Archive for category: Diversified Industries

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Last week, it was revealed that Amazon lobbied more federal entities than any other American public company in 2018. Given the significant resources brought to bear, its strong popularity among consumers, and the successful public relations-frenzy that drove 238 cities and regions to compete to win the company’s HQ2 throughout most of the year, companies looking to emulate best practices for strengthening their brand’s reputation and standing in the public arena, as well as achieve key business objectives, might look to follow Amazon’s playbook.

However, with the Seattle-based e-commerce giant’s decision not to move forward with its Long Island City headquarters in New York due to political pressure, perhaps the lesson for other companies and organizations is not what Amazon did or did not do, but that political risk has arrived as a prime factor in corporate affairs. Delve CEO Jeff Berkowitz recently shared his thoughts with Morning Consult on what New York’s HQ2 fiasco means for those seeking to avoid a similar fate. Here are some of his key takeaways:

• Shoe-Leather Lobbying Is No Longer Enough: From healthcare to defense to labor regulation, Amazon contacted 40 different federal entities on 21 different general issue areas, spending $14.4 million to do so – second only behind Google parent company Alphabet’s $21 million. Despite a powerful influence machine in Washington and the support of a majority of New Yorkers, Amazon was criticized “day in and day out” by local politicians who refused to meet with the company and caused it to simply decide that the environment was not one it wanted to work in over the long term. Lobbyists walking the halls of power are no longer enough – instead, companies and other organizations requiring governmental and public support in order to achieve their objectives need new and better tools to combat public pressure driven by even a small minority of activists who can wield outsized influence in the public arena.
   
• Evaluate Strategies Through A Lens Of Political Risk: With politicization infusing everything from sportswear to chicken sandwiches, a company or organization’s strategy for achieving its objective must be viewed through a cohesive lens of political risk. This means assessing the political risk relating to a business decision by identifying the range of stakeholders who may engage on the issue, understanding the network of influence and its impact, and leveraging these insights to inform a strategy to overcome challenges and achieve the objective as developments unfold. When done proactively and in advance of key decisions, assessing political risk can prevent wasted time, money, and reputational damage in a futile endeavor.
   
• Leverage Opportunities By Having The Best Information: Assessing political risk as part of the due diligence process is not only about avoiding foreseeable public affairs challenges. It can also help identify and leverage opportunities. Analyzing the stakeholders and influencers surrounding a project, objective, or issue can become a force-multiplier for a company or organization, allowing it to focus on reaching out and engaging the constituencies that matter so that their message can be amplified with key decision-makers. Seizing such opportunities, and making the best decisions and identifying the best strategies, requires having the best information. In Amazon’s case, they could have identified political opponents in advance and mobilized the majority of New Yorkers who supported HQ2 in Queens to mitigate that opposition.
   
• The New Normal Is Heightened Political Risk: Whether something is good politics or not is an increasingly important consideration for organizations traditionally removed from politics, be they companies, investment firms, or nonprofits. While it is not clear that the public nature of the HQ2 competition was in part responsible for the political risk it attracted, and which ultimately defeated the New York headquarters, political risk has arrived as a crucial factor that must now be taken into account by companies and organizations when making key decisions. In addition to influencing smoke-filled rooms, then, they must now engage too in the fog of the public arena.

Your company or organization doesn’t need to be in the throes of a highly-public competition to choose a new headquarters in order to be adapting to political risk. Applying a framework to evaluate key decisions through the lens of political risk before they are made, or even as added due diligence for those that are already in process, can increase the likelihood of anticipating, mitigating, and overcoming the public affairs challenges that are common in today’s operating environment.

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FIZZLING OUT

It appears not even divine intervention can save La Croix. National Beverage Corporation, the maker of sparkling water beverage La Croix, recently announced a 40 percent drop in profits last quarter following an October lawsuit that accused the company of mislabeling its products as “all-natural” and claiming the company’s waters contain a synthetic compound “often found in cockroach insecticide,” among other chemicals.

The company’s poor performance sparked an odd response from CEO Nick Caporella, who claimed the losses were not the result of “negligence nor mismanagement nor woeful acts of God,” but instead “injustice!” While National Beverage announced in January an accredited lab found no synthetic additives in La Croix, that hasn’t spared the beverage from becoming a laughing stock on social media. Caporella’s response is unlikely to shift that perspective. Indeed, he would do well to heed his own advice that “Brands do not see or hear, so they are at the mercy of their owners or care providers.”

