Companies large and small are scrambling to respond to the coronavirus pandemic, including understanding the emerging economic risks that could affect their profits, their operations and even their very existence.
Add another burden to public companies’ growing roster of risks: Congress.
As lawmakers and the Trump administration prepare additional legislative responses to the crisis, there is a growing danger that extraneous items affecting public companies could be slipped into the bills.
The White House and congressional leaders are racing to approve what is likely to exceed $1 trillion in aid for displaced workers, the airline and tourism industries, healthcare providers, and more. But some lawmakers are looking to exploit the crisis to ensure non-coronavirus provisions affecting public businesses become law, too.
For example, House and Senate Democrats are pushing provisions relating to corporate governance, compensation and corporate finance restrictions, including bans on stock buybacks and prohibitions on the repricing of named executive stock options.
Although fiscal relief legislation is still under development, there is risk that any industry receiving federal financial support could face limits on stock buybacks, executive salaries and new disclosure requirements. Lawmakers also want the federal government to take equity stakes in public companies that accept federal aid, like the warrants Washington received from financial institutions that accepted Troubled Asset Relief Program funding in 2008 and 2009.
House Financial Services Committee Chairwoman Maxine Waters, D-Calif., released six pages of proposals that she said would “help the economy during the COVID-19 crisis.” Among them: Require public companies to disclose their risk of supply chain disruption, ban stock buybacks and dividend payments, and impose new restrictions on executive compensation and golden parachutes.
Other Waters proposals would mandate human capital, environmental, social and governance disclosures.
Sen. Sheldon Whitehouse, D-R.I., and seven other Democratic senators wrote to congressional leaders this week saying federal aid for the U.S. airline and cruise ship industries should include requirements to address pollution.
“Given the poor environmental records of some companies in these industries, we believe that any such financial assistance should be paired with requirements that companies act in a more responsible fashion,” the letter said.
Lawmakers on both sides of the aisle are reluctant to write a blank check to corporations affected by the crisis. Congressional leaders in both parties want aid targeted at making it easier for businesses to retain workers even as the economy stalls – and to be positioned to rehire laid-off workers once the health crisis ends.
But some in Congress want to go further than ensuring companies maintain their payrolls. Sen. Elizabeth Warren, D-Mass., wants any company that accepts federal relief to permanently prohibit share repurchases, install workers on boards of directors and require shareholder approval for political expenditures.
“Let me be clear: We’re not doing no-strings-attached bailouts that enrich shareholders or pay CEO bonuses,” Warren tweeted.