From WOTUS to POTUS: Environmental Uncertainty in the Next Administration

Over the past several weeks, we have dived deep into the increasingly permanent state of regulatory uncertainty in Washington. Besides perhaps trade policy, there is no arena in which this state is more prevalent than the various and sometimes obscure environmental rules that govern everything from energy to agriculture to transportation to infrastructure to manufacturing and beyond. No matter who wins in November, the litigation of these key rules – in courts of public opinion as well as law – will continue unabated.

Beyond what happens with the controversial Paris Climate Accord, public affairs professionals can expect continued debate on an alphabet soup of rules like WOTUS, NEPA, ACE, TSCA, and beyond. How these rules are written and implemented will determine how industries can operate and what it will cost the consumers they serve. To prepare for what comes next in these debates, and ensure you know which acronym to deploy when, here’s what you need to know:

The Next Administration’s Application Of The Clean Water Act Can Set Industries Back Or Move Them Forward. The Obama Administration 2015 “Waters of the United States” (WOTUS) update to the Clean Water Act angered farmers, developers, and other critics, who argued WOTUS created onerous bureaucracy surrounding land use and increased uncertainty. In 2020, the Trump Administration replaced WOTUS with the Navigable Waters Protection Rule to “streamline the definition so that it includes four simple categories of jurisdictional waters.” Environmental activists and their allies argue Trump’s “Dirty Water Rule” “significantly reduce[d] the range of protected wetlands” and turned to the courts to stall or prevent its implementation. Because Clean Water Act rules can be challenged in any of the nation’s nearly 100 federal courts, opponents intend to continue flooding the courts with challenges, while supporters, like agriculture advocates and homebuilding coalitions, are preparing to fight back.

  • What Happens Next? See You In Court. If President Trump wins a second term, opponents of his rule will double down on their legal challenges, leaving the EPA to fight a multifront war in the courts. If Vice President Biden is elected, public affairs professionals can anticipate more stringent regulations, leaving key industries in limbo as they try to figure out whether these rules will ebb or flow.

One Reason Infrastructure Week Feels More Like Groundhog Day: NEPA. Both Republicans and Democrats say they want more infrastructure, but the maze of federal regulations make such investments difficult, with time-consuming, labor-intensive, and expensive environmental rules slowing progress. The “Magna Carta” of these laws, the National Environmental Policy Act (NEPA), has for 50 years required federal agencies to produce “environmental impact statements” to determine the effects of proposed projects such as highways or energy projects and given community and outside stakeholders the ability to challenge or appeal these assessments. As we’ve noted in the past, the Trump Administration has advanced reforms of NEPA to “ensure that the Federal environmental review and permitting process for infrastructure projects is coordinated, predictable, and transparent.” Supporters say that this streamlining untangles a bureaucratic web that inhibits the construction of worthwhile projects. Opponents claim a weaker NEPA would “sell out our clean air, clean water, and safe climate” to corporations by lessening environmental and community activists’ ability to raise concerns.

  • What Happens Next? Building Projects Keeps Getting Harder. If President Trump is re-elected, his administration will likely be forced to defend his NEPA reforms in court for years to come. If Joe Biden is elected, the outcome of NEPA reform remains unclear. Biden will likely look to rollback President Trump’s NEPA reforms, while still attempting to follow-through on his commitment to spend $2 trillion in infrastructure. Without adjustments to NEPA’s rules, however, getting projects – even environmentally friendly ones like renewable energy generation – will prove more difficult for his administration.

The Never-Ending Power Emissions Debate. In 2018, the Trump Administration proposed the Affordable Clean Energy (ACE) Rule to “establish emission guidelines for states” regarding power plants. ACE replaced the Obama Administration’s Clean Power Plan, which the Trump EPA argued had

TSCA May Have More Drama Than La Tosca As Chemical Fights Compound Uncertainty For Regulators And Industries. Created in 1976, and amended in 2016, the Toxic Substances Control Act (TSCA) regulates new or already existing chemicals. Critics of the administration argue the Trump EPA is too “industry-friendly,” and is endangering the public by exposing them to chemicals that can’t be confirmed as harmless. In November 2019, the 9th Circuit Court of Appeals agreed, gearing up yet another fight for a Trump Administration in a second term – or for a prospective President Biden to ditch once he’s in office. Moreover, industry suspects a Biden Administration “could interpret TSCA, and the many legal, science and policy issues it invites,

  • But There’s More: Debate On This Chemical Could Upend Medical Supply Chains Amidst The Pandemic. Beyond the TSCA fights, under outside pressure EPA has indicated it will consider action on an increasingly high profile chemical in 2021: ethylene oxide (EtO). EtO is a common sterilizer used on medical devices, but it has also been deemed a carcinogen by the EPA. As EPA looks to regulate the gas in 2021, any closures of EtO plants could bring the United States to “the cusp of a major medical logistical failure,” all while the country tries to navigate the COVID-19 pandemic.

CAFE Standards Remain On The Menu… Arguing it would allow the auto industry to make cheaper, safer vehicles, the Trump Administration finalized a roll back of the Obama era Corporate Average Fuel Economy (CAFE) standards in March 2020. The administration also upped the CAFE standards fight by revoking California’s federal waiver on emissions, calling for a uniform national standard and denying California’s assertion that the state needs more stringent emissions standards.

  • … And California Just Upped The Ante. The CAFE fight will certainly continue beyond election day, especially with California’s new mandate that all new passenger cars and trucks sold in the state much be emissions free by 2035, which now has found interest among Congressional Democrats as a national objective. While Biden is likely to restore California’s CAFÉ waiver and allow the state to move forward with such a ban, Trump’s EPA Administrator has indicated his agency would need to approve California’s ban on gas-powered vehicles.

Regardless Of Who Wins In November, Public Affairs Professionals Will Have A Daunting Task In These Environmental Debates. Energy and environmental issues are among the top concerns for any presidential administration, but the increasing contentious fights over how to address climate change means that each regulatory action becomes a knock-down, drag-out fight. Ever-changing rules combined with stalled implementation compound uncertainty for sectors that require reliable, stable policy direction to get things done. Their public affairs professionals always have their work cut out for them, but now more than ever, affecting policymaking remains a daunting task. With Delve in your corner, you can better anticipate what’s next.

The Art of the (Trade) Deal

Here’s what you need to know…

In 2016, then-candidate Donald Trump was able to leverage already growing angst on trade to advance his quest for The White House. Now, after nearly four years of trade wars, supply chain disruption, and sanctions, America has its greatest trade deficit in 14 years. Complicating matters is election year uncertainty about what the next presidential administration – be it a Trump second term or a transition to Joe Biden – will mean for how companies conduct business at home and abroad.

This uncertainty clearly has C-suites concerned, with a 2020 Conference Board survey of CEOs from around the world ranking trade disruptions as their second biggest external worry. In the U.S., corporate executives say it’s their fourth biggest worry, tied with the related issue of global political instability. This pain is felt here at home, according to the Mercatus Institute, which determined that uncertainty about shifts in trade policy has resulted in an approximate $53.4 billion decline in foreign direct investment flows to the U.S.

There is no question trade policy instability – already exacerbated by the pandemic – will keep public affairs professionals on their toes in the coming administration, no matter who wins. For the industries and coalitions impacted by trade, the debate is more than just tariffs and saber rattling. The future of America’s supply chain and relations with key allies and competitors around the world is at stake. To help these professionals anticipate what is next in the trade debates, here is what you need to know.

The trade wars have only just begun.

European Friends in Diplomacy, Foes in Trade?: While Joe Biden vows to end the “artificial trade war” launched by the Trump Administration against the EU, experts argue his trade policies would actually make matters worse, citing Biden’s penchant for “preferential treatment for U.S.-made goods, a long list of subsidies to domestic industries, and a ban on foreign companies from government procurement,” policies that Foreign Policy notes are often “widely abused by governments and corporations, and often lead to a spiral of retaliation by other countries.”

Fighting the Red Dragon: Both candidates are vowing increased pressure on China but have different ideas on how to get it done, a phenomenon the Los Angeles Times dubbed the “same diagnosis, different prescription.” The biggest difference, the Times explains, is that Biden would seek more international backing for any retaliation against China, while Trump acts independently. Of particular interest is what will happen to the Trans-Pacific Partnership (TPP), a 12-nation trade deal initiated by President Obama while Biden was vice president and from which Trump withdrew. Because so many Democratic lawmakers and leftwing activists opposed the TPP, it is uncertain whether Biden would consider reviving U.S. participation.

WTO Woes:  President Trump has been very critical of the World Trade Organization, arguing repeatedly that the international body had been too soft on China, and his administration has, “undermined the organization’s highest dispute-resolution forum, the Appellate Body, by locking the nomination of new judges until in December [2019] it was no longer able to operate.” In retaliation, 17 WTO members, including the EU, Brazil, and China, set up their own parallel WTO court without the U.S. Undeterred by repeated measures from the WTO to stifle American action, Trump continued to criticize the organization and promised to act in American interests. While pro-trade advocates had hoped Biden would be a better ally than Trump, critics warn he won’t fix the system, but instead, advance policies similar to those from Trump.