His comments, as well as the company’s financial and legal issues, provide another example of how reputational risks carry real costs and a company’s response can make things better, or in this case, worse.

WEWORK IS WATCHING YOU

You may think WeWork’s $47 billion valuation stems from its ability to provide shared workspaces for startups across the country. However, over the past year, WeWork has aggressively tried to generate more revenue by collecting and analyzing information about how people move and operate within these shared offices. For example, WeWork recently acquired Teem, which makes software that collects data on conference room bookings, and Euclid, a service that tracks smartphones in retail spaces.

WeWork is also testing several types of sensors with its own employees in order to learn how the intended use of office spaces compare to how workers actually use them. It looks as though WeWork’s future may be in selling customer data, which could bring with it a whole host of regulatory headaches and reputational concerns, even with WeWork’s Chief Product Officer Shiva Rajaraman’s assurance that the company aims to “defend privacy as well.”

CHINA’S OVER-INFLATION PROBLEM

It turns out China’s economy may not be so big after all. A new report from the Brookings Institution found that China’s economy is about 12 percent smaller than official figures estimate and its real growth has been overstated by about two percentage points annually. The report has sparked fresh concerns that China’s economic slowdown is more serious than previously acknowledged as the U.S. and China continue to negotiate a trade deal.

With a growing population demanding more middle-class privileges, China’s economic challenges may add additional pressures on Chinese President Xi Jinping to make a deal when he meets with President Trump at a summit tentatively planned for late-April. Trust but verify, indeed.

SHADOWY “STUDENT”-LED MOVEMENTS

As students eagerly pass out catchy political flyers to their campus colleagues, it is easy to dismiss them as student-led movements passionate about a cause. Yet these “grassroots” organizations are often times sophisticated political operations with billionaire backers on both the left and right. One such group, NextGen Rising, masquerades as a youth-led grassroots organizing movement but is in reality a subsidiary of the NextGen Climate Action Committee, a political-action committee formed by billionaire anti-Trump critic Tom Steyer.

Rather than provide professional development programs, these groups tend to be far more interested in instilling political ideologies in young college students. Groups like NextGen Rising serve as a reminder of the importance of understanding an organization’s funders in order to know the true motive of a movement.

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In an October edition of TL;DR, we wrote about the “other machinations in Washington” that overshadowed the announcement of the United States-Mexico-Canada Agreement, or USMCA, which was negotiated to replace NAFTA. Since then, the agreement has stayed somewhat under the radar and in fact, the Administration has already moved its focus to trade negotiations with China, meaning that ratifying USMCA is no sure thing. With outside groups gearing up for what will be a major public policy fight, here is a look at the landscape of interests engaging on this issue and the challenges they are facing:

• But First, How Did We Get Here? Formal negotiations between the North American neighbors ended and an agreement was signed on November 30th, marking the start of the governments’ efforts to sell the deal to their domestic audiences and gain ratification from their respective legislatures. In the U.S., that process was complicated first by the midterm elections where the President’s party lost its majority in the House, and then by the longest government shutdown in U.S. history that delayed the publication of the agreement’s congressional assessment report, the next step of the ratification process. Despite these realities, the Administration appears to have a “shockingly optimistic forecast” on the fate of the deal, and although Speaker Pelosi shares this optimism that concerns can be addressed and an agreement passed, the reality of the challenge ahead suggests that companies, industry groups, and issue coalitions will need to vigorously engage in the debate to influence ratification in Congress, which is increasingly uncertain.
   
• The Reluctant Democrats: For Speaker Pelosi’s optimism for ratification to be well-founded, USMCA will have to gain the support of pro-trade members in her caucus. Several efforts to lobby these members are already taking form, including Trade Works for America, which was launched by influential Republicans to make their case to Democrats in traditional Republican and Trump districts, has already raised a third of its approximately $15-$20 million budget. Another group, Pass USMCA, is headed by Democrat Gary Locke, who served as Ambassador to China and Commerce Secretary under President Obama, and Rick Dearborn, who most recently served as Deputy Chief of Staff for President Trump. In bringing bipartisanship to bear in its efforts to push ratification, Pass USMCA is betting that Democrats and Republicans in Congress can be brought together in polarized Washington to ratify President Trump’s trade deal – despite Democrats’ seemingly increasing reluctance to do so.
   
