Regulatory: Developing a political compliance plan

Crafting a policy to protect your company and avoid regulatory scrutiny

It should be apparent from our series on political activities (participating in politics, super PACs, pay-to-play, corporate law restrictions, lobbying disclosure) that compliance is an essential component to any political activity. The risks of noncompliance involve not only civil and criminal sanctions, but also reputational harm and bad publicity. Loss of reputation may hinder or even reverse successes in the legislative and political sphere.

The compliance plan

A good compliance plan will be comprehensive, easy to follow and easy to monitor. No one model is perfect for every company or organization, but the following are key components to a successful plan.

1. Draft and disseminate simple and clear policies on political activities that:

    • Explain the company’s policy on political contributions and other political activity
    • Prohibit the use of corporate facilities and staff in connection with personal volunteer political activity, unless authorized and permitted by law
    • Restrict employees from lobbying unless specifically authorized to do so
    • Prohibit giving impermissible gifts
    • Require political contributions to be pre-cleared if the company is subject to pay-to-play rules
    • Prohibit coercion of political contributions

2. Provide regular training and updates to officers and employees involved in government affairs, compliance and others who may interact from time to time with government officials.

3. Develop a central calendar of all report due dates for lobbying and political giving. Include not only the dates the reports are due, but also dates on which drafts are to be prepared and all of the steps for sign-off on the reports. This will leave plenty of time for accurate and timely reports.

4. Develop a central file for all lobbying contracts, and be certain they have obligations for the lobbyist to file all reports, share all reports with the company before they are filed, and comply with all applicable gift and ethics rules (note: many states prohibit contingency fee contracts for legislative services).

5. Determine who will be responsible for signing off on and answering questions about decisions to:

    • Hire outside lobbyists
    • Authorize internal employees to lobby
    • Disburse corporate funds for political contributions
    • Disburse corporate funds for trade associations, social welfare organizations and charities
    • Donate to independent expenditure committees such as super PACs
    • Make statements about legislation that will impact the company
    • Engage in grassroots advocacy with customers, employees or the public

6. Determine who will be responsible for filing lobbying reports and implement appropriate tracking mechanisms to compile the relevant data.

7. Ensure that the tax department is aware of all legislative and political activities so that those costs are treated as nondeductible.

8. Clearly delineate the restricted class of individuals eligible for PAC membership or to participate in other political activities.

9. Track lobbying and political costs accurately and simply (this includes association memberships, travel to Washington, D.C., for legislative visits, outside lobbyist fees and other similar expenses).

10. Track employee time for those employees engaged in lobbying activities.

11. Don’t forget your outside consultants. As your agents, it is important that they understand the company’s rules regarding political activity and gifts.

12. Instill a culture of asking first. For example, for site visits or invitations to receptions or charitable fundraising events, there is often a right way to accomplish your goals. But because gift rules can be very technical and specific, it is important to review planned activity even before extending an invitation.

Other considerations in a plan

PAC: If the organization has a political action committee, it should develop bylaws that provide a structure of governance for the PAC. Some PACs allow a single individual or small group to decide how the PAC will distribute its funds, and others have a more robust governing committee to make those decisions. Regardless of the model, it should work with the company’s government affairs team to support those efforts and not run counter to them. Even if the company is not planning to make many contributions, creating a PAC can give the company flexibility to pay for fundraising events.

If the PAC is active at the state level, then, depending on the state, it likely will have to register and report in that state (or at the very least, file its Federal Election Committee reports with the state).

Contributions: If the organization makes direct corporate contributions in state elections, then it must determine who gets to decide to whom to contribute. This could involve the PAC committee or other senior management. The company should have appropriate controls in place to make certain that an employee will not authorize a contribution that might embarrass the company. Also, remember to monitor in-kind contributions, such as catering for fundraising events and use of corporate offices for political activity.

Interactions with officials: Companies that interact with consumers may find themselves interacting with candidates and political officials outside of the lobbying or political sphere. They must be careful to avoid giving inadvertent gifts to officials subject to gift limitations. For example, hotels cannot simply comp rooms for elected officials, wireless phone companies cannot give phones to campaigns and so forth.

Senior management: Interacting with the government may involve senior management in two different ways.

  1. They may be called upon to meet with elected officials and to help lobbying for a company’s positions. This is permissible, but those individuals need to understand the rules, and they will likely have to track their time and expenses for lobbying purposes. Beware that some states now regulate “goodwill lobbying,” which applies to efforts to cultivate relationships with officials regardless of whether specific legislation or other matters are even discussed.
  2. Contributions to candidates or third-party groups may raise the company’s profile, and senior management should be kept briefed on those expenditures and contributions.

Although there has been criticism of corporate legislative and political activities recently, it is simply a fact of life that many organizations will have to be engaged with the government and politicians. Doing so requires careful planning and compliance to avoid running afoul of the many restrictions and disclosure obligations imposed by state and federal campaign finance, lobbying disclosure and gift and ethics rules.

Contributing Author

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Ronald Jacobs

Ronald M. Jacobs is a Washington-based partner in Venable’s regulatory group. He co-chairs the political law practice at Venable LLP, and counsels clients on all...

Additional Contributors: Lawrence Norton

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