The largest US companies are preparing for a wave of congressional hearings after the midterm elections, as Republicans vow to pursue investigations into businesses’ environmental and social positions.
Control of both houses of Congress could swing to the Republicans after midterm elections on Tuesday, as polls show Democrats falling behind in several potentially pivotal races. A GOP majority in the House or Senate would put Republicans in charge of committees with the power to subpoena individuals and documents.
Although conservative lawmakers have pledged to put the administration of Joe Biden under the microscope — and investigate matters including alleged tax violations by the president’s son Hunter and the FBI’s decision to raid Donald Trump’s Florida home — big businesses are also bracing for increased scrutiny of their internal policies, investment decisions and hiring processes.
Lawyers for financial institutions and technology companies have been training executives in recent weeks on how to respond in a televised grilling from politicians, according to people familiar with the matter. And just days out from the midterm elections, Republican senators including Tom Cotton from Arkansas have written to law firms urging them to preserve documents related to environmental, social and governance initiatives “in anticipation” of investigations.
“Over the coming months and years, Congress will increasingly use its oversight powers to scrutinise the institutionalised antitrust violations being committed in the name of ESG, and refer those violations to the [Federal Trade Commission] and the Department of Justice,” Cotton, along with senators Mike Lee, Chuck Grassley, Marsha Blackburn and Marco Rubio said in a letter sent to 51 law firms on Thursday.
“It used to be when Republicans took control of congress that meant that corporations could breathe a sigh of relief,” said Robert Kelner, the chair of Covington’s election and political law practice, who advises big banks and prominent companies. “That has changed.”
While the public statements made by Republican candidates point to an increased focus on financial institutions and big tech, “large swaths of corporate America” could be forced to testify in front of Congress, one high-profile lawyer said, and face accusations of “prioritising environment and social causes rather than their fiduciary responsibilities to investors”.
“Where you invest and put a plant, where you shoot a movie, all of those issues are now being made political,” another lawyer said, adding that companies’ public positions on everything from gun control to abortion to voters’ rights will be in the spotlight.
While congressional committees cannot compel companies to change their practices, it is a crime to mislead Congress, and evidence presented to lawmakers could be used in litigation or investigations from regulators such as the Securities and Exchange Commission.
As well as being coached for appearing on the Hill, executives are being trained on how to act in recorded depositions, which have featured in the House select committee investigation into the attack on the Capitol on January 6, 2021.
“All of our congressional investigations clients are very aware of how video tapes were used during the select committee hearings,” Covington’s Kelner said.
If a Republican-controlled Congress puts pressure on businesses to revamp their environmental or social commitments, the Biden administration and regulators’ priorities could change in response, said Frank Ryan, Americas Chair at DLA Piper, with greater oversight on climate and energy issues in particular.
The bottom line is that businesses in a variety of industries should prepare for a period of shifting enforcement focus,” he said.
Reginald Brown, who has prepared 14 chief executives and high-profile individuals for congressional hearings over the past year, said companies could also face increased scrutiny by the committees’ current Democratic leadership in the weeks between the elections and the swearing-in of new senators and members of congress in early January.
“You could see a few last gasp hearings during the lame duck period . . . There may be a renewed sense of urgency,” said Brown, a partner at Kirkland & Ellis.
But businesses may be spared if the next Congress is more focused on investigating government departments and officials in the Biden administration, he added: “Democrats investigate companies and Republicans investigate Democrats.”