• The NAFTA Warriors: Much of the declared opposition in Congress to USMCA is due to it being “too similar to NAFTA,” and this opposition includes some of the usual groups against trade deals who hold sway and influence with the Left’s liberal base. Environmental activists from Greenpeace to the Sierra Club have slammed USMCA for leaving intact “NAFTA’s bad rule book and the growth of the oil industry,” and Public Citizen and its Global Trade Watch has raised concerns over both environmental standards and labor standards that U.S. firms can use “to continue to outsource jobs to pay Mexican workers poverty wages.” For reluctant Democrats, the pressures from these groups make it politically difficult for them to support a deal that’s viewed as “more of the same,” not to mention the product of a President they are committed to resisting.
   
• The Strange Bedfellows: The opposition to USMCA in its current form is not just made up of usual activists, however – it also includes large corporate interests and conservative think tanks. Meds For America’s opposition is focused on pharmaceutical patents and the development of generic drugs. In a letter raising its concerns to the U.S. Trade Representative, Meds For America’s broad coalition of strange ideological bedfellows was on full display. Signatories included labor unions such as the SEIU, AFL-CIO, and American Federation of Teachers; powerful interest groups like AARP; major health care company Kaiser Permanente; and, conservative organizations such as FreedomWorks and R Street Institute. The presence of these organizations that usually influence Republican policy and pressure Republican lawmakers makes it more difficult for those on the Right, especially policymakers who opposed Trade Promotion Authority, to stand up for USMCA.

For those trying to achieve passage of USMCA in Congress, time is already short. Any further delays in the ratification process would make it more and more difficult for the USMCA to take effect, especially with Canadian federal elections later this year and the U.S. presidential election in full swing by then. And although NAFTA would remain in effect currently if the USMCA is not ratified, President Trump is adding additional uncertainty to this scenario by threatening to terminate NAFTA to pressure Congress to ratify USMCA – which a top Republican senator believes would make doing so “immeasurably harder.”

Those pushing ratification will need to thread a needle to navigate the challenges laid out above and build a broad, like-minded coalition that can get this deal done. To do so, they will need to pull back the layers and uncover insights into this network of opposition, including its funding, motivations, tactics, and coordination, so that they can identify potential allies – no matter how unlikely – and expose and undermine their opponents’ anti-USMCA message in the public and with policymakers.

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AI’S RISKY BUSINESS

As everyone from the Pope to President Trump seem to be going all-in on artificial intelligence (AI), two companies that should be its most ardent supporters are sending out warnings about this growth. In recent SEC filings, Google and Microsoft cautioned investors that AI technologies may create ethical and legal problems that could damage their brands and the demand for their products.

Microsoft’s list of potential problems includes flawed algorithms, insufficient datasets, biased information, and inappropriate or controversial data. Microsoft and Google appear to be asking for policymakers to create a regulatory framework to help make sense of this uncharted territory. The filings should also serve as a wakeup call to policymakers from companies, investors, and stakeholders, who can make headway on this issue now while the industry continues to grow – and before the challenges foreshadowed come to fruition.

GOING LOW

A Roll Call analysis found that Democratic senate candidates in 2018 who published more negative tweets were more likely to be victorious in their races, while Republican candidates were less likely to win when doing so. If this success is any hint as to the future, Republican candidates on the ballot in the 2020 election cycle can expect more of the same with withering tweets attacking them.

Additionally, because many media outlets tend to reinforce Democratic attacks while pushing back on or ignoring Republican attacks, Republican candidates will have to get started earlier with uncovering the research insights that can help their campaigns win, anticipate the inevitable negative attacks, and ensure their claims are thoroughly supported by undeniable facts that can withstand the intense, and sometimes biased, media scrutiny.

GREEN NEW DEAL WITH IT

Is the Green New Deal (GND) “immoral” and “unrealistic?” Even among Democrats, it depends on who you ask. When self-identified Democratic Socialist Representative Alexandria Ocasio-Cortez (NY)  posted details of the GND plan to her website, it called for the elimination of all fossil fuel energy production and nuclear power, the replacement of every “combustion-engine vehicle” within 10 years, and “retrofit[ting] every building in America” with “state of the art energy efficiency.”

The reception for the outlandish plan, which triggered backlash, resulted in a bungled rollout and the removal of the plan online, followed by arguments with critics in the media about whether the document was legitimate or not in the first place (spoiler: it was). If the press is going to automatically support the GND instead of ask critical questions about it, Republican policymakers and the companies and organizations concerned by its economic and policy implications may be underestimating the degree of difficulty in putting out the truth about the harmful and costly policies it promotes.

