Trump supporters stand on the U.S. Capitol Police armored vehicle as others take over the steps of the Capitol on Wednesday, Jan. 6, 2021, as the Congress works to certify the electoral college votes.
Bill Clark | CQ-Roll Call, Inc. | Getty Images
Corporate money has flooded U.S. elections ever since 2010, when the Supreme Court ruled in Citizens United that business donations amounted to protected free speech under the First Amendment.
But the steady stream of cash slowed earlier this week when several businesses announced they would suspend donations from their political action committees (PACs) after the Jan. 6 riots on the U.S. Capitol. The businesses spanned industries, from Facebook to JPMorgan Chase to Walmart.
The promises were relatively narrow and did not suggest a permanent retreat from election spending. Some businesses only promised to cut spending from politicians who objected to certifying President-elect Joe Biden’s victory, while others said they would reassess all PAC contributions.
But as employees, consumers and shareholders step up pressure on businesses to address their social impact, the announcements represented a significant departure from the status quo.
If the trend sticks, businesses may look to a handful of companies to learn how to gain influence in government without PAC spending.
In the tech sector, Apple and IBM have long resisted creating their own PACs, yet their presence is felt strongly in Washington. CEOs from both companies have sat on President Donald Trump’s American Workforce Policy Advisory Board, and Apple’s Tim Cook has cultivated a relationship with Trump that may have helped it avoid getting caught in the crossfire of Trump’s tariff fight with China.
“We’ve never had a PAC at IBM and I’ve never felt that it diminished our effectiveness or our voice in any way,” Christopher Padilla, IBM’s VP of government and regulatory affairs, told CNBC in an interview. “In fact, it’s times like this that I’m actually glad we don’t have a PAC because it’s kind of easy just to say, ‘I’m going to stop my PAC giving either to everybody or to some people.’ It’s a little harder to say, what are the deeper issues that are causing some of these problems and can we do anything about it as companies?”
On Friday, IBM revealed several particular areas where it plans to focus its advocacy this year. Broadly, the policies center around ensuring a stable federal government and that political partisanship doesn’t interfere with public servants’ jobs. This includes things like strengthening the Hatch Act, which is meant to prevent public officials from using their posts for partisan activities, and legislating clear rules about how a presidential transition should be performed.
Padilla talked with CNBC on Thursday to share why IBM has decided to take a stand on such issues and how it has made its voice heard in Washington without PAC contributions.
Gaining a voice in Washington
PACs aren’t the only way companies can spend money to influence politicians. In the third quarter of 2020, for example, Apple spent nearly $1.6 million and IBM $650,000 in lobbying spending, according to public disclosures.
Padilla said that much of the money IBM puts toward policy issues is used to connect with their local representatives. Pre-pandemic, this included flying many of them into Washington to meet directly with lawmakers.
“I sit in those meetings and the kinds of relationships the local plant manager from New York or Texas has with their elected official, you can’t buy that with hundreds of PAC checks,” Padilla said.
IBM has had a seat at the table for key policy proposals, including around reforms to Section 230 of the Communications Decency Act, a contentious statute that protects online platforms from being held liable for users’ messages on their platforms. IBM successfully advocated for SESTA-FOSTA, the package that removed Section 230 protection for platforms that hosted solicitations of sex trafficking.
More recently, it’s urged lawmakers go even further, making liability protection dependent on platforms demonstrating a standard of “reasonable care” to remove illegal behavior from their sites. IBM has praised the bipartisan PACT Act, for example, which would require platforms to remove content that a court finds to be illegal within 24 hours. The company is firm, however, that Section 230 should not be repealed and the “Good Samaritan” provision that allows companies to moderate their platforms should be left intact.
Tech platforms like Facebook have also advocated for SESTA-FOSTA as well as other modest reforms to Section 230. But IBM does not have as much potential direct exposure to liability as consumer-facing platforms would if the statute were more significantly altered.
President Donald Trump speaks, flanked by Vice President Mike Pence (L) and IBM CEO Virginia Marie ‘Ginni’ Rometty (R) during a roundtable discussion on vocational training with United States and German business leaders lead in the Cabinet Room of the White House on March 17, 2017 in Washington, DC.
In some ways, shying away from election spending has been helpful to IBM’s efforts, especially during a time of deep political division. He described IBM as “fiercely nonpartisan,” even during the intense 2016 election where many prominent tech executives voiced support for then-Democratic nominee Hillary Clinton. Padilla said IBM was able to quickly reach out to the Trump administration to lay out areas of overlapping interests.
In addition to serving on Trump’s workforce policy panel, former IBM CEO Ginni Rometty previously served on former President Barack Obama’s export council.
“I remember going with her in September 2016 for a meeting with President Obama in the Oval Office to talk about trade and we were back in the West Wing less than six months later for her to have a meeting with President Trump,” Padilla recalled.
Without a PAC or other partisan moves, he said, “When the pendulum inevitably swings, you can be well-positioned to advocate your interests.”
Employees expect more from corporations
Without a PAC, Padilla said it would have been easy to have “washed our hands and said we don’t have anything to do here” to address the riots at the U.S. Capitol. But, he said, that approach “certainly wouldn’t have addressed the questions we’ve gotten from our own employees about what can we do to try to address some of these issues.”
Employee activism has gained steam over the past few years, particularly at tech companies built on the values of an open internet and innovation. At places like Amazon, Facebook, Google and Microsoft, internal movements have forced the companies to takes stances or action on issues like climate change, sexual harassment and work with the military.
Over the past summer during mass protests for racial justice and police reform, employees, consumers and shareholders looked to brands to take a stance on those issues. Many companies issued statements, pledged money to nonprofits and some, like IBM, backed policies like the George Floyd Justice in Policing Act.
Padilla said he’s noticed “a sea change” in terms of how employees, shareholders and local communities expect the company to get involved in issues outside of its direct business during his nearly 12 years at IBM.
“What we’re seeing more and more is companies are having to get involved in issues that maybe go a little bit outside their narrow lanes because their employees and their shareholders are expecting them to do so,” Padilla said. ”This is what companies do now.”