The next president wants you to “Buy American.”

A Trade Consensus … Sort Of: In the 2016 election, Donald Trump stressed the importance of rebuilding American industries. In 2020, both he and Joe Biden are making it a large part of their platforms. In fact, even Democrats once skeptical of protectionist measures enacted by the Trump Administration, including Rep. Earl Blumenauer (D-Ore.), are embracing a “Buy American” approach, urging Biden to consider maintaining some of the previous administration’s tariffs if he is elected. While their ideas may be different on how to transform trade, it seems that, at least for the foreseeable future, “Buy American” is politically popular (75 percent said they would support such policies) and will be around for a while.

It’s Still All About China: With the Trump Administration’s laser focus on China as the coronavirus culprit, a second Trump term would inevitably feature new punitive actions against the Asian nation. These actions extend far beyond tariffs, with President Trump banning federal contracts with companies that use Huawei and other Chinese companies and issuing an executive order attempting to force a sale of Tik Tok and restrictions on WeChat. The public overwhelmingly supports an anti-China approach, with record numbers of Americans holding unfavorable views of China. Even prior to the coronavirus outbreak, 77 percent said they thought tariffs were an important way to discourage U.S. companies from moving abroad. While both parties are open to tariffs, Republicans offer businesses via regulatory reform and tax reform as a carrot, while Democrats instead prefer fees and fines as a stick.

Coronavirus Spurs Continued Supply Chain Scrutiny: Harvard Business Review called the pandemic a “wake-up call for supply chain management.” Indeed, coronavirus has exposed how fragile our supply chain is, especially for delivering resources critical to public health and national security. The Department of Defense has long warned about the problem, with experts citing China’s role in manufacturing and distributing vital drugs, equipment, and supplies. Now, both political parties want to incentivize repatriation of critical industries to the U.S. The Biden campaign has announced a variety of rules it will implement, including filling the Strategic National Stockpile with American-made goods as much as possible. Meanwhile, the Trump Administration says supply chains should be entirely in the U.S. Critics argue that these measures are needlessly costly, while supporters insist it’s in the best interest of jobs and national security for the country. In either case, a variety of interests will want their voices heard, from labor unions eager to have a say in what those jobs look like to corporations trying to make sense of what tax, regulatory, labor and trade conditions may arise.

Sanctions may shift from snapbacks to solidarity, but they’re here to stay.

Iran Deal Drama: Much to the chagrin of European allies, the Trump Administration has acted aggressively to stop Iran’s global threat, backing out of the controversial Obama era Iran Deal, which the administration described as “one of the worst and most one-sided transactions the United State has entered into.” In 2019, the Trump Administration notified the U.N. Security Council that it would “restore virtually all of the previously suspending United Nations on Iran,” using a “snapback” provision in the deal used by the Obama Administration to assure wary Senators. This move drew the consternation of fellow U.N. Security Council members, and few allies have joined the renewed U.S. sanctions regime. Meanwhile, critics argued that restrictions on doing business with Iran make things difficult for the banking and energy sectors, while some scholars and progressive activists have promoted lifting sanctions to benefit both Iran’s and America’s economies. More hawkish voices continue to advocate against any step to normalize relations with Iran, a state they feel is hostile to American interests, allies, and security. While Biden has already promised to “offer Tehran a credible path to diplomacy,” there are no indications that Trump would back down from his strong stance on Iran.

Dealing with Bad Actors: Sanctions on countries engaged in human rights offenses and illegal economic practices are also likely to continue in the next term. The Trump Administration enjoyed broad bipartisan support for its sanctions on Venezuela, and Joe Biden says he’ll push for more sanctions against Maduro’s regime if they can be accomplished multilaterally. While existing sanctions are focused on thwarting public sector economic activity for the socialist regime, some worry that pressures could bleed into the private sector, affecting international businesses and important American trading partners, like India. America also has enacted sanctions upon China for a myriad of offenses, including its military aggression, illegal trade practices, and its ongoing persecution of religious minorities, including Uyghur Muslims. Sanctions are also being used to address China’s forceful takeover of the once-independent Hong Kong.

Russia, Russia, Russia: Meanwhile, many in Washington remain concerned about Russia’s growing influence in the world. Title III of the Countering America’s Adversaries Through Sanctions Act (CAATSA), sanctions Russian oil and gas, defense and security, and banking sectors in response to the country’s aggression in Ukraine and interference in the 2016 presidential elections. Democrats want to take that law a step further with the Defending Elections against Trolls from Enemy Regimes (DETER) Act as another way to punish Russia for what they feel was undue influence in the previous presidential election by banning these individuals from entering the U.S. Given the likelihood of continued Russian – as well as Iranian and Chinese – interference in the current election, the next president will be forced to weigh further sanctions on nations fundamentally at odds with American values while fortifying America’s and the world’s economies as they recover from the global pandemic.

Going at It Alone or Building Consensus: Conventional wisdom and history suggest it is effective to have multiple parties join in sanctions efforts. For the Trump Administration, wielding power via sanctions often meant “going at it alone.” With Democrats more interested in building international consensus, this could mean reversing key efforts by the Trump Administration that lacked support from other countries. This wildly different approach will greatly affect the ability of industries to forecast how policies may change with a new administration, and in particular, what thresholds will need to be met for major overhauls in trade policy.

Prepare for the coming upheaval.

In an increasingly globalized marketplace, trade policy has never been more important – in politics and in business. The variability from one administration to the next, and an ever-changing list of friends and foes on either side of a policy, makes navigating these challenges even more difficult for the public affairs professionals representing industries doing business at home and abroad. Competitive intelligence is the key to seeing what’s around the corner and being prepared to meet it head-on. Delve stands ready to help you tackle the trade upheavals ahead – and anything else the next administration will bring.

Grab Your Paddle. More Regulatory Ping-Pong is Coming

“In a range of large industries — technology, energy, resources, financial services, transportation, trade — the regulatory situation is volatile and prone to significant change,” senior leaders from PricewaterhouseCoopers recently declared. Leave it to accountants to make what could be an understatement of the year. Over the past several decades, the federal government has grown to an unprecedented size, with Americans and U.S. businesses now contending with a $2 trillion regulatory burden each year, equal to 12 percent of overall domestic spending. Adding to that burden is ongoing regulatory uncertainty whose economic repercussions are bad for American families and businesses, holding up key business deals and even restricting Americans’ access to credit.

Indeed, well before the pandemic hit, regulatory fights had intensified, with many rules remaining unsettled and continuously litigated between administrations based on the policy preferences and political expectations from their supporters and allies. In response, each administration’s opponents turn to the judicial system and court public pressure to delay or throw out new rules or changes they don’t like. The result, as a National Association of Manufacturers’ study of business leaders found, is regulatory instability that hurts U.S. competitiveness internationally and economic growth at home.

While forward-thinking public affairs professionals are gearing up for the “mad dash” of the transition period following the November election, they must also prepare for the next match of regulatory ping pong on key labor and healthcare rules in the coming administration. Here’s what you need to know to get ready:

State of Play: With more financial backing and an expanded ability to activate supporters than ever before, an ever-broadening range of advocacy and interest groups can relentlessly litigate rules and regulations – shifting seamlessly from influencing a sympathetic administration to doing battle against the next if it’s hostile to their views. As the PwC leaders wrote, “Many organizations have found that these shifts impact their industry, the specific markets in which they operate, and the general environment for business.” Unfortunately for these businesses caught amid never-settled rules, “hiding under a rock is not a suitable option.”

