The Midterms, Compliance, and You

All right, corporate compliance officers: the midterm congressional elections are over. We can now start dissecting what the results mean for corporate conduct and risk issues for the next two years.

That the Democrats took back the House by a margin smaller than they wanted, but large enough to win — well, that’s not news. Anyone following political polls and trends saw that coming. So right away we have numerous lawmakers in Washington replaced, including (formerly) important members of the Financial Services, Judiciary, and Ways & Means committees. Democratic ideas on securities law, data privacy, law enforcement, and tax policy are all about to get much larger.

Still, those changes are more the domain of your legal or regulatory affairs teams — and honestly, those changes won’t mean much for them either. With the House and Senate still politically divided, compliance officers aren’t likely to see much major legislation transforming what you do. (Except, maybe, a consumer data protection law.)

Instead, keep an eye on President Trump using the Republican majority he still has in the Senate to get more of his minions into administration jobs, to pursue typical Trumpian issues for another two years. His political goal is to set up even more tension between him in the executive branch and Democrats in the legislative.

That allows Trump to frame his 2020 re-election campaign as him doing great work, while Democrats are out to stymie him at every turn. Senate Republicans will go along with it, because Trump did campaign for them in places like Florida, Tennessee, Missouri, and Texas — and they won.

So what does all that mean for ethics and compliance officers, or anyone else charged with steering large groups of people toward uniform standards of behavior? Well, have you enjoyed the last two years of Trump pitting Americans against each other and spreading division at every turn? Because you’re only going to get more of it for the next two.

Sure, we could talk about new proposals in securities law, or data privacy, or trade sanctions, or criminal penalties for corporate misconduct. All of those issues will be revisited by Democrats in fiery public hearings, and some of them might even lead to new legislation. Maybe.

None of those things, however, will be what drives a compliance officer nuts.

You’re going to be driven nuts by the ethical and policy challenges of managing large workforces in a country divided against itself.

Divisive Politics and Business

For example, suppose one of your employees pulls into the office parking lot in a car covered with aggressive pro-Trump political stickers, just like the van of Caesar Sayoc, the Trump supporter charged with sending pipe bombs to Democrats and the media. Other employees then complain on the hotline that they no longer feel safe with that coworker around, because radical conservative terrorism is a legitimate fear in Trump America.

Van of Cesar Sayoc, alleged pipe bomber.

Does the company sanction his political speech (you can; political affiliation is not a protected class) or do you tell the uneasy employees to get over themselves? What if the employees who complain are all Jewish? What if they’re all Muslim? What if they’re all black, and the driver has confederate flag bumper stickers?

That’s a policy choice your company will need to make. It won’t be based on the company’s ethical values — because every wants to make employees feel safe, and every company wants not to intrude on employees political views. It will need to be based on the company’s ethical priorities — because one of those two things will need to come first. Your company will need to decide which one.

That’s how yesterday’s election results will really affect corporate ethics and compliance. Businesses will need to make more of those decisions, over and over. They’ll need to make them while juggling multiple constituencies that despise each other.

We saw a more practical example at Google earlier this year, when employees forced the company to withdraw from extending a Pentagon contract for artificial intelligence. They didn’t want anything to do with the Trump Administration. So Google had to choose between its business priorities (bidding on a lucrative contract) and what employees perceived as its ethical priorities (don’t work with the Trump Administration).

Google acceded to employee wishes. The tech sector (Uber and Salesforce, among others) has seen that dynamic numerous times in the last two years. We’ll see it more often in the next two, especially as Trump persists with a political agenda the majority of Americans don’t want.

We could also see more spats where political sensitivities and third-party risk merge into one nasty mess. Think of Delta and UPS canceling discounts they offered to members of the NRA; or Dick’s Sporting Goods deciding to stop selling assault rifles after the shooting massacre in Parkland, Fla. When Delta (based in Atlanta) canceled its NRA deal, Georgia lawmakers revoked a tax break for the company. Dick’s Sporting Goods lost business with big gun manufacturers like MKS Supply and Mossberg & Sons Inc.

None of that is illegal. Some constituency somewhere, however, will consider it immoral; with a countervailing group who believes it isn’t. So those two groups will fight about your company’s actions and ethics — and if you don’t think your own workforce and customers will choose sides, you’re delusional.

Trump Makes This Worse

Take Kris Kobach, for example. He was the former Kansas secretary of state who headed Trump’s special committee to investigate voter fraud in 2016. Spoiler: no fraud was found. So Kobach returned to Kansas to run for governor, lost last night, and is currently unemployed.

Which means he needs a job.

Now imagine Trump sacking Kirstjen Nielsen as secretary for the Department of Homeland Security, since Trump is unhappy with Nielsen’s slow pace of rounding up and deporting immigrants. Then he nominates Kobach to replace her at DHS, since Kobach does have the proper Trumpian skepticism of all people with brown skin. And Republicans in the Senate confirm him. None of that is far-fetched. It’s something Trump could do, and something he would want to do: double down, to drive his critics even more crazy.

But imagine the reaction among employees who fill Corporate America from suburb to shining suburb. Tens of millions of them will think, “Guys, we just told you to lay off the anti-immigrant stuff — and now this nutjob is running DHS and immigration? WTF?” Millions of others (not as many as the first group, but still millions) will think, “Damn right, send ‘em back to wherever they came from.”

Which side will prevail? I don’t know. But if your business might ever bid on a DHS contract, fights like that could lead to real business consequences (see tech companies, above; brimming with unhappy employees). Compliance officers will be part of the executive team trying to make both sides play nice with each other, when really they hate each other.

Good luck with that. It hasn’t been easy for the last two years. It won’t get any easier now.

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