Not long after Georgia became the first state this year to pass restrictive voting legislation, hundreds of companies, individual CEOs and other executives signed on to a public statement that read, in part: “we all should feel a responsibility to defend the right to vote and to oppose any discriminatory legislation or measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.” The statement was organized by two prominent Black executives, Kenneth Chenault, a former CEO of American Express, and Kenneth Frazier, CEO of Merck. Signatories included Alphabet (Google), Amazon, American Airlines, Bank of America, Cisco, Ford, General Motors, J&J, Mastercard, Netflix, Salesforce, Starbucks, T. Rowe Price, Target, United Airlines, and Wells Fargo. In response to the statement, Senate Minority Leader Mitch McConnell, himself a beneficiary of millions of dollars in corporate contributions, warned “corporate America . . . to stay out of politics.”
Beyond inducing the Minority Leader to apparent hypocrisy, the collective energy of Black leaders and the corporations willing to join them has had a growing impact on the national conversation. After Georgia passed its restrictive new voting laws, Delta Airlines and Coca-Cola, two of the state’s largest corporations, issued their own statements acknowledging their disappointment with the legislation and committing to efforts at reform. Major League Baseball made headlines by moving its annual All-Star game from Atlanta to Denver in protest, while other entertainment ventures (e.g. the planned Will Smith movie “Emancipation”) also pulled out of the state. In Texas, where voting restrictions have advanced quickly in the legislature, major companies including American Airlines and Dell Technologies are now likewise speaking out.
These moves by companies are not without risk. States like Georgia and Texas provide tax breaks and other support to corporations headquartered within their borders, while state politicians frequently receive campaign-sustaining donations from those same companies. This creates a web of financial interdependence that corporate criticism could begin to undermine. (Of the companies that halted political donations to many federal politicians following January’s Capitol attack, approximately 75% had also previously made donations to lawmakers who supported voting rights restrictions.) At the same time, a substantial share of the electorate continues to believe that voter fraud cost Donald Trump last year’s presidential election. But in spite of these risks, corporations are going public with statements in defense of voting rights—and by extension, in obvious opposition to legislative efforts to restrict ballot access.
Why are corporations speaking out? For many, the most obvious answer may be the correct one: because their leaders know it is the right thing to do. The recent public statement provides evidence for this, via the many CEOs and other executives who signed on individually even when their companies did not. The rising acceptance of the corporate social responsibility model also supports a more values-based approach, as do last year’s strong statements by so many corporations in response to the murder of George Floyd and the rise of the Black Lives Matter movement. Companies now have a chance to back those statements up, and many are seizing it.
But public corporations also have a fiduciary duty to their shareholders, and as such, any political statement they make must to some degree be subject to the cold calculus of risk. So what risks, other than perhaps the reputational risk of not speaking out, weigh in favor of vocally opposition to voting restrictions?
To answer this question, we believe it is critical to understand political risk. For investors, political risk has traditionally referred to the risk of investments in unstable countries, where the rise of a dictator or the formation of a new government can upend business overnight. The contemporary understanding of political risk is much more complex, taking into account international supply chains and the ability of technology and social media to rapidly influence public opinion. Add these to the core risk of political system instability, and the last five years of US politics can be read as a rapidly growing ledger of corporate political risk. In our view, it is sensible for companies to promote outcomes that will reduce it.
As is so often the case, we believe the socially responsible position and the long-term investment case are in alignment here. A less inclusive democracy would be less responsive to companies’ own employees, customers and communities, piling business risks on top of political ones. Conversely, egalitarian political systems tend to promote broad economic stability and growth, raising the prospects for both corporations and their stakeholders. In the context of the current debate over voting laws, we are pleased to see so many companies in agreement with our view: that expanding ballot access is not only morally right, but also a prudent corporate response to risk.