Labor Loops: Labor standards are among the most ostensible ways that the federal government affects the day-to-day life of working Americans, and as such, are often a top priority for presidential administrations. After just 10 days in office, President Barack Obama rolled back three significant Bush era labor regulations to make it easier for unions, who had strongly backed his presidential bid, to organize. When President Trump took office eight years later, he began an overhaul of these and other major rules enacted by the Obama Administration, none of which remain fully settled if outside interests have their way next year. These include:

  • Among the more contentious of these reversals were the Trump Administration’s actions on the Persuader Rule, created by the Obama White House to force businesses to disclose to the federal government any firms they hired to help in negotiations with organized labor. The National Federal of Independent Business fought the rule in court, arguing that it compromised businesses’ ability to confidentially interact with their legal counsel. When a federal court judge in Texas blocked the regulation from taking effect in 2016, the Trump Administration formally rescinded it in June 2017, calling it a win for the “rights of Americans to ask a question of their attorney without mandated disclosure to the government,” while the leftwing Economic Policy Institute condemned it as a “huge blow to workers’ abilities to negotiate for better treatment on the job,” reaffirming that the two political parties couldn’t be farther apart on the issue.
  • Meanwhile, overtime regulations continue to be caught in the back-and-forth of presidential transitions. According to the Department of Labor, businesses are exempt from paying overtime if their workers are considered “white collar” and make above a certain pay threshold. The Obama Administration more than doubled this cap and enacted a rule that included an automatic update provision increasing it every three years. The business community largely opposed this regulation, as it would have been costly to deem between 2.8 million and 4.2 million more workers eligible for overtime. A coalition of states and business groups opposed the measure, filing suit in district court asking for a preliminary injunction to halt the implementation of the rules. A judge agreed, deciding the Obama Administration overstepped its authority in its rulemaking. With an appeal pending, the Trump Administration updated the regulations in a way that would expand benefits but scale back the number of qualified workers to just 1.3 million. While business leaders heralded it as a major achievement, union conglomerates, like the AFL-CIO, called it a “pay cut for working people” that would compound over time.
  • The National Labor Relations Board, which adjudicates major labor disputes on behalf of the federal government, typically changes control of its five-person board when a president appoints a new representative to fill a five-year term. Currently, there’s a 3-2 majority for the GOP, which recently ruled against “micro-unions,” a multitude of smaller labor groups within the same company that many corporations say make it impossible for them to negotiate unified terms among their employees. Democrats and their progressive allies are strong proponents of micro-unions, as they help expand labor union control in workplaces. If party control shifts, the panel could greenlight micro-unions again, costing industries billions of dollars in new administrative costs.
  • The Joint Employer Rule remains one of the most controversial in labor policy, as it affects upwards of 14 million American workers. In February 2020, the Trump Administration reinstated the decades-old joint employer standard under the National Labor Relations Act that “an entity can only be a joint employer if it actually exercises control over the essential terms and conditions of another employer’s employees.” This rule overturned one created by the Obama Administration that many believed unfairly targeted franchise businesses or those who outsource services, like cleaning and maintenance. The International Franchise Association (IFA), for example, argued that the Obama rule would cost upwards of $33 billion in annual compliance costs and remove 376,000 job opportunities. Labor activists have fought hard against the Trump reversal alongside important allies, including blue state attorneys general like New York’s Attorney General Letitia James. James demanded the Trump Administration stop the implementation of the new rule, while the IFA and other business coalitions joined forces to oppose these efforts. In early September, a Manhattan-based federal judge agreed with the demands of the state AGs, halting the implementation of the Department of Labor’s new test. The Trump Administration has vowed to continue fighting for it, though a Biden Administration would likely return to the Obama era standard that drew the ire of a range of business advocates, who would certainly once again fight a standard they view as unfair and burdensome.

The Fight That Will Never End. Perhaps one of the greatest regulatory uncertainties for businesses’ labor practices is the disjointed implementation of Obamacare. Much of President Obama’s landmark legislation is applied via regulation, which makes key provisions easily reversible once a new administration takes office. The Trump Administration has undone many foundational components of the law, such as the contraceptive mandate, which forced all employers to provide birth control and abortion coverage in their employees’ health care plans, and the individual mandate, which required all eligible Americans to carry health insurance policies. They also reduced the open enrollment period from 90 days to 45, while ending cost-sharing reduction payments and enacting new Medicaid work requirements. Whether via executive action, legislative overhauls with Republican Congressional leaders, or defending their positions in court, the Trump Administration has sought to dismantle sizable portions of Obamacare piece-by-piece, leaving businesses constantly adapting to an ever-changing regulatory environment in health care policy. Even a decade later, many of these fights have only just begun, with activists are vowing to reinstate provisions the Trump Administration has removed, while the presidential campaigns are making it a centerpiece of their electoral efforts – and courts at every level will continue to hear cases about different aspects of the law.

Competitive Intelligence Is Your Spin Move: On each of the aforementioned issues, public affairs professionals must face not only their ideological opponents on key matters but also activists mobilized to stand in their way. No longer can industries wait to find out who is going to be in office in a few months. Instead, they must lay the groundwork among policymakers, interest groups, and aligned industry organizations, understanding that a regulation they support or oppose could end up in the crossfire of other political fighting or draw unprecedented attention from those who wish to thwart their aims. To navigate this uncertainty, competitive intelligence is key. It is not enough to have a few ideas about what an organization wants to see in an administration’s regulatory policy, or even to be closely allied with the decisionmaker. Public affairs professionals need to know far more if they want to prevail: who is on which teams, what their motivations may be, what their tactics are, and how they connect and collaborate with policymakers and other stakeholders. Delve can give you the intelligence advantage to prepare for tomorrow’s matches today – and win.

You Will Have 78 Days

Here’s what you need to know…

Labor Day signifies the home stretch to the election, but here at Delve, we are already thinking about what happens next. After the election comes policymaking that will impact a range of businesses and other interests – both in the frenzy of yearend deals and beyond. To help public affairs professionals prepare, this fall TL;DR will focus on the key challenges and opportunities companies and industries will face after the election is over and as the next administration (and Congress) prepares to govern.

To kick off this series, we focus on the 78 days between the 2020 general election and the 2021 presidential inauguration. If the election results are contested or uncertain, the country could be torn apart – and other policymaking put on hold while the results become clearer. There is also likely to be a “lame duck” legislation session with a potential rush of consequential legislation. Plus, the presidential transition – whether to a second Trump term or the new Biden administration – will spark jockeying to shape policy agendas and the personnel appointments that advance and undermine them.

All of these pose risks and opportunities for public affairs professionals, so to maximize your organization’s impact in those 78 days, here’s what you need to know.

If you think the presidential campaign is contentious now, imagine what it will be like if election results are in doubt.

The Never-Ending Election Night?: With historic numbers of mail-in ballots expected in the 2020 general election, some experts warn that it could take “weeks” to decisively determine an election winner, while others are saying that come election night, it may appear that President Trump could have “won,” only for Joe Biden to be declared victor once mail-in votes are all counted. As our nation treads uncertain waters, the distrust in government and the news media will leave a void, and many will turn to more trusted institutions to fill it.

Electoral Uncertainty Could Force Corporate America To Choose Sides. Amidst the chaos of an unclear result, many Americans, or at least the online activists who profess to speak on their behalf, will demand action. With companies far more trusted than government and increasingly comfortable speaking out on social issues, there will be considerable pressure for companies and their CEOs to speak out and take sides on who won, both directly and through signaling partisan alignment on issues like “voting rights” and election integrity. In an age when “silence is violence,” many consumers will expect trusted brands to take a stand, even when it seems illogical to get involved in politics. A failure to act – or at least signal agreement with the most vociferous voices haranguing them – could result in social media backlash, boycotts, and even pain in the stock market.

Companies Should Prepare Now For The Onslaught. This potential scenario means that public affairs professionals will need to prepare business leaders across the country to have an outsized voice in the weeks between the election and when the winner is announced. To do so, it will be crucial to have a thorough understanding of who your stakeholders are – from political and community leaders to policymakers to financial markets to employees and customers – as well as where they are likely to stand in this debate. Shaping your messaging and engaging these stakeholders cannot wait until the uncertainty have arrived. To add more confusion, while planning for such vulnerabilities, public affairs professionals must also consider how they will navigate and engage two possible transition teams – a prospect unseen in twenty years.

What Congress hasn’t finished by September will be taken up in the “lame duck.” Public affairs professionals need to be ready.

Lame Ducks Can Still Hold Surprises: The headlines for the lame duck are likely to focus on a continuing resolution to keep the government funded and other must pass spending bills like the National Defense Authorization Act and the Water Resources Development Act. However, it is what happens below the headlines that can keep public affairs professionals on their toes. The rush to finish legislation before the term ends is ripe for last minute provisions that can catch advocates off guard if they have not properly assessed the landscape and put the right monitoring program in place. Industries must anticipate that policy fights thought vanquished by one side are seen as unfinished by another. With the right Congressional champion, such fights can return in a blink amidst the lame duck deal making.

The presidential transition is already underway – are you prepared?

As Nominations Replace the Horse Race as Media Obsession, Companies Can Shape The Next Cabinet: It is safe to say that both the Trump Administration and the Biden campaign are already plotting the course for the next presidential term and which allies could fill key executive and judicial posts. When The White House switches party control, cabinet secretaries, including those in seemingly apolitical posts, will always be expected to resign with the notable exception of Secretaries of Defense during active wartime, and even re-elected presidents tend to have considerable post-election turnover. Political prognostication and leaks from campaigns, transition teams and likely administration officials will be ubiquitous. To ensure their interests are protected before nominees are announced, public affairs professionals need a strategy to connect with decision makers backed by thorough vetting of possible nominees and careful monitoring of new developments. Once a nominee is announced, it may be too late to stop them.

