Republicans plan to launch a variety of investigations into the U.S. Chamber of Commerce and many of its largest member corporations if they retake the majority in the House of Representatives this November. The probes, said a GOP member of Congress and multiple Republican operatives who requested anonymity to discuss plans that have yet to be made public, will marry Republicans’ newly formed hostility to the Chamber with the party’s mission to undermine the growth of the ESG investment sector.
The power of ESG — which stands for environmental, social, and governance — criteria to shape company valuations and behavior has become a major source of consternation among conservatives, who argue that companies that follow it are breaking with their fiduciary duty to maximize profits for investors.
The Chamber has infuriated Republicans by endorsing ESG criteria. “Today, for many companies, climate change and carbon emissions impact long-term value, thereby becoming a factor that retirement fund managers should take into consideration,” wrote a Chamber vice president in a typical statement in July 2020.
The congressman highlighted what he saw as the downfalls of that approach. Republicans accuse ESG advocates of using ESG criteria to punish American energy companies, only to then give an advantage to large, foreign energy companies over which the U.S. has little oversight anyways.
“How is it again that you can discourage investment in American energy when you own, or when you’re controlling board seats, of an American energy company, but you’re pushing it offshore to a Chinese energy company? Tell me you didn’t violate your fiduciary duty somehow,” said the congressman. “Then you throw that over into Judiciary [Committee hearings] and say, how do you reconcile this from an antitrust perspective? How can somebody actually be duty-of-care to the shareholders of one entity when you’re duty-of-care to the Chinese Communist Party’s-controlled energy company?”
“There is not going to be much to investigate,” said a Chamber spokesperson. “The Chamber is at the forefront of fighting the SEC climate, human capital and similar disclosures and believes fiduciaries must focus on maximizing return.” House Republicans, though, think the Chamber is having it both ways, criticizing the Securities and Exchange Commission rule but supporting the principle. “The U.S. Chamber of Commerce supports climate policy that includes the disclosure of material information for investors to use,” reads the Chamber’s comment on the SEC’s proposed rule changes that would increase disclosure requirements for ESG funds.
The growth of the ESG industry has led to some counterintuitive results, as companies have learned to game the metrics: Some private prison companies, for instance, score well on the criteria.
On Thursday, 14 state treasurers issued a joint statement condemning Republican efforts to combat investor advocacy, which has led multiple states, including West Virginia, Idaho, Oklahoma, Texas, and Florida, to restrict state treasurers from doing business with funds that deploy ESG screens.
“Disclosure, transparency, and accountability make companies more resilient by sharpening how they manage, ensuring that they are appropriately planning for the future. Our work, alongside those of other investors, employees, and customers have caused many companies to evolve their business models and their internal processes, better addressing the long term material risks that threaten their performance,” the statement reads. “The evolving divide suggests that there will be two kinds of states moving forward: states focused on short term gains and states focused on long term beneficial outcomes for all stakeholders.”
The Chamber announced recently it would devote $3 million toward the election of Mehmet Oz — who goes by Dr. Oz — in Pennsylvania, and funneled it through the Senate Leadership Fund. The move was generally seen as an olive branch to Senate Minority Leader Mitch McConnell, R-Ky., who is linked to the super PAC. They have so far made no similar contribution to the House Republican super PAC.
Today’s GOP war on the Chamber of Commerce represents a stunning turnaround from just a few years ago, when House Republicans and the Chamber were aligned on just about everything. And it comes in the wake of the collapse of the National Rifle Association, leaving two of the GOP’s most powerful outside armies largely disarmed. But as the Republican Party and the Chamber have polarized to opposite sides of the conservative movement, a deeper disagreement between the two — dating back to the movement that formed around Barry Goldwater in the 1950s and ’60s — has been reawakened.
At the height of the New Deal era after World War II, Democrats and liberal Republicans were united in the belief that cooperation between big business, big labor, and government was the secret to the era’s economic boom. John Kenneth Galbraith, the nation’s most famous economist and later President John F. Kennedy’s adviser, dubbed it “The Affluent Society” in a 1958 book that was both a cultural and a political sensation.
Arrayed against this coalition was an aggrieved and increasingly well-organized network of small and medium-sized businesses that felt they were getting squeezed by the big guys. What was good for General Motors, they said, was not necessarily good for them.
Big Labor and the New Deal coalition thought that they were living in a time of peace between capital and labor, but capital always knew that they were engaged in a strategic ceasefire, having been crushed by the Depression and unable to compete against the rising strength of the modern government.
But there was no real peace, and big business launched its counterattack on both labor and government in the 1970s, ushering in the neoliberal era. The Chamber, this time allied with small and medium-sized businesses, played a major role in the counterattack, with the heir to the Goldwater movement, Ronald Reagan, enacting a wish list of big business policies, deregulation, and tax cuts.
