Did Westgate Change Anything? HR and the Governance of Political Activity

16 Nov. 2012 | Comments (0)

In the heat of the 2012 election season, David McCann at CFO.com and Stephen Colbert on The Colbert Report, along with several others in the media, highlighted a newly emerging practice that has many worried about a resurgence of corporate dominance over the political process and raises serious questions about the potential pressure points that wealthy business owners might apply over their workforce.

I’m speaking, of course, about the recent CEO letters sent out by David Siegel of Westgate Resorts and Arthur Allen of ASG Software Solutions, as well as the move by Murray Energy CEO, Robert Murray, to close down the company’s mines, purportedly for safety reasons, and encourage – some would say mandate – that employees attend a local Romney rally. There are other examples as well, from a “civic voter information packet” at Georgia-Pacific to a memo circulated to employees at Lacks Enterprises.

In his recent opinion piece on CFO.com, Mr. McCann, and many others in the media, are concerned by this recent activity, beginning with the potential impact that introducing politics into the workplace might have on worker productivity. But Mr. McCann goes further to raise the possibility of illegal activity.

Karl Sandstrom, Of Counsel at the law firm, Perkins Coie, and a former FEC Commissioner, did not see any legal issues with the letters. "Asking employees to 'volunteer' time without compensation at a campaign event is another story," says Sandstrom. We’ll leave the question of legality to the Federal Election Commission, the Department of Labor, and the various state agencies to decide. Yet, it seems that if only Murray Energy had paid its employees, then perhaps even the question of legality wouldn’t be an issue. As a recent FEC statement of reason points out, “Requiring employees to work on independent expenditures…is not a violation of the (Federal Election Campaign) Act (of 1971) or (Federal Election) Commission regulations.”

James Hawley, Professor & Director of the Elfenworks Center for Fiduciary Capitalism, Saint Mary's College, and an expert on American corporate history, pointed out that through much of the late 19th and most of the 20th century, politics and business were often quite closely intertwined. One need only think of the Mill Towns along the East Coast and the Midwest to see examples of where business and politics were essentially one and the same.

What really stands out, however, is that in each of these cases, as well as others cited in the media, I have yet to hear of a public company CEO or executive engaging in this type of behavior. Perhaps this is because of a diversified investor base, greater oversight from boards of directors and/or federal agencies such as the Securities and Exchange Commission, or because public companies are just more sensitive to the potential scrutiny of the media and the public. At the same time, public companies often have much more established policies and practices around political activity. Whatever the case, I do not think that we’ll see a major public company CEO in the news for this kind of activity any time soon.

So what are HR and other senior managers that work in private firms to do when confronted with such a situation? As a general practice, it is important for companies to establish clear governance protocols with respect to political activity. In 2010, The Conference Board published the Handbook on Corporate Political Activity which outlined several considerations and potential steps that companies can take to establish clear policies and procedures with respect to their corporate political activity.

One of the more tactical practices that can be put in place is a committee of managers representing several key business lines and support functions, including government relations and legal, that review and approve all political activity. Such a committee can both help to manage for potential risks related to a corporate political activity, but also create a deliberative process that insulates individuals from being placed in conflicted situations. Companies should also consider what role their board of directors might play in the oversight of a company’s political activity. Periodic reports to the board can serve as a valuable check of alignment of activities, and, in some instances, management will present the company’s political activity policies to the board for approval and regular review.

The approaches outlined above and others in the handbook can help prevent what may be an uncomfortable or even illegal situation from occurring. Yet, when the CEO of a closely controlled company wants to act, it may be difficult to prevent them.

Given these recent events, what is clear is that managers should raise the question at their companies, asking what their governance of political activity is or should be. Being proactive is the best way to prevent a potentially embarrassing, unethical, or even illegal situation from occurring.

 

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  • About the Author: Marcel Bucsescu

    Marcel Bucsescu Marcel Bucsescu is assistant director of The Conference Board Governance Center. In this role, he oversees all Center programs and leads several key efforts, including The Conference Board Committee o…

    Full Bio | More from Marcel Bucsescu

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