THE PEOPLE VS. TWITTER

With journalists rushing to tweet their latest scoops and the world’s eyes constantly on President Trump’s Twitter account, it is easy to think of the social media platform as a representative sampling of the public discussion. But what if Twitter’s impact is overblown or misleading? Twitter revealed in its fourth-quarter earnings report that the company has an average of 27 million daily active users in the United States, or 8.2% of the total population (assuming that each account is controlled by a different person, which is unlikely).

This data suggests that despite the site’s power to drive media narratives and news cycles, the “Twitterverse” is not an accurate representation of the public conversation. As more and more news stories are generated by the outrage, hashtags, and hot takes on Twitter, a misleading and dangerous trend is taking form where the 280-character antics in the “Twitterverse” are taking the place of actual fact-based information and broad public sentiments.

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Instead of a reflective and relaxing weekend celebrating the legacy of Dr. Martin Luther King, Jr., many Americans found themselves wading into the debate surrounding the interaction between red MAGA-hat wearing high school students and a Native American elder just steps from where Dr. King gave his famous “I Have A Dream” speech in front of the Lincoln Memorial 90 years ago. The resulting mayhem has become the norm in today’s age of heightened political and reputational risk, where a viral moment on social media spurs a viral narrative that devolves into outrage, accusations, clarifications, and threats – with little or no regard for the truth, and before all of the facts are clear.

This episode presents an opportunity for companies and cause organizations to evaluate (or reevaluate) their preparations to defend against the repercussions of an inevitable viral moment targeting them, because once a story is out in the public arena, the costs of managing and mitigating the reputational fallout only increase. Here is how your organization can prepare for its viral moment:

• Understand The Range of Interests And Stakeholders In Your Operating Landscape: Heightened political and reputational risk means that companies and cause organizations need to think through potential challenges they face, as well as where such challenges could originate from. Understanding the range of interests and stakeholders in one’s operating landscape, including their concerns, motivations, and tactics, can provide insight into where opponents and activists may engage an organization on an issue in the public arena, thereby providing space to address any concerns before they lead to public actions like protests and boycotts. It can also help an organization avoid making decisions that undermine its support among core constituencies, particularly at a time when consumers want to support organizations that align with their beliefs. In addition, because viral moments may come from unpredictable and unforeseen events, an understanding of your organization’s network of interests and stakeholders can help solidify support among different partners, build broad coalitions, and shift the public debate into a stronger position during a public affairs challenge, helping mitigate negative consequences that may otherwise stem from it.
   
• Know Your Vulnerabilities, And How To Compensate For Them: Once reserved for political candidates running for office, vetting vulnerabilities has become an important tool for organizations to evaluate individuals, from major league baseball to the corporate boardroom. It is also a critical tool to evaluate an organization itself, allowing it to assess flaws, vulnerabilities, and negative coverage it may be susceptible to in the public arena, that competitors, activists, and other opponents may use against it to ignite a viral moment. Knowing your company or cause organization’s vulnerabilities, and proactively preparing the full set of facts to respond to those who may obfuscate the truth or only present a part of the story that your opponents want to feature, helps ensure you can control as much as possible in a fast-moving and challenging situation.
   
• Tell Your Story, Before You’re In A Fight: Once an organization understands the network engaged on its issues and its vulnerabilities, it can build a proactive public affairs strategy to tell its story. Sharing a compelling narrative about your organization, supported by the facts and insights that you want to share, defines your organization’s brand and can build goodwill in the public arena. When a viral moment occurs, these efforts can mean a company receiving the benefit of the doubt in a crisis from a public familiar with its story, making it more difficult for that viral moment to lead to lasting reputational damage.
   
• Have A Plan: While even the best-laid plans go out the window once a crisis begins, having a plan to mitigate heightened risk remains key to minimizing the impacts of a viral moment. The above components are all parts of a successful public affairs strategy, and with the addition of a monitoring regimen that helps an organization keep apprised of key developments, changes in the state of play, and better see around the corner to anticipate and respond to events as they occur, these facets of reputational management are the hallmarks of protecting your interests and achieving your objectives in an age of viral moments – especially so when the media landscape amplifies and further obscures such moments in real time.

The incident on the steps of the Lincoln Memorial is simply the latest in a quickening pace of viral moments that companies and cause organizations will inevitably find themselves the targets of. Preparing now – before events transpire that are outside of your control –  improves the likelihood that your organization can weather the challenge when it happens with a sound, substantive strategy to protect itself in the public arena, because when the stakes are the highest, facts matter more than hot takes.

