter (R-Texas), Robert Aderholt (R-Ala.), Mario Diaz-Balart (R-Fla.)—voted to reject the results of the Electoral College, 306 votes for Biden/Harris/ as opposed to 232 for Trump/Pence.
Beside the six HAC-D members, another five GOP HAC members voted against certification, including Charles Fleischmann (R-Tenn.), Andy Harris (R-Md.), Chris Stewart (R-Utah), Steven Palazzo (R-Miss.), and John Rutherford (R-Fla.).
Also among the 147 GOP non-certifying members are one member of the Senate Armed Services Committee (SASC), Josh Hawley (R-Mo.), who is said to be eyeing a 2024 presidential run; two members of the Senate Appropriations Committee—John Kennedy (R-La.) and Cindy Hyde Smith (R-Miss.) ; and 13 members of the House Armed Services Committee—ranking member Mike Rogers (R-Ala.); Mo Brooks (R-Ala.); Jim Banks (R-Ind.); Jack Bergman (R-Mich..); Scott DesJarlais (R-Tenn.); Matt Gaetz (R-Fla.); Sam Graves (R-Mo.); Vicky Hartzler (R-Mo.); Trent Kelly (R-Miss.); Doug Lamborn (R-Colo.); Elise Stefanik (R-N.Y.); Joe Wilson (R-S.C.); and Rob Wittman (R-Va.).
Freed suggested that companies will have to examine all their political spending in determining how to proceed.
“Companies today are facing heightened risks from what and who their political contributions associate them with,” he wrote in his email. “We see companies trying to address this – after the fact – by pausing or stopping corporate PAC contributions. The question is, are they going further and dealing with all of their political spending? And is there a change in their political spending behavior? Are they looking at the broader issues or consequences that their spending associates them with? What are the new levels of risk that they face? Risk could be a brand management problem. It could also be employee morale problems.”
In the future, companies “will need to take a hard look at their political spending and the pluses and minuses,” per Freed. “Do they need to make contributions to get access? What is the cost of getting access and associating the company with officeholders who voted to overturn the 2020 presidential election? The questions go much further.”
According to the 2020 CPA/Zicklin Index of Corporate Political Disclosure and Accountability, Northrop Grumman, Honeywell [HON], and Boeing are “trendsetters” with a perfect score of 100 for Northrop Grumman and Honeywell and 91.4 for Boeing. Lockheed Martin and Leidos are in the “second tier” of companies that comply with the index with 78.6 and 65.7 ratings, respectively; Raytheon and General Dynamics [GD] are in the “third tier”—57.1 and 41.4 ratings, respectively; and Textron, Inc. [TXT] and Huntington Ingalls Industries [HII] are in the “bottom tier” with zero scores.
According to the Center for Responsive Politics’ OpenSecrets.org website, Lockheed Martin was ninth on the list of the largest PAC and individual contribution givers to the 147 non-certifying members of Congress in the 2019/20 election cycle–$794,353; followed by Northrop Grumman at eleventh–$762,939; Raytheon at 13th–$736,866; and Boeing at 20th–$662,701.