4 Best Practices for Responsible Corporate Political Action Amidst Social Division
KEY LESSON
The new Erb Principles for Corporate Political Responsibility are a robust framework for companies to engage in political activities ethically and responsibly. By adopting these principles, your business can navigate the complex landscape of political engagement, while minimizing risks and maximizing your positive impact.
Political influence is a powerful tool for business leaders to protect and advance corporate interests, but it also carries significant risks and responsibilities in our increasingly divisive social climate.
Today, businesses possess incredible skill and power in shaping laws and influencing elections through education, financial contributions, lobbying, and advocacy. However, by exercising this power, companies now also face increased scrutiny.
“Companies are seeing an increase in pressure from a range of stakeholders, specifically customers and employees, for transparency around climate and social issues that is now being extended to policy and decisions about when and how to engage in political affairs. Brands will need a rigorous framework for assessing and managing their wide range of policy and legislative activities.”
Standards are needed to help avoid the reputational, business, and legal risks posed by engaging in political activities. This is especially important when money is involved. Companies now account for 88 percent of disclosed federal lobbying expenditures. This level of influence in our current contentious culture puts corporate executives and public affairs teams on heightened alert.
For the past year, IGC has worked with fellow executives from across the political spectrum and the Corporate Political Responsibility Taskforce at the University of Michigan’s Erb Institute to provide business leaders with: “a non-partisan, principled thought process that does not prescribe specific policy positions.” The result of this collaboration is the new Erb Principles for Corporate Political Responsibility (CPR). This framework helps organizations engage in ethical and responsible political activities that align with their corporate goals, address systemic societal challenges, and support the broader interests of society.
“Neither traditional shareholder primacy nor stakeholder capitalism has been really clear about the legitimate role of business in civic and political affairs. Yet, through our conversations, we believe CPR may be an area of common ground. We developed the Erb Principles as a place to start, enabling better conversations and more aligned action, internally and externally.”
Corporate Political Responsibility
By understanding and implementing the Erb Principles for CPR, you can confidently navigate the complex political landscape and secure a more favorable environment for your business to thrive. While we encourage you to read the full document, here’s a brief overview of the four principles:
Legitimacy
Before getting involved in political issues, your company should ensure it can articulate an authentic basis for engagement. Your company’s activities must: be legal; compliant with governance best practices and relevant regulations; and reflect the company’s commitments (not just the viewpoints of an individual executive), contributions (whether your company helped create the issue) and consequence (its importance to society’s systems overall). A key component of legitimacy is also ensuring the proper use of company resources.
Accountability
It’s key to align your public affairs plan, including the work of relevant business associations, with your company’s purpose, values, goals, and stakeholder concerns. Once you’ve ensured alignment, document a clear process for decision-making, oversight, monitoring, and assessments. If your work negatively impacts the company or your stakeholders, accept responsibility and quickly incorporate lessons learned.
Responsibility
Your company’s political activities should: champion healthy market competition; support and protect constitutional democracy; ensure good-faith contributions to policymaking; and avoid adverse impacts on environmental sustainability, human rights, or other public good. Additionally, in our divided public sphere, you have an opportunity to demonstrate leadership by promoting unbiased civic engagement and participating in civic discourse that advances public understanding of important topics.
Transparency
Your company should provide clear, comprehensive, and accessible information regarding your political activities, including direct and indirect lobbying, campaign contributions, and participation in trade associations. This transparency builds trust and allows stakeholders to evaluate your commitment to ethical engagement in politics.
Adhering to these four guidelines helps your business build both stronger civic institutions and long-term shareholder value. IGC encourages you to actively engage employees, shareholders, customers, and communities in the development and implementation of your political engagement. This involvement fosters trust, collaboration, and a shared understanding of your company's mission and values.
Commit to Act
IGC encourages our customers, partners, and community members to join organizations like IBM, Pirelli Tire, and Danone in taking measurable actions to adhere to these guidelines. Current supporters have committed to complete one of these three actions in the next 12 months:
Create a policy prohibiting election-related spending from corporate treasury funds (example at bottom of this page).
Adhere to the CPA-Zicklin Model Code of Conduct for Political Spending, which provides businesses with best practices for responsible and transparent corporate political spending.
Commit to the Global Reporting Initiatives Public Policy Standard (GRI 415), which sets expectations for organizations to disclose their lobbying activities, including any financial or in-kind political contributions, and the significant issues that are the focus of their public policy lobbying.
The Erb Institute’s Corporate Political Responsibility Taskforce has provided companies with additional information and resources with the goal of signing on 30 companies to support the Principles by the end of 2023. As the business-sustainability hub at the University of Michigan, the Erb Institute is uniquely positioned to advance this effort, tapping experts from across the country, and conducting research to test and share the impact of CPR practices.
“The interplay between government institutions and businesses engaging in both policy and politics is rightfully being scrutinized in ways not seen for generations. IBM is proud to have joined the Corporate Political Responsibility Taskforce and contributed to the development of these principles so that companies trying to navigate this moment can have an actionable framework to follow and so that, collectively, we can strengthen society’s trust in the ways that businesses impact policymaking.”
Key Lesson
The Erb Principles for Corporate Political Responsibility are a robust framework for companies to engage in political activities ethically and responsibly, and to determine when to stay out of political issues. By adopting these principles, your business can navigate the complex landscape of political engagement, while minimizing your risks and maximizing your positive impact. Implementing the Erb Principles will help you build trust with stakeholders, protect your reputation, and contribute to a more sustainable and just future.
Have Questions or Concerns? We Can Help.
IGC has partnered with the Erb Institute and renowned corporate public affairs experts from across the country. Together, we use innovative, data-driven methods to obtain stakeholder feedback, analyze your brand, and provide customized recommendations for your Board, C-Suite, PAC, or department leads in legal, HR, government affairs, and communications. We will give you the confidence, tools, and peer network needed to navigate the complex intersection of social issues, economics, and politics.