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AN UNLIKE(LY) REQUEST

If there’s one thing social media needs more of, it’s politics; at least Facebook seems to think so. The company just launched a new feature enabling users to create political petitions, share them among friends, and notify a government agency for action.

As TechCrunch points out, not only will these Community Actions allow individual users to sow polarization with outlandish or offensive causes, but they also “provide vocal interest groups a bully pulpit from which to pressure politicians and bureaucrats with their fringe agendas.” Essentially, Facebook has supercharged the political side of Change.org.

Today’s anti-corporate activists are professional and well-organized. Giving them the leverage of the world’s largest social media outlet is unlikely to leave Facebook and other tech companies unscathed and may even hasten this outcome by providing an avenue for increased anti-tech activism. Any business exposed to regulatory or reputational risk should keep an eye on this new feature and any copycats it may inspire in Facebook’s competitors, including (God help us) Twitter.

THE REFERENDUM CONFUSION

The lessons of the November 2018 midterm elections might appear obvious at first glance: red states kicked out blue Senators, swing districts swung to the Democrats and delivered the House, the polarization of the American electorate continued apace. Yet, behind the headlines and under the radar, a subtler trend unfolded: liberal voters directly enacted conservative policies and vice versa.

Through the use of ballot measures, advocacy groups took their proposals straight to the people, unencumbered by party loyalties or candidate weaknesses. As conservative voters in Missouri were unseating Democratic Sen. Claire McCaskill, they were also approving legalized marijuana and raising the minimum wage. Jay Inslee, Democratic governor of Washington, saw his dream of the nation’s first carbon tax crushed by a 13-point margin.

While voters tend to use partisan and personal affiliations to choose between candidates, policy questions are apparently judged by different criteria. The trend presents both opportunities and challenges for businesses hoping to anticipate the policy and political environment in which they must engage, requiring a concerted effort to dig deeper to better understand the spectrum of interests and stakeholders engaged on the issues important to them.

A MATTER OF TRUSTS 

Antitrust policy took center stage at the confirmation hearings of Attorney General nominee Bill Barr, specifically in relation to Big Tech. Several senators spent long stretches of their allotted time asking Barr, who fought the Justice Department’s attempt to block the merger of AT&T and Time Warner in 2018, about the potential for government action against the giants of Silicon Valley. Jeff Sessions, conversely, was asked only twice about antitrust matters during his Attorney General confirmation hearings in 2017.

Lawmakers’ sudden interest in the issue as it applies to tech companies seems ominous, especially in light of growing popular distrust of the industry. For his part, Barr said, “I don’t think big is necessarily bad, but I think a lot of people wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers.” If confirmed, the incoming Attorney General’s handling of this waxing political issue could set the tone for his tenure and have serious regulatory ramifications across all industries.

PUNTING ON POLITICS

The Super Bowl’s cultural appeal rests only partially on football these days. Excepting New England fans, most Americans usually don’t get to support their home team in the NFL’s climactic finale and prefer to tune in for the drama of it all or the halftime show or, famously, the commercials. Now a new Morning Consult poll is putting advertisers on notice: political messages are out of bounds.

Nearly two-thirds of respondents, including 55 percent of all millennials polled, disapproved of using Super Bowl advertisements to make political statements. Morning Consult CEO Michael Ramlet noted, “The biggest disconnect between the general public and agencies and companies is this idea that you have to take stands to win Gen Z or millennials. That’s not what the data shows” most viewers of any age want during the Super Bowl.

Of course, viewers are unlikely to skip the game over a few political commercials and it is still expected to draw television’s biggest crowd. This new data should at least give Madison Avenue pause; while there may be no such thing as bad publicity, woke advertising brings just as many reputational risks as rewards. 

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As Democrats had no clear path to combat climate change only a few weeks ago, the Green New Deal has seemingly come out of nowhere, gaining national attention as influential House members, Senators, and potential 2020 presidential candidates voice their support for more urgent action. With some calling it this generation’s “moon shot” or “civil-rights movement,” the Green New Deal has gained enough momentum to suggest that it will become a major issue impacting companies, cause organizations, and consumers next year and beyond. Here is what you need to know about the Green New Deal and its potential impact:

1. What Is The Green New Deal? Inspired by President Franklin Roosevelt’s New Deal programs during the Great Depression, the Green New Deal is a pledge to combat climate change supported by incoming Rep. Alexandria Ocasio-Cortez and young climate activist groups such as the Sunrise Movement and Justice Democrats. However, there is confusion as to what exactly this pledge entails. Currently, the Green New Deal is merely a slogan for an aggressive approach to climate change, a call for a(n impossibly) quick transition to 100% renewable energy (natural gas and nuclear need not apply), and an idea of how a new select committee on climate change should function. More ambitious interpretations believe it to be an expansive plan to achieve net-zero carbon emissions by 2050 with a goal of achieving full employment, advancing racial justice, and providing universal healthcare.
    