Nomination Fights Have Become Professionalized Advocacy Operations – Make Sure You Are Ready to Win: The days when presidents nearly always enjoyed the privilege of appointing whomever they wished for cabinet and judicial positions – absent a glaring character or professional failure – have long since passed. Now, no matter who wins the presidency in November, each of his nominees are likely to face an onslaught of criticism and organized, well-funded efforts to thwart their nomination. Highly connected groups of activists, buttressed by tens of millions of dollars in political funding, stand ready to disrupt hearings, flood Congressional switchboards, and make media plays to get their way. Supportive organizations and their activists will also do their part. Meanwhile, public affairs professionals also have an important role to play in this process. To the Senators considering nominees and the general public watching it all unfold, the voices of respected industry coalitions really do matter, and it can affect perceptions of a nominee as he or she proceeds through the confirmation. Because things happen so quickly, public affairs professionals must be prepared to navigate any potential nominee, as well as anticipate how his or her nomination could go.

Stay calm in the mad dash with the right insights.

The 78 days between the 2020 general election and the next presidential inauguration will bring Thanksgiving, Hanukkah, Christmas, and New Year celebrations. They’ll also bring a policy mad dash when the “lame duck” session welcomes contentious legislative negotiations and last-minute deadlines, as well as a media frenzy on potential appointments for a new presidential term. In today’s fast-changing political environment, public affairs professionals cannot wait until the election is over to think about what comes next. They must see whatever sits waiting for their organization around the corner, whether it is an opportunity or a challenge. Delve’s insights can help them do so.

A Fair Hearing

Here’s what you need to know…

Watching the four major technology industry CEOs be called before a Congressional committee this week, public affairs professionals inside and outside the Beltway could only think, “There but for the grace of the news cycle goes my boss.” Indeed, that hearing was just one of several prominent hearings held this week that highlighted a challenging recent trend to which public affairs teams must adapt to protect their companies’ and industries’ reputation and policy interests.

Congressional hearings as theater is certainly not new, but like many other aspects of today’s civic discourse, the rancor has reached new depths. From how and why hearings are held to how Members of Congress use (and “reclaim”) their time for questions to whether witnesses even get to answer those questions to the speed and volume of reporting and messaging around a hearing, the spotlights on seats at the witness table produce more heat (and less light) than ever before.

To ensure their principal is prepared for this hot seat, public affairs professionals need to dig deeper to ensure they understand their side’s vulnerabilities and challenges, anticipate the motivations and messages of the legislators, and be fully aware of the other stakeholders and advocates looking to use the hearing to their advantage. Because hearings happen in an echo chamber, not a vacuum, here’s what you need to know to navigate them successfully.

Congressional hearings have changed – so must your strategy to survive them.

For most of history, Congressional hearings have been largely focused on legitimate fact-finding. Lawmakers would interview witnesses as they sought to understand current events, solve a problem, or craft legislation. These days, however, Congressional hearings provide lawmakers uninterrupted camera time in the hopes of creating a viral moment their allies and supporters can highlight well after the hearing concludes. And during the Trump Administration, much of the posturing in hearings is meant to prove or disprove the validity of executive action or statements, even when the witnesses are from the private sector.

Disconnecting Congressional hearings from their legislative purpose also means witnesses can be called up time and time again to keep the spotlight on an issue, leaving little hope that a matter is closed once a long day of hearings is done. To be prepared for a marathon of scrutiny that may never end, public affairs teams must have a long-term strategy grounded in consistent, actionable intelligence. Getting and keeping the information advantage offered by such intelligence means following these three rules of hearing survival.

The first rule of hearing survival: know thyself.

Vet Your Witness: Smart witnesses know they should have as much knowledge about their own vulnerabilities and challenges as they do about the others in the committee room. These concern not only the individual testifying but also the organization and industry they represent. Lawmakers, fellow witnesses, and the press may call into question educational and professional qualifications, social affiliations, political leanings, media controversies, social media posts, or articles written long ago in different times. An edgy Facebook post may have gotten laughs in 2008, but it may be out of bounds in 2020. “Liked” a tweet to bookmark it for later reading? Get ready for it to be viewed as an endorsement of another Twitter user’s views. These days, nothing is off limits, and no one is given the benefit of the doubt. Witnesses must accept this reality and anticipate potential challenges it could pose. A thorough vulnerability analysis of the principal and organization ensures there are no surprise questions or fumbles that could have been avoided.

Assess Your Organization and Industry: Lawmakers and the press may also dig deeper into the state of the organization a witness represents, forcing them to deftly and truthfully respond to inquiries about employee welfare, investment practices, hiring standards, profits, executive compensation, and international relationships. Here, again, political contributions and advocacy of the witness, organization, and its affiliated industry can come into question.

A witness should also be prepared to address past organizational or industry problems, as well as provide concrete examples of how these wrongs have been righted and how leaders have taken accountability to correct the course. Throughout preparations and the hearing, public affairs professionals should keep in mind how their organization and industry are currently being viewed by lawmakers, stakeholders, the public, and the press. If current views are negative, they must develop messaging that is not merely defensive, but instead, explains its merits and justifies the validity of their testimony. Without a clear-eyed assessment of your risks and challenges, you cannot survive such questions in a public hearing unscathed.

The second rule of hearing survival: read – and research – the room.

Understand Legislators’ Motivations and Expectations: Hearings are usually intended to generate headlines. So in addition to the obvious logistics of a hearing, public affairs professionals should consider the motivations and expectations of those calling the hearing – whether they are to drive a public narrative, glean actual knowledge about a topic, or merely use the witness as a proxy for the opposing party or administration. There are also interest groups – labor unions, trial lawyers, advocates, industry coalitions – who want hearings called and who provide lawmakers with materials to frame the debate. It is often these same groups with whom a witness’s organization frequently interacts, whether positively or negatively. Keeping a careful watch of these stakeholders’ and advocates’ ongoing activities, messaging, and tactics can give a witness a better grasp on why a hearing is taking place and how others might want to use it.

Know Who is on the Dais: Beyond the hearing setup, witnesses must be keenly aware of the personalities and agenda at play on the dais – who is friend and who is foe, and who has hidden interests or connections? Lawmakers may have a specific policy passion that guides much of their political philosophy and work on the Hill, and naturally, they may have their own conflicts of interest, too. Lawmakers also have sizable research teams, both in their personal offices and on the committee staff, not to mention the materials provided from advocates and lobbyists, so they will be ready to ask the hard questions. Not only should witnesses be prepared to answer those questions, but they should also know why they are being asked.

The third rule of hearing survival: echo chambers require echoes.

Lights, Camera, Action: For many lawmakers, hearings present a rare opportunity for uninterrupted camera time. This new reality can transform committee hearings from fact-finding missions to live performances, complete with dramatic displays and pithy one-liners, often at the witness’s expense. In recent weeks, Americans have seen firsthand the manic tendency of lawmakers to “reclaim [their] time,” giving a witness few or no seconds to answer a question or respond to an accusation made about them.

Unfortunately, lawmakers sometimes have little to no basic knowledge about a topic of a hearing. They typically rely upon notes and prepared questions from staffers, but they might not understand answers a witness gives or the complex issues they are ostensibly trying to explore. To save face, some lean into bombastic and fact-less tirades, leaving the witness no choice but to sit silently as he or she is smeared. If a witness is prepared, he or she won’t be rattled. Instead, the witness will fully expect a lawmaker or fellow witness to act on behalf of a particular agenda and will know how to anticipate, pre-but, and navigate it.

Identify Who Really Drives the Narrative: While they might not have an actual seat at the table in the committee room, there are other players to consider in a Congressional hearing. The media can frame a hearing however they’d like, often looking for “gotcha” questions that embarrass a witness or a sensational exchange that may get clicks without including any substantive content. In the era of soundbites and Twitter quips, a quote can be sliced and diced without context to create a totally imagined reality. Thorough, insightful research can help a principal better prepare by increasing his or her awareness of how the subject matter, an organization, or a witness is likely to be portrayed by the press.

Prepare to Preempt: While activists may not always be in the committee room, they can still shape what happens, whether with in-person protests or by flooding social media feeds with hostile messaging. Effective competitive intelligence is more than watching when it happens. It requires tracking previous activities, projecting their future plans, and anticipating risks to those they target. It also means fully grasping the extent of their influence, as well as questioning their credibility. They, too, have biases and vulnerabilities to consider. 

Use these rules to adapt. Public affairs is now survival of the smartest.

“Always be prepared” is more than the Boy Scouts’ motto. It is how smart public affairs professionals regard the work they must do to be ready for such a moment long before it arises. Organizations need to know what their friends and foes say about them, and they should be prepared to address any attack that could come their way. That takes more than monitoring media mentions. It means understanding how their detractors talk about them, organize against them, and plan to make life difficult for them. This requires a long-term investment in competitive intelligence. By the time you think you need it, it may be too late to learn all you need to know.

