The Washington PostDemocracy Dies in Darkness

Opinion For corporations, political ‘wokeness’ works

Morgan Stanley was among the companies that suspended donations to Republicans who voted against certifying the 2020 presidential election results. (Mark Lennihan/AP)
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Jeffrey Sonnenfeld is a senior associate dean and the Lester Crown Professor of Management Practice at the Yale School of Management and the president of the Yale Chief Executive Leadership Institute.

Since last fall, we have witnessed unprecedented levels of civic engagement from America’s corporations. Last November, to help fortify our electoral system, thousands of employers gave employees paid time off to vote or volunteer as election workers. Following up on that commitment to democracy, many CEOs and major trade groups promptly confirmed the election results and stood their ground when President Donald Trump challenged the count. In January, dozens of major companies pledged to withhold contributions to “objectors” in Congress who failed to perform their constitutional duty with a perfunctory confirmation of the electoral college results. Three months later, hundreds more firms signed onto petitions condemning attempts to roll back voting rights in nearly every state.

Trump sycophants have responded to this nonpartisan political activity with name-calling and threats, as well as claims these moves would hurt the companies’ market performance. Meanwhile, skeptics (especially on the left) have speculated that companies are reneging on that January pledge. But new data from the Federal Election Commission shows that these claims are myths. In fact, the vast majority of corporations are sticking to their pledge not to support those Republican “objectors,” and that stance is not hurting their market performance. In short, political “wokeness” works.

Doubters will point to articles such as one that ran in the Wall Street Journal, headlined “More Corporate PACs Resume Political Donations to Republicans Who Rejected Election Results.” But, as the article stated, “the companies whose PACs have resumed donating weren’t among those that had made specific pledges to not give to the group of GOP lawmakers.” When I and my Yale research team of Stephen Henriques and Charles Gress examined FEC data, including new filings for the second quarter, we determined that 85 percent of companies adhered to their pledges to not donate to objectors. Of the top 10 corporate PACs by donations, none contributed to an objector’s campaign after Jan. 6. One company that did, Toyota, apologized after public outrage and recommitted to not funding objectors. Several of those 15 percent who appeared to renege seem to have largely been caught by a timing blip of having made the donation on Jan. 6 itself. It should be noted that a few companies that pledged not to donate to objectors did, however, contribute to GOP pools that may have diverted funds to objectors against those donors’ wishes. But overall, the numbers are remarkably reassuring.

Certainly, the objectors are feeling the pain. According to the Journal, “nearly 100 of the members who voted against certifying the election results and had comparable 2019 data reported receiving less money from corporate and industry PACs for their campaigns in the first half of the year compared with the first half of 2019.” That’s in line with a previous report that the 147 GOP legislators who voted against certifying Joe Biden’s victory saw an 80 percent drop in donations from corporate and industry PACs.

We should be careful not to overstate the importance of corporate PAC support. My team determined that, so far in 2021, 82 percent of Democratic candidate funding and 78.7 percent of Republican candidate funding has come from individual donors. This is similar to the 2020 cycle, when individual donors made up 75.6 percent of Democratic candidates’ support and 87.1 percent of Republican candidates’ support. But as the Journal notes, “In the 2020 election, more than 100 House lawmakers relied on corporate and industry PACs for 40% or more of their funding.” With a closely divided House, every race’s funding counts.

As to whether being socially engaged or “woke” has hurt companies’ performance, we can easily answer this question by looking at the firms’ stock performance. Looking at the total shareholder return (TSR) of the public companies that spoke out against voting rights restrictions, roughly half have handily outperformed the S&P 500 average’s TSR of 16.05 percent this year, based on our calculations, with the others all showing healthy returns. That includes firms such as Morgan Stanley (a 36.96 percent TSR this year) and Cisco (22.40 percent).

Almost 200 years ago, Alexis de Tocqueville spoke of community trust as social capital, which to business leaders is as vital as financial capital. Chief executives may be wary of bringing partisan politics into the boardroom. But free, fair and secure elections are much more than a political issue. Respect for the rule of law rather than the law of rulers underlies our market economy and social harmony. Thankfully, as the data shows, business leaders can have the courage of their convictions and not suffer for it.