2. Who Is Behind The Green New Deal? Besides the vocal support of the incoming-congresswoman from New York, a relatively new group – the Sunrise Movement – has taken the lead in organizing young people to push for ambitious action to fight climate change, including the Green New Deal, and exposing what they believe is wrong with fossil fuel companies. Sunrise grew out of the 2016 election, and is focused on winning elections from 2018 through 2020, merging political organizing with the “creativity, moral clarity, and disruptiveness of efforts like divestment and NoDAPL.” The group’s ambitious efforts include grassroots mobilization in “politically significant states” and the goal of creating small “hubs” throughout the country to influence elections in 2020 and beyond. With connections to Occupy Wall Street and the divestment movement, including groups that received grants from booster organizations such as 350.org and Open Society Foundations, Sunrise is certain to be an influential group targeting policymakers and the energy industry in the public arena going forward.
    
3. What Challenges Does A Green New Deal Face In Becoming Reality? The political challenges, from Republican opposition to a lack of clarity to an internal power struggle between veteran lawmakers and vocal activists, are daunting. Yet, perhaps the two most challenging obstacles are technology and popular support. For the former, current and near-term technology is not capable of generating anywhere near enough reliable, always-on electricity or store enough of it from renewables to power America. As to the latter, public support for the Green New Deal is high now, but many Americans are just hearing about it for the first time, few know what it means, and once they learn about how it will impact their cost and quality of living, support could dissipate quickly.
    
4. Is The Green New Deal Here To Stay? The groundswell of initial support for the Green New Deal, as well as the growth and influence of new organizations like the Sunrise Movement, represent a heightened level of political and reputational risk for companies, cause organizations, and consumers. As this New Age of Activism becomes fully formed, environmental groups are using new and more aggressive tactics that have never been seen before, and they are organizing more quickly and widely than ever. Thus far, there has been little organizing on the opposite side of this public policy issue in response, although this new normal suggests that the risks will increase, rather than decrease, in the near- to long-term.

As the Green New Deal gains traction, companies and cause organizations can take some solace in the fact that there are no concrete policies and proposals yet, meaning there is still time to proactively prepare their strategy to confront this coming public affairs challenge. Before voicing support in an attempt to ward off public peer pressure, companies and organizations should be careful to appease such a broad and unspecific coalition, some parts of which are unlikely to be swayed, appeased, or satiated unless they get their way.

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House Hunters: Oregon 

If you live in Oregon, your house may soon get more crowded. In order to increase housing supply, lower prices, and diversify neighborhoods, the Oregon state legislature introduced a new proposal that would ban single-family zoning in towns and cities, which one economist argues would more efficiently accommodate future population growth than simply building more housing under current zoning laws. However, critics claim the ban will encroach on residents who own and want a single-family home and care about property rights, but could also incentivize homeowners to sell their land to developers, increasing demolitions and ruining neighborhoods.

The proposal is the first of its kind at the state level, but it comes on the heels of a similar law passed by the Minneapolis City Council earlier this month and the City of Portland is currently considering its own ban, perhaps signaling a broader trend toward top-down zoning reform as a policy proposal du jour – despite evidence that government zoning rules have contributed to rising housing costs across the country rather than make housing more accessible.

California Texting Tax Will BRB

California taxpayers may want to thank federal regulators for shielding them from higher taxes following the Federal Communications Commission’s vote to classify texting as an “information service” rather than a “telecommunications service.” The FCC’s decision forced the California Public Utilities Commission to back down from a proposed tax on text messages, which had been scheduled for a January vote to determine whether texting should fall under a California law levying a surcharge on telecom services.

“Prior to this FCC ruling,” the CPUC explained on Twitter, “text messaging was not a classified service under federal law,” so the CPUC saw it as a potential avenue to raise revenue from taxpayers. This episode serves as a reminder of the impact that federal and state regulators can have on individuals and businesses, and how even far from the halls of Congress, the seemingly smallest details can have some of the biggest impacts.