If the future of work is remote, when will policymakers login?

Here’s what you need to know…

Coronavirus has changed so much about how we live our lives – and many of those life modifications just may turn out to be permanent. Perhaps the most significant of these changes is the shift among businesses to allow more work to be done remotely. While time-honored traditions like the business lunch may return, many Americans are eager to cling to one particular aspect of the new way of working: teleworking. In fact, 6 in 10 respondents told Gallup pollsters they’d like to continue working from home after the coronavirus crisis is over.

As companies become more comfortable with allowing telework, however, they are finding a surprising reality welcoming them. While some of those surprises are pleasant, such as the increased productivity of remote workers and greater flexibility for parents balancing work with “Zoom school,” there are also unpleasant surprises as companies learn more about the confusing tangle of state and local regulations and unexpected costs awaiting them when employees can work from anywhere.

So before public affairs professionals celebrate their companies’ decision to move all operations offsite or allow employees to work remotely, here’s what you need to know to ensure the decision does not come with unexpected costs and compliance challenges thanks to regulatory regimes still largely based on a business’ physical footprint that is increasingly inapplicable to the future of work.

COVID-19 showed employers productive telework is possible, and employees want to keep the flexibility.

The Big Shift: In 2014, just 6 percent of respondents told Gallup they worked at least 20 hours each week from home. By the time pandemic shutdowns began nationwide in mid-March 2020, 31 percent of Americans were working remotely. In the weeks that followed, that number doubled. According to Pew Research, 90 percent of those who lost jobs due to COVID-19 shutdowns worked in industries or for organizations where telework was either not permitted or impossible. For Americans able to work virtually, technology provided job security – jobs they might have otherwise lost if Internet-based tools were unavailable. For employers, the promising results of this great remote work experiment means many are thinking employees could live anywhere, reducing relocation costs and expanding the talent pool nationwide.

Now What? With a return to normal appearing slowly on the horizon, organizations are preparing for what a future with reduced in-person office presence would look like. According to CNBC, 43 percent of employees said they would like to continue teleworking permanently. Employers sensed this trend, and by late March, 74 percent of company executives interviewed by Gartner said they anticipated at least 5 percent of their company workforces would telework after the pandemic concluded.

Indeed, many organizations have already begun that transition for great numbers of their employees. Most notably, Facebook, which had once given $10,000 bonuses to team members who lived within 10 miles of their offices, says it will now permanently shift tens of thousands of its employees to remote work. Other tech companies like Google, Twitter, and Shopify have also announced making virtual collaboration from home permanent, and because the industry often sets trends for top employers across the nation, many more will likely follow suit to compete for the best talent. However, as organizations cast a wider net in their recruiting and retention strategies, picking the best candidates from far and wide, there are hidden costs and complexities that may surprise them.

Before moving operations online, organizations should anticipate compliance costs and confusion.

Postcards from Paradise: Now unbound from their offices, teleworking employees have the opportunity to pick where they live, not based on where a job may be but on where they want to be. While employees may move to the Florida Keys or atop a mountain in Montana, their mobility comes at a price to their employers. The new virtual workspace will require organizations to be familiar with the rules governing a myriad of potential residences of their employees, both current and future. Benefits like workers’ compensation, disability insurance, and unemployment insurance vary wildly from state to state. So, too, do licensure and business registration requirements, which often are not clear because they were written for a physical world of business with storefronts and official offices, not for a virtual world. Organizations will now have to look into whether or not they’re required to register in each state where an employee lives, which means that 12 employees living in 12 different states could potentially necessitate 12 different registrations, with such costs rising exponentially and unexpectedly for employers.

Even More Tax Men Come Calling: Another complication facing organizations considering virtual work options are the vastly different tax structures for different states and municipalities. Some states, like Texas and Florida, do not have state income tax. Then, there are issues with sales tax, as rates and what is taxable can differ wildly from locality to locality. These considerations include not only e-commerce transactions but also state and municipal sales taxes imposed on service-based offerings such as consulting or digital subscriptions. Still other locations have different withholding and pay stub requirements.

All of these can leave human resources and accounting departments scrambling to ensure they are constantly in compliance with thousands of different tax conditions simultaneously. When all the accounting is complete, many companies will face a shocking uptick in taxes owed and compliance costs – expenditures for which they might not have budgeted prior to a remote working shift. Indeed, many organizations choose their operating base on a location’s tax and regulatory environment. With team members scattered across the country, these considerations are no longer in the hands of corporate officers, but of employees who are moving with other considerations in mind.

Jurisdictional Confusion: A persistent concern among employers remains the correct application of rules that depend on number of employees within a firm, office location, or certain jurisdiction. For example, the Family Medical Leave Act (FMLA). Current regulations say that in order to receive qualified medical leave, an eligible employee must be “employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.” This complicates matters for teleworking employees, whose employers may think that they are not covered by FMLA if they live elsewhere.

According to legal experts at Lowenstein Sandler, LLP, however, the employee’s worksite “is the office to which the employee reports and from which assignments are made,” not where the employee lives. “So, for example, the lone Massachusetts employee who works from her home, but who receives all of her work assignments from her supervisor in New York where the company employs more than 50 employees, may be eligible for FMLA leave,” Lowenstein explains, adding, “State leave laws may impose additional leave obligations upon employers.” Multiply that across various jurisdictions and a plethora of federal, state, and local work rules, which often conflict with each other, and companies shifting to remote work could face considerable legal and regulatory confusion.

Despite a few emerging solutions, policymakers are still applying 20th century rules to 21st century work.

Practical Solutions: In one of the country’s regions most devastated by coronavirus, business advocates have come up with solutions to navigate each state’s tax laws for employees working from home. There’s a growing movement in the tristate area of New York, New Jersey, and Connecticut to allow for reciprocity, so employees can avoid paying taxes in multiple states as they work from home for an extended period. Illinois already has a similar arrangement with nearby states, so employees working there but living in Kentucky, Michigan, Wisconsin, or Iowa may pay taxes where they live. Employees across America may soon demand the Illinois model, especially if they reside in states with low or no income tax but work in states that charge it.

20th Century Rules Meet A 21st Century Workforce: Most of the rules and regulations governing labor in the U.S. originate from 20th century practices and standards. However, the future of work was changing even before the pandemic, and with the American workforce increasingly going virtual, compliance requirements must change, too. This leaves organizations in a tough spot: their workforce demands the kind of flexibility that working from home provides, while the laws and regulations make delivering these benefits difficult, time-consuming, and expensive. As companies try to adapt while maintaining compliance, mistakes are inevitable, leaving them exposed to reputational and legal challenges.

No More HQ2 Competitions? This shift to a more remote workforce could also add complications for states, counties, and cities, who for years have wooed businesses to their territory for the promise of tax income and jobs. Now, employees can vote with their feet, regardless of where the business chooses to locate its headquarters. This shift in power dynamics means something like the Amazon HQ2 competition may be a relic of the past.

Work from home is here to stay, and in the months ahead, we will discover just how many Americans will maintain their telework flexibility. As organizations modify their practices to accommodate this trend, they will have to navigate a compliance landscape that is more complicated than they may have realized. They will also need to consider new challenges that can arise as a result. By understanding these challenges ahead of time, leaders will be able to save themselves time, money, and headaches while creating a safe, desirable workplace that keeps current team members happy and recruits the best and brightest, too.

And the Rockets’ Red Glare

Here’s what you need to know…

As our nation celebrates its 244th birthday, we remember the tremendous achievements of our country and the great sacrifices made by many men and women to ensure America remains strong, independent, and free. While our 2020 festivities may look different than years past, they may still involve the time-honored tradition of fireworks illuminating the night sky.

These days, however, a lot more goes into creating fireworks than imagined by the Chinese monks who accidentally invented them more than 1,000 years ago. In our modern times, bringing fireworks to the people requires navigating a complex public affairs environment that is  a far cry even from 1777, when John Adams suggested we celebrate America’s freedom with “Bonfires and Illuminations.”

Between a complex regulatory landscape, competing pressures from a diverse array of stakeholders, a supply chain reliant on China, and an operating landscape impacted by COVID-19 and recent social unrest, the fireworks industry’s public affairs challenges may seem all too familiar to many of you. So if you are like 80% of Americans hoping to watch some much needed “Bonfires and Illuminations” for Independence Day, here is what you need to know about the challenges the industry navigated to brighten your holiday.

