Corporate outrage rarely looks like the noblest of sentiments. There was certainly no shortage of it in the wake of January 6’s riot in the US Capitol by supporters of outgoing president Donald Trump.
Faced with the crossing of a line that few could ignore, financial institutions and corporate titans fell over themselves to present their pristine credentials.
Goldman Sachs, Citi, Morgan Stanley and JPMorgan announced plans to pause political donations, with the latter’s CEO Jamie Dimon stating on Wednesday that it was “taking a pause, a little bit of a deep breath, figuring out what we should change and how we should change it”.
Whether through bans on political funding, or pledges to stop doing business with Trump individually or his enterprises collectively – or moves by social media companies to silence his most prominent channels – many of the measures now being announced are, however, characterized by little more than their convenience.
The blanket nature of some moves also seems nonsensical. Suspending all political donations risks looking like the kind of ‘drain the swamp’ mentality that fed the Trump bandwagon.
Likewise, short-term suspensions of funding hardly look rooted in principle – raising the suspicion of a quiet resumption when no one is looking or a hedging of one’s bets.
Many recent statements have, however, focused specifically on donations to individuals that backed the attempt to overturn the 2020 election result.
Support
When Trump became president, Wall Street largely welcomed the deregulation and tax initiatives that his administration championed, and as a consequence overlooked his more objectionable rhetoric as just that – designed to play to his electoral base.
Some went further in their overt support than others. Blackstone CEO Stephen Schwarzman was still backing Trump until late November, weeks after the presidential election that he lost.
That many have decided to withdraw support only now should come as no shock: while the merits of Trump’s economic policies can be debated and disagreed on by reasonable people, they were undoubtedly beneficial to many in the corporate sphere.
Trump is now unequivocally a loser. Brand-aware firms prefer winners
What has changed? To Trump’s most vociferous critics, arguably nothing, given the direction of travel of recent years, but to others, including many Republicans, everything has changed.
The violence and disregard for the rule of law illustrated by the events of January 6 have transformed the calculation for Trump enablers or tolerators within corporate America.
While his administration held power, there was little incentive for firms to rock the boat. Now it is different.
Many would have attached the tag to him well before the November 2020 election, but in its wake, Trump is now unequivocally a loser. Brand-aware firms prefer winners, all the more so when their policies can influence the bottom line.
Social media companies are fearful of regulation and are getting their response in early. Corporates and banks, who profess to worry more than ever about their social responsibility credentials, see an opportunity to burnish these at little cost now that an administration of a different hue has taken charge.
Scope 3
Despite this, January’s tipping point reflects other fundamental shifts of recent years – and may change the standards by which companies are judged in future.
One is the internal activism of company employees, now known to have played an important part in the decision by Twitter to shut down Trump’s account and thought to have contributed to the actions by some banks.
In an internal memo to employees, Candi Wolff, Citi’s head of global government affairs, emphasised that “we want you to be assured that we will not support candidates who do not respect the rule of law”.
Another shift is the greater willingness of investors to hold firms to account publicly for perceived discrepancies between their words and their actions, or for pledges of responsible behaviour that are far-off, half-hearted and vague.
As we note elsewhere, HSBC is merely the latest institution to come up against critical shareholders determined to call for more substance not just in messaging but in defining clear paths to real change.
As illustrated last year by the likes of Glencore, in environmental standards the watchword now is Scope 3 – the consideration of not just the first- or second-order impacts of a firm’s activity, but the impact of those other parties that it facilitates.
Even privately owned Trafigura, with no annual shareholder meetings to embarrass management, is planning to address Scope 3 within the next two years.
Bank and corporate reactions to the Capitol riot are another take on Scope 3. Their eventual embrace of policies that look through to more distant impacts of their choices is to be welcomed.
However, they should expect no easier ride from shareholders as a result. Many observers will see declarations that a line of acceptability has been crossed, now that it is impossible to do otherwise, as more convenient than saintly. For some, it will have been little more than the minimum.
If one lasting consequence of the reaction to January 6 is a ratcheting up of scrutiny of corporate choices, something good will have emerged from something truly bad.