Bad Batteries Busted

Residential batteries used to store energy and power homes, long lauded as a critical technological innovation in the fight against climate change, may not be as green as once thought, according to a new study. Climate activists have promoted home batteries as a way “to take control of energy costs, get more from solar panels, and be less reliant on importing dirty power from the regional electricity grid.” Yet, researchers determined home battery users tend to draw power from the grid for storage when energy is at its cheapest – that is, when it’s being produced by coal and other fossil fuels.

In order to reverse this incentive structure, the study found, utilities would need to drastically hike prices on electricity at times when power is mostly being produced by fossil fuels. In fact, the main result of this revelation looks to be more pain for consumers: California regulators will begin mandating “time-of-use” rates in 2019 to artificially inflate energy costs, and several other states are reportedly not far behind.

Chicago Shenanigans

Chicago’s good old-fashioned machine politics give a whole new meaning to vulnerability. David Krupa, a 19-year-old Republican student at Chicago’s DePaul University, knew his chances were slim when he decided to run for Alderman of the city’s deep blue 13th Ward, but he collected more than triple the number of requisite signatures – 1,729 – and filed as a candidate. Illinois House Speaker Michael J. Madigan (D) and his 13th Ward Democratic Organization had other ideas: the Boss found over 2,700 people to swear affidavits revoking their signatures from Krupa’s petition.

Not only did more than a thousand more people revoke their signatures than had actually signed, but subsequent examination of the names revealed only 187 of the revocations matched names on the petitions. Election attorney Michael Dorf opined “So, what about the 2,609 people who didn’t sign for David but who filed revocations? That’s fraud. That’s perjury. That’s felony.” That’s also a gaping vulnerability for which we should hope voters demand accountability. In the meantime, welcome to Chicagoland, Mr. Krupa!

Here’s What You Need To Know

As election day approaches, the question remains if the country will be overtaken by the blue wave or if the red wall will be big enough to stop it. Regardless of the outcome, however, companies and organizations will need to navigate and influence the post-election environment to their advantage. Here is what you need to know to be prepared to overcome the challenges and make the most of the opportunities after November 6th:

• Will The Red Wall Be Enough To Hold Off The Blue Wave? The Republican National Committee has raised over $270 million for the 2018 cycle, which has been invested in data and turnout infrastructure over the past two years, building on the success of its 2016 operation that helped deliver a surprise victory for Donald Trump. As much as people say this election will be a referendum on the president, Trump has had almost straight-line approval and disapproval since he has entered office, suggesting there is little buyer’s remorse that Democrats can leverage into new votes. Further, the Kavanaugh confirmation galvanized Republican voters and erased any enthusiasm gap once enjoyed by the Democrats. When it comes to the Blue Wave, Democrats have raised a lot of money recently, but it is not being spent in the right places (Texas, anyone?) and may be too late to be effective. That said, Democrats only need 23 seats to gain a majority, and the historical average midterm loss for the president’s party is 25. That loss increases to 37 for presidents whose approval rating is under 50% in the lead up to the midterm election. Given this historical trend, Democrats do not need a wave to win back the House.
• What Should Businesses Expect If Democrats Do Take The House? If Democrats take control, regardless of what they are saying legislative and policy wise, what will overwhelm the leadership’s agenda will be anti-Trump fervor, demanding investigations and impeachment, but the focus and implications of those investigations would reach far beyond the Administration. On a number of key policy issues, companies in industries like energy, pharmaceuticals, financial services, and beyond are at risk of becoming proxies for Trump and his policies. Combine this fervor with the multiple Democratic 2020 presidential contenders in Congress competing for attention and appreciation from their party’s liberal base, and the potential policy and reputational harms for companies and industries multiply significantly. Companies can also expect a Democratic majority to build on the momentum of efforts to coordinate with government officials at the state level.
• Risks From A Blue Wave Extend Well Beyond The Beltway. There are two offices at the state level that the private sector should be watching closely: gubernatorial races with candidates that could be jockeying for the 2020 Democratic nomination, and state attorneys general races with candidates who will likely target corporate interests to elevate their political profiles. While a slew of senators in D.C. are already angling for the nomination and using policy proposals targeting companies, Wall Street, the fossil fuel industry, and others to build support from their base, several gubernatorial candidates could take that approach from their statehouses if they think: “Why not me?” This includes Andrew Cuomo (NY), Gavin Newsom (CA), and Richard Cordray (OH). For attorney general, Keith Ellison in Minnesota and Letitia “Tish” James in New York could build national profiles by suing companies on issues that translate to public support, whether lowering the price of insulin, Wall Street divestment, or New York State’s lawsuit against Exxon Mobil alleging the company deceived shareholders on climate change, which could expand to ensnare other firms and even investor-owned utilities.
• It Is Not Just Who Is On The Ballot, But Also What Is On The Ballot. On November 6th, voters will decide on 157 ballot measures in 37 states across the country, and succeed or fail, these measures provide a predictive model for forthcoming policy battles. The volume of measures is not particularly noteworthy, but what is new and different is what is driving these initiatives: professionalized activists funded by national interest groups or high net-worth individuals, as opposed to local interests that can be held accountable for the consequences of their proposals. With Congress and Trump not enacting the policies national interest groups seek at the federal level, they are working in the states to build momentum and enact policy changes. What should raise companies’ and industries’ interest in these ballot initiatives is that strategies and playbooks in one state will be replicated elsewhere, and those that are successful will be replicated across the country with greater speed.