  • Complex Regulations That Vary Greatly Across State And Local Jurisdictions: Just as fireworks colors and displays vary wildly, so too do the laws that regulate them. At the federal level, fireworks are regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and are defined by two categories: “display fireworks” and “consumer fireworks.” At the state level, most states permit some or all types of “consumer” fireworks, but three states (Illinois, Ohio, and Vermont) limit them to sparklers and other novelties, and one state (Massachusetts) bans the use of consumer fireworks all-together. Within states, many counties, cities, and towns set their own additional rules on the purchase and use of fireworks. It is important for suppliers and consumers alike to be aware of the laws, which often include age and time restrictions.
  • Pressures From A Broadening Range Of Stakeholders With Competing Interests: Despite being largely viewed by Americans as a fun summer activity, the pyrotechnics industry has faced mounting pressure by a diverse array of activists with a range of concerns. Environmentalists complain air pollution and alleged traces of chemicals that could be harmful to animals or bodies of water. Other pushback has come from veterans’ groups worried about fireworks triggering PTSD in veterans, as well as animal rights activists who claim the loud explosions can spook pets, causing them to run away. These advocates often argue that Americans should seek alternatives to fireworks, like laser light shows or limiting flames to the barbeque grill.
  • Potential Tariffs And Other Supply Chain Challenges: While most see fireworks as a quintessential American tradition, nearly 95 percent of the fireworks that are detonated in the U.S are imported from China. That is why many in the industry were concerned last summer as President Trump considered including fireworks in a round of tariffs on Chinese imports. Ultimately, they were excluded from the list, but the reliability and safety of its supply chain remains a challenge for the industry. Companies must constantly evaluate the reputability of Chinese suppliers, and remain on-guard for potential counterfeiting that could endanger consumers. Because of the high demand and hyper seasonal nature of the industry, many fireworks suppliers place their orders a year in advance—which has saved suppliers from COVID-19 related inventory issues, but that left the industry exposed to other economic impacts from the virus.
  • Economic Impact Of COVID-19 Lockdowns and Cancellations: Because many suppliers place orders a year in advance, many are now vulnerable to oversupply issues as lockdowns and social distancing regulations have many municipalities cancelling their annual Fourth of July fireworks events. This reality has been extremely painful for businesses that execute professional displays, with one Pennsylvania based company losing over 400 of their events this year, and leaving it unclear if companies in this industry can survive until next year without assistance from the federal government. In contrast, consumer fireworks retailers’ sales have boomed more than 200% higher than last year.
  • Caught In The Middle Of A Social Movement: Like many brands trying to do and say the right things in the current moment, fireworks have become an unintended flash point. In densely populated areas, 9-11 call centers have been overwhelmed by calls complaining about unauthorized fireworks. Some panicked residents are falling prey to conspiracy theories, fearful it could be coordinated police responses, attempts to frame minorities, the early signs of an impending civil war, or gun violence. The reality, though, may be much simpler, with officials pointing to boredom after months of quarantine leading to early, unauthorized observances of the summer holiday. In a time when even such long-held traditions can have new meaning – real or imagined – public affairs professionals must be mindful of how their product is perceived by the public.

With many communities canceling traditional fireworks displays due to the ongoing pandemic, Americans have flocked to the stores to buy their favorite bottle rockets, sparklers, and Roman candles, causing further public safety concerns the pyrotechnic industry and its public affairs representatives may need to address. So, as you safely enjoy fireworks displays with friends and family, remember the pyrotechnic industry has carefully navigated regulatory and reputational terrain that is all too familiar to those in other less explosive industries just to bring us these bright displays in celebration of our Independence.

From all of us here at Delve, have a happy and safe Fourth of July!

p.s. – Want an even greater information advantage at your holiday soiree? Check out 2019’s examination of the plant-based meats joining Independence Day barbeques across the nation, or 2018’s look at the reputational scrutiny facing Bourbon.

The Public Market Disconnect

Here’s what you need to know.

In a late April letter, Citigroup’s global head of credit strategy marveled that “the gap between markets and economic data has never been larger.” Even as stocks are on-pace to exceed previous peaks, 7.5 million small businesses face the prospect of permanent closure and 41 million Americans are out of work. Indeed, the true picture of job losses may be far worse than the unemployment number indicates. Yet major stock market indices are well on their way to regaining pre-pandemic and historic highs. As The Washington Post noted this week, “[M]any market players … remain stumped by the speed of the rebound in stocks amid the wider economic wreckage wrought by the pandemic shutdowns.”

This disconnect illuminates the reality that the stock market no longer serves as a reliable indicator of the strength of the American economy. In recent years, radical transformations in how investments are made have increased the unpredictability of the market, while long-term investors – who often hold funds tied to market indexes or targeting retirement dates – are less reactive to the highs and lows of such volatility. Meanwhile, the introduction of greater regulatory burdens has discouraged companies from going public, with many instead relying upon cash injections from private equity and venture capital to meet their funding needs until well after their companies mature.

This new reality now pervades the investment industry, and it puts private equity and venture capital firms in an important position for the economic recovery. While they long have been the subject of animus and scrutiny, particularly from their unfailing detractors in politics and the media, they now hold a far different place in the economic landscape than many policymakers or the market participants themselves realize. Although these firms might operate in private markets, they now serve a vital public purpose, which means policymakers must see them as the vital economic actors they have become, while the firms must ensure they act as good corporate citizens who can withstand this heightened public scrutiny.

To adapt this new reality and what it means for your interests, here’s what you need to know:

The stock market used to tell us how the economy is doing. Not anymore.

There’s No Business Like Big Tech Business: On March 20, 2020, the U.S. stock market made its deepest dive since the Great Depression, erasing years’ worth of gains and plummeting to fewer than 19,200 points. Today, the Dow Jones Industrial Average (DJIA) is already nearly 6,000 points above its position when President Trump took office on January 20, 2017 and has recovered a great deal of its coronavirus losses. This gain is due in large part to tech giants like Facebook, Amazon, Apple, Netflix, and Google – known colloquially as the FAANG stocks – soaring. Since the March 20th valley, Facebook has grown 57 percent, Amazon is up 31 percent, Apple has risen by 39 percent, Netflix is up 24 percent, and Google has grown 28 percent. Even in the midst of a global pandemic, the stock value of all FAANG companies remains at their highest-ever. The Economist chalks it up to investors “despairing[ly] reaching for the handful of businesses judged to be all-weather survivors.” In this case, those all-weather survivors make up one-fifth of the value of the entire S&P 500 Index – and they have given the rest of the stock market reason to breathe a sigh of relief and start investing again.

Balance of Trade: Over the past several years, significant changes in how and when Americans invest have transformed the economy. Thanks to the creation of 401(k) plans in 1978, average Americans now ride the stock market long-term, directing much or all of their retirement savings to the stock market. In 1990, 401(k)s controlled $384 billion in assets. In just thirty years, that amount has risen to $4.8 trillion, a more than 1200 percent increase in value. Much of these investments are dedicated to index funds or target date funds rather than individual stocks, leaving these funds with a large supply of incoming dollars that must find an investment home, regardless of then-current market conditions. Meanwhile, experts say that high-frequency trading has changed the algorithm of investing, making the markets more volatile and creating exceptionally high peaks– and in the case of coronavirus, exceptionally low valleys – in the stock market. This shift is due to expanded access to technology that has replaced expert traders with computerized models, which some analysts argue can ignore legitimate analysis and common sense.

The American economy is now built in private markets.

The “Listing Gap”: In recent years, the American marketplace has seen fewer Initial Public Offerings (IPOs). In fact, only 3 percent of venture-backed companies went public in the last decade. As Business Insider’s Bob Bryan noted, a 2015 study “found that the US had developed a ‘listing gap’ between the number of firms that should be listed based on the country’s economic development and the shrinking number that are. … At the peak in 1996, there were 8,025 publicly listed US companies; as of 2012 that number was down to 4,102.” This drop came even though historic U.S. economic data suggested “9,538 should have been listed,” leaving “a ‘gap’ of 5,436 listings.” This massive split is due in large part to the imposition of more stringent regulatory frameworks like Sarbanes-Oxley Act in 2002 and Dodd-Frank in 2010, both of which made going public increasingly unattractive to entrepreneurs and investors alike.

The New Business of Big Business: This listing gap has shifted the balance of financial power toward venture capital and private equity, which has allowed start-ups to maintain more autonomy, and investors to avoid added disclosures, all while creating wealth and growing companies without tapping public markets. Indeed, as entrepreneurial financial expert Greg Crabtree explained in a Growth Institute blog post: “Entrepreneurs used to need the public markets for liquidity. That is not the case anymore. There is so much money in the market looking for a place to go that liquidity is easily solved. In every deal we have seen in the last couple of years, the private equity firms have been offering as good of a deal as any public company has in a purchase or investment scenario.”

Private Equity’s Role: These days, companies are often delaying going public as long as they can, thanks to greater funding availability made possible by private equity. There is perhaps no greater example of the powerful role of private equity in transforming this dynamic than with Uber. Bain & Company calls the rideshare company the “poster child” for private equity, as it rode $21 billion in venture capital to a private valuation of approximately $72 billion. Although it had been in business since 2009, Uber Technologies, Inc. took a decade to go public and only did so to access enough capital to pay out investors and shareholders. Bain & Company argues Uber’s examples shows “the advantages of going public no longer outweigh the considerable disadvantages,” as private equity frees up companies to borrow at historically low rates while avoiding the “myriad costs and hassles of going public.” 