This highly-politicized environment is the new normal, and organizations and companies should be armed with the information and facts of policy and regulatory issues impacting them to protect their reputations. The more you can influence and shape events in the policy and regulatory landscape to your advantage, the better the chance that you can achieve your organization’s objectives – whatever the outcome of this year’s midterms.

News You Can Use

TIPPING THE BALANCE

Amazon has become the latest company to go to a $15 minimum wage, but at the same time workers in D.C. are pushing back. On October 16, the D.C. city council repealed Initiative 77, a measure passed by voters in June that would have raised the minimum wage for all tipped workers by 2026. The initiative, meant to provide financial stability and protections against sexual harassment, was fought by the tipped workers themselves, who argued it would destroy restaurants’ thin profit margins and cut jobs from their support staffs while potentially lowering tipped workers’ take-home pay.

Estimations concluded that Initiative 77 would cost the D.C. restaurant industry $600 million, surge food prices, force restaurants to buy from big box suppliers instead of local farms, and reduce the incentive to leave high tips. An increased minimum wage appears to be a favorable political stance for liberals to take, but when the workers who should be benefitting are fighting back, politicians may want to rethink their positions.

OVERSTEPPING AND OVEREXPOSED

Just as we predicted, receiving investment from sovereign funds of overseas countries brings a myriad of political and reputational risks for companies. This lesson was prominently on display in the scandal surrounding the death of Saudi dissident and journalist Jamal Khashoggi. After repeated denial, the Saudi government admitted that Khashoggi was murdered in its consulate right before Saudi Arabia’s Future Investment Initiative Conference, also known as “Davos in the Desert.”

American businesses, media outlets, and U.S. Treasury Secretary Steven Mnuchin pulled out of the conference in response, although the political and reputational risk has already impacted their future exposure to the Kingdom. Going forward, executives need to accept their roles as “de facto diplomats ” in today’s era of elevated risk, and evaluate their organization’s business decisions through this lens in order to avoid negative implications that may stem from it.

CLIMATE COVER THANKS TO TREES?

The UN’s Intergovernmental Panel on Climate Change recently put out a report on climate change, and panic ensued given its bleak predictions. Abigail Swann, a professor at the University of Washington, however published research that could change the way scientists view climate change. While most research on climate models focuses on wind, rain, and other physical occurrences, Swann believes researchers have ignored vegetation and how plants influence rainfall, a role that “blows the ecology community’s mind.” Forests provide carbon storage, water filtration, and wildlife habitat, and the total effect it can have on the ecosystem is largely ignored in gloom and doom studies.

Ironically, Swann’s research also finds that forest die-offs can be beneficial to the climate in certain areas, suggesting that environmentalist efforts to plant trees may do more harm than good to the climate in some cases. While there is uncertainty in how these findings can be implemented, it serves as a reminder that the earth remains incomprehensible to experts and predictions are futile, meaning balanced, responsible solutions are always a better approach than panic.

POLITIFARCE?

For the second time in a week, PolitiFact, a media fact-checker, has been caught not checking its own facts. The site originally ruled that a claim that Sen. Claire McCaskill (D-MO) said “normal people” can afford private planes was “false,” even though a video of McCaskill saying exactly that in a town hall is readily available on the Internet. PolitiFact only changed its ruling after receiving backlash for its favoritism.

Whether it was bias or sloppiness or both, these latest incidents make it more difficult for fact checkers to be seen as impartial referees instead of engaged combatants in the political clashes of our era.