Even Public Markets Are Focused on Private Enterprise: Further demonstrating this shifting dynamic is the keen interest in Special Purpose Acquisition Companies (SPACs), which are often and sometimes derisively called “blank-check” companies, which can raise money through an IPO for the sole purpose of buying other companies. According to Pitchbook, SPACs have “accounted for 38 percent of U.S. IPO filing and raised $6.5 billion as of May 20 – more than the total capital raised by institutionally-based IPOs during the period.” Experts attribute some of this interest to the coronavirus pandemic, because “as private companies’ valuations fall and they look for liquidity, SPACs could fill a void left by traditional IPOs,” but like many pandemic-connected observations, the trend began beforehand and has been accelerated by the virus.

As private equity’s role grows, so will public scrutiny.

Leading the Way:  As millions of American businesses face coronavirus lockdown-induced closures, private equity will take center stage to reinvigorate the country’s emblematic entrepreneurship. Private equity will continue to give entrepreneurs the unique space to be creative and to take risks in ways that more traditional investing models do not. As Bloomberg News quipped late last year, “everything is private equity now.” With growing numbers of American businesses from pet shops to real estate agencies already relying upon private equity firms to fund their growth, PE will help reshape the new American economy.

Changing the Narrative: With a crucial role to play in the recovery, private equity must face its reputational challenges head-on. For decades, leftwing policymakers have vilified the private equity industry as reckless gamblers, relying upon the investments of ordinary people to place risky bets and saddle enterprises with unsustainable debt. The media have echoed these claims, with some insisting private equity should be pushed out in the recovery. As private equity’s role in the economy continues to take center stage, that scrutiny will grow with it – but it also means policymakers will need to reach an uneasy peace with private equity. Whether policymakers like it or not, cutting PE-backed firms out of pandemic relief programs and other such measures will not be tenable if the country is to regain its economic momentum.

Still, private equity firms will also need to appreciate their new public purpose. That must begin with refuting its persistent negative image. As The Economist explained in a recent analysis, the PE industry is vital not only for its investors but also for the overall recovery of the global economy. This requires them to engage in efforts long understood by publicly traded companies to bolster public trust. Doing so will require understanding and anticipating the accompanying political and reputational risks and getting ahead of them. That’s where Delve offers them – and anyone looking for competitive intelligence support – a real advantage.

Government Loans Bear Unexpected Public Interest

Here’s what you need to know…

In late April, Allied Progress, a project of activist group, launched, a website calling out public companies that have received federal funds as part of relief efforts for businesses impacted by COVID-19 and the governmental response to the pandemic. The website, which outlines how much these firms received, how much their executives make, the value of their most recent stock buyback, and their 2019 net income, was just the latest indication of efforts to shift public attitudes and perceptions regarding economic aid for businesses hit by the pandemic and accompanying lockdowns.

In March, lawmakers passed historic spending legislation that dedicated trillions of dollars in benefits to remedy coronavirus shutdown losses for businesses large and small alike. Companies had to make a decision: accept loans from the federal government whose terms were unclear, or risk closing forever, leaving behind millions of unemployed workers and their families who relied upon income from these businesses to live?

As the country reopens, there is now more space for media and activists to examine just who got federal relief dollars and how was it spent, leaving companies vulnerable to attacks for their decision to prioritize their survival and care for their employees. Fueled in part by activist efforts such as Allied Progress’ website, the media is feverishly seeking to unearth anyone who receives a loan, with NBC News’ Senior Business correspondent, Stephanie Ruhle, tweeting she will “search … until my last breath on Earth” to match the publicly disclosed EINs of loan recipients with those of hedge funds and private equity firms because, she believed, “these loans aren’t for you.”

The competing pressures on firms will only increase as time goes on and the pandemic, hopefully, dissipates, particularly in sectors that were already boogeymen for partisan actors and many in the media. To ensure public affairs professionals can anticipate what comes next, here’s what you need to know.

There’s no such thing as free money.

Your Receipt of Taxpayers Dollars Will Be Public: Because they’re benefiting from a taxpayer-funded loan, no business will be able to conceal its receipt of the funds. Sen. Marco Rubio (R-Fla.) who chairs the Small Business Subcommittee in the U.S. Senate, has already promised the public will be able to find out who exactly received coronavirus relief loans, and if the Trump Administration won’t do it, his subcommittee will. In fact, concerns regarding fairness and transparency of the programs are already mounting with major media corporations suing the Small Business Administration (SBA) to secure access to government records of the administration of the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Advance.

Prepare For A Potential Audit – By the Government and the Press: Businesses who receive rescue loans related to the coronavirus will experience extra scrutiny, with Treasury Secretary Steve Mnuchin telling Fox Business that the IRS will perform a full investigation of any company that received $2 million or more in loans before forgiving them. If the agency discovers loans were not properly managed by recipients, these organizations may be subject to criminal liability. Meanwhile, the Securities and Exchange Commission (SEC) has launched a “PPP Loan Sweep” of public companies, documenting what qualifications businesses believe enables them to receive a loan. And of course, the press and the public will do “audits” of their own, and organizations must be prepared for what they might find.

As public sentiment shifted, so did the loan terms.

State of Confusion: At first, loans like the Small Business Administration-managed PPP and EIDL were articulated as stopgaps meant to stimulate the economy and keep American workers paid. But as time went on, the Treasury Department and the Small Business Administration issued more than 40 pieces of guidance in the form of “frequently asked questions,” often providing new or conflicting information to overwhelmed businesses trying to make sense of the terms of their loans. New direction on the loan terms just kept coming, even after the federal government had granted up to $500 billion in aid.

In an effort to curb the issuance of loans to those who might not need them, the Trump Administration issued a rule in late April that would require PPP loan recipients to certify that they couldn’t access any other sources of capital without significantly damaging their “ongoing operations.” Other guidance confirmed PPP funds had to be dedicated mostly to payroll, but often varied on how that payroll could be paid and to whom. This persistent ambiguity left business owners confused and countless others excluded from the aid all-together. As The Washington Post noted, some were holding the money or returning it because they couldn’t figure out the rules.

Easier to Opt Out: For some businesses, the money they’d receive from an SBA loan wasn’t worth the confusion surrounding its administration. In particular, many start-ups in Silicon Valley say they don’t have the time to parse through the intricate and ever-changing regulations governing the loans. For others, opening themselves up to liability in the form of potential audits and media opprobrium isn’t worth the risk. Still others say that the loan is too restrictive, limiting the benefits of its intended purpose of economic support while tying the hands of businesses. The result is increased unemployment claims the loans were intended to curb and businesses left to struggle under lockdowns and other restrictions that prevent them from operating during the pandemic. Already, nearly 100,000 small businesses have shut down since the pandemic began.

Public pressure on organizations meant workers lost.

Pressure Point: As Americans return to normal life, increased scrutiny of who took advantage of their eligibility for these loans is inevitable. We are already seeing stories of small businesses who shuttered because they couldn’t receive critical assistance while others the American people never considered could be eligible received them. The Washington Post reports $1 billion in small business loans went to public companies, while Forbes senior contributor Erik Sherman claims many of those corporations had plenty of cash in reserves. Even the Catholic Church, which runs tens of thousands of schools and hospitals across America, came under fire for receiving a PPP loan to pay its employees.

Politicians are also getting in on the blame game, with House Speaker Nancy Pelosi (D-CA) demanding a San Francisco-based property management company return its $3.6 million PPP loan. On the right, conservatives successfully forced Harvard University, which enjoys an endowment of nearly $41 billion, to pay its dining hall employees after furloughing them due to coronavirus lockdowns, even as the college obtained a $9 million loan it ultimately returned under pressure.

Return to Lender: Dozens of major corporations have already returned the money they received in small business loans – to the tune of hundreds of millions of dollars. While food service corporations like Potbelly and Ruth’s Chris were among the more notable names to do so, small businesses also chose to return their loans, citing a desire to avoid public scrutiny and potential audits. These range from think tanks like the Aspen Institute to mattress fabric manufacturer Culp. Experts lament that pressure from lawmakers, media, and the public have shamed impacted companies from receiving a needed benefit that would keep their employees paid. As Allyson Baker, a partner at Venable law firm who has been working with companies to secure government loans, explained to Politico, “There’s another side to it, which is, ‘If I don’t take, I might be laying people off, I might be hurting my business, I might be hurting the people I employ. It is something that a lot of people are struggling with right now.”

In the case of the restaurant industry, their decision to forego federal funds might have spared them the pain of a temporary public relations crisis, but it might have prolonged their financial woes and further endangered the jobs of those they employ. Nowhere is that more apparent than Shake Shack, which caved to public pressure after receiving a $10 million PPP loan they obtained to cover lost wages for their hourly workers. In addition to lockdowns artificially depressing their sales, restaurants like Shake Shack now face skyrocketed costs of meat due to production plant shutdowns – exactly the time of “economic uncertainty” contemplated in the PPP application – which makes the cost of doing business even higher even as consumer demand plummets.

Stay ahead of the scrutiny

Coronavirus forced a lot of organizations to make a lot of tough decisions. While things are reopening, they’re not out of the woods yet. Smart public affairs professionals have anticipated the operational and reputational risks associated with receiving federal funds, and they’re planning their response. A competitive intelligence advantage from Delve is the best tool they have.

The Forthcoming Pandemic of Litigation

Here’s what you need to know…

As Americans begin returning to some semblance of normal life, organizations have more to consider than simply how to resume their usual operations and stay afloat in a shaky economy. Their actions leading up to, during, and after the coronavirus pandemic are now under a magnifying glass, as eager plaintiff’s attorneys prepare a tsunami of lawsuits and class action litigation to take advantage of the sympathy of the courts and frustrations of the public. Since the response to COVID-19 has affected Americans of all walks of life, trial lawyers will have little trouble finding plaintiffs for the cases they want to make.

As Congress considers the next steps it can or should take to help get Americans back to work, the debate over liability protections for businesses is heating up. While that debate remains ongoing, public affairs professionals must quickly mobilize to ensure their organizations or industries are included in reform legislation while simultaneously preparing their companies and industries for an onslaught in litigation. To help you understand and navigate this challenge, here’s what you need to know:

What is liability reform, and why does it matter?

What Is Under Debate: In the context of COVID-19, liability reform is meant to protect organizations against unreasonable lawsuits occurring as a result of the pandemic. For medical facilities like nursing homes and hospitals, lawsuit protection is especially crucial, as they have faced exceptional strains on their health care systems due to labor and resource shortages amid heightened demand. Manufacturers say they also deserve relief from potentially onerous liability, as they quickly retooled their operations to make needed products for the first time, such as personal protective equipment. And small businesses worry that, should employees or customers contract COVID-19 despite their best efforts to maintain safe and hygienic facilities, their organizations could crumble under the costs associated with fighting lawsuits. However, labor unions and trial lawyers say corporations already enjoy too much protection under the law, and liability reform would only further inhibit employees’ and the public’s rights to access the courts for financial remedy.

Why It Matters: Business advocates have long argued that tort reform, legislation that restricts excessive or meritless litigation, improves productivity, lowers consumer costs, and increases employment opportunities. In the midst of an extraordinary public health crisis, advocates say that such efforts are not necessary merely for success but also for survival for many organizations. Coalitions ranging from the National Restaurant Association to the National Retail Federation pointed out in a letter they sent to lawmakers that “without Congressional action, the threat of litigation will mire our recovery and negatively impact the economy writ large by injecting great uncertainty and risk into the ability of our businesses to operate during the pandemic.” The U.S. Chamber of Commerce argues that without significant liability reform, businesses will lack the confidence to reopen, exacerbating America’s current economic hardships. On the other side, powerful labor unions and trial lawyer groups stand ready to fight any measure they believe artificially limits workers’ ability to sue their employer.

The outcome of this battle could determine if and how the economy begins to rebound after artificial shutdowns saw nearly 40 million Americans unemployed and hundreds of thousands of businesses shuttered. As business magnate and former Democratic presidential hopeful Michael Bloomberg noted, “It’s essential that companies take actions that protect their employees,” but “Even those that take every conceivable precaution … will face unprecedented liability concerns that could paralyze investment and prevent them from rehiring workers they may have laid off or furloughed.”

While Congress debates, states are leading the way.

The State of the Capitol Hill Debate: Senate Majority Leader Mitch McConnell (R-KY) has been vocal about the need to pass meaningful liability reform to stave off frivolous lawsuits, arguing a “lack of protection for businesses owners from lawsuits related to the coronavirus would ‘dramatically slow’ the economic recovery.” Republicans on Capitol Hill have said they will not consider any forthcoming coronavirus response bills that do not prominently feature measures to protect businesses from frivolous lawsuits. The White House has indicated President Trump is supportive of Congressional GOP efforts to mandate liability reform as a part of any future coronavirus legislation.

While Senate Minority Leader Chuck Schumer (D-NY) has minimized such an effort as merely creating “immunity for big corporations,” some Congressional Democrats have vocalized a willingness to consider litigation protection in future COVID-19 legislation. According to The Wall Street Journal, Rep. Ro Khanna (D-CA) is “pushing legislation that would require OSHA to force companies to develop worksite-specific coronavirus-protection plans,” and that he is “open to a liability shield for companies that comply with strong mandates.” On the other side of the aisle, Rep. Michael Turner (R-OH) has introduced legislation to shield employers from lawsuits associated with employees catching COVID-19 after returning to work, so long as the employer is abiding by state and federal laws.  

States Are Already Providing Protections, Especially To Healthcare Industry: While federal lawmakers weigh different legislative options, states are taking matters into their own hands. Governor Gary Hebert (R-UT) has signed what may be the broadest protections into law so far, “provid[ing] businesses liability protection stemming from an individual contracting coronavirus on their property,” which ensures business owners are “immune from civil liability for damages or an injury resulting from exposure of an individual to COVID-19” that occurs on their premises, as long as there is no reckless or intentional infliction of harm.

Time Magazine reports that at least 15 states led by governors of both parties have implemented liability protection for nursing homes, maintaining exception for “gross negligence and willful misconduct.” In New York, the state’s hospital association secured special protection from both civil lawsuits and criminal prosecution, as the health care system was overwhelmed by the worst outbreak of COVID-19 in the U.S. While they’re not immune to prosecution for intentional misconduct or gross negligence, medical professionals and facilities are protected from liability concerning “decisions resulting from a resource of staffing shortage.”

Democratic governors in Illinois and Michigan, not typically known for their support of tort reform, have enacted measures to protect health care professionals during the pandemic. Meanwhile, Republican legislators in Louisiana are pushing a bill that would provide liability coverage to health care workers, some real estate owners, and certain companies for actions taken during the pandemic. In Massachusetts, state legislators are considering offering liability immunity to higher education institutions who have offered emergency aid. 

Pandemic-related lawsuits could impact recovery for years.

The Lawsuit Pandemic Has Already Begun: In an editorial, The Wall Street Journal points out that the lawsuit pandemic is already well underway, explaining, “Trial lawyers are filing suits against emergency-supply manufacturers (false advertising), colleges (refusal to refund student fees), cruise lines (emotional distress), retailers (wrongful death), nursing homes (negligence), and governments (denial of hazard pay)—and much more.” Even in the early days of the pandemic, trial lawyers had begun filing class action lawsuits against a wide array of institutions and industries. Some plaintiffs are angry that airlines are providing credits instead of refunds to their customers, while others claim that they were wrongfully denied federal stimulus payments. The entertainment industry is already being hit, with SXSW organizers facing a lawsuit for its refusal to refund tickets due to the festival’s cancellation. Law 360 says these cases are only the tip of the iceberg, with Adam Levitt, a partner at Chicago-based plaintiff’s firm DiCello Levitt Gutzler LLP, telling the outlet they’ve “never been busier.”

Lawsuits Are A Multi-Year Process: With or without liability protection, lawsuits that do move forward may take many years, costing both sides an inordinate amount of time and money. In fact, there is significant historical precedence for protracted legal battles lasting long after catastrophes and crises take place. These cases can take many years to make it through the courts. In fact, it took a group of 35 plaintiff’s attorneys more than 11 years to collect just $20 million in payments for 120,000 claims against the U.S. Army Corps of Engineers and construction firms whose alleged failures resulted in widespread destruction during Hurricane Katrina. For a group of more than 150 home and business owners in New York, fires sweeping the Rockaway Peninsula of New York City before or after Hurricane Sandy meant spending seven years fighting two of the state’s utility companies through multiple courts just to secure a jury trial for their claim. As businesses and governments spend time and money on these suits, they are not focused on the recovery.

An Ounce of Prevention is Worth the Investment: Savvy public affairs professionals have anticipated this lawsuit pandemic since COVID-19 began. They understand the tremendous financial and reputational damage that lawsuits both valid and frivolous could pose to their companies and industries, and they know that being armed with the best information possible is key to weathering the storm. Every organization needs a competitive intelligence advantage to make the case to lawmakers that they should be included in any reform legislation and to protect themselves against litigation risk. Delve can help by going deep beneath the surface of the news to find out which industries and companies are being targeted and why. We use a custom approach to uncover the motivations and organizing tactics of those posing a risk to organizations, as well as the teams they’re assembling to make it happen, ensuring you are well-positioned to prepare for the risks and fight back successfully should they arise.