Jamie Galbraith, who followed his father into the economics profession, served as an aide to the Joint Tax Committee in Congress and recalled the Chamber at the time as an “ultra supply-side, ultra Reagan revolution organization with essentially no compromisers. … The Chamber was just down-the-line for the lowest possible taxes and most complete deregulation and privatization.”
But the Chamber started drifting back to the center in the early part of the Clinton years, endorsing the administration’s health care proposal known as “Hillarycare,” for the first lady. “All of a sudden, the Chamber just became something wholly different than whatever I perceived them to be. And I know we were very upset about it,” said former Texas Rep. Dick Armey, the No. 3 Republican at the time.
In the wake of the endorsement, recalled one Republican operative, a member of House Republican leadership asked to meet with the Chamber’s board. Instead of delivering a standard political speech, he began by asking all the staff to leave the room. “He just ripped them a new asshole,” said the operative. “How could you possibly go down this anti-free enterprise, left-wing trail,” the GOP leader demanded. (The operative recalled it was Armey, but Armey said it may have been Tom DeLay. I couldn’t track down DeLay in time for this story.)
The dressing down worked. Richard Lesher had run the organization since 1975, but after Republicans took power in 1995 after the Gingrich Revolution in 1995, Lesher was eased out. “When we took the majority, of course, they came over, reminding us that we were the best friends we ever had — yakety yak,” Armey said. “When you come into the majority, you have no shortage of newfound friends.” The Chamber was a reliable Republican ally for the next roughly 20 years, up until just the last few.
(DeLay later launched what he dubbed the K Street Project, which was an effort to bring all of Washington’s lobbying industry under Republican authority, dictating that firms fire Democratic lobbyists or lose access to the GOP. “That was a boneheaded idea, and you can quote me if you like. I mean, who in the hell did he think he was, telling people who they can hire and who they can’t?” said Armey. “I objected to it in a leadership meeting. And my objections were not well received.”)
The tensions between big and little businesses never fully subsided, and the same network of smaller businesses that aligned themselves with Goldwater, forming the more conservative wing of the GOP, organizing behind Donald Trump in 2016 and beyond. The small and medium-sized businesses, particularly manufacturers, have also long been opposed to free-trade policies, as they lack the capacity to offshore their own production and can’t compete with cheaper products from overseas.
The conservative Republican member of Congress said that he didn’t begin as an active opponent of the Chamber, but didn’t see them as a natural ally either. “Frankly, as a business guy, I couldn’t join some of the efforts nationally, because they were at odds with small companies,” he said. “They were really pushing for a long time this pro-China trade policy, which was great for General Motors, but it was bad for everyone in the supply chain. And it was really gutting domestic manufacturing. And it was the same with NAM” — the National Association of Manufacturers — “a lot of their members had had an organization that was working against their interests. And the biggest, biggest members have certainly benefited from a lot of this stuff. And I think that’s a big part of why Trump was so well received by the small and medium business community.”
The Chamber is among the biggest spenders on lobbying activities in the country, but House Minority Leader Kevin McCarthy, R-Calif., and leading Senate Republicans like John Cornyn of Texas regularly take public shots at them. The Chamber’s top lobbying job, typically one of Washington’s plummest K Street assignments, sat open for several months until it was filled by two-term, back-bench former Rep. Evan Jenkins, who, like many Republicans from West Virginia, began his career as a Democrat. He was most recently a judge in West Virginia, having left the House to pursue an unsuccessful run for Senate in 2018.
In 2020, the Chamber endorsed 23 House Democrats in swing districts, a sharp break from the past practice of endorsing a nearly exclusive slate of Republicans, with one or two Democrats thrown on the list for a patina of bipartisan perception. The pivot came after the Chamber had been unsuccessful in stopping Trump from getting the 2016 GOP nomination — with a top Chamber lobbyist even endorsing Hillary Clinton and speaking at the Democratic National Convention. The business group delighted in Trump’s tax cut, largely written by Chamber ally Speaker Paul Ryan, but once Democrats took control in 2018, the Chamber began hedging its political bets by backing moderate Democrats.
“There isn’t a group that has less influence over Republican members of Congress at this point than the Chamber of Commerce.”
“The Chamber of Commerce, after what they did in 2020, they basically became persona non grata in the conservative movement,” said one well-connected Republican operative. “There was already a split in the conservative movement, who were never fans of the Chamber, but you had more moderate members and even those Republicans, particularly the ones in the House, have had enough of the Chamber.”
“There isn’t a group that has less influence over Republican members of Congress at this point than the Chamber of Commerce,” the operative, who asked for anonymity due to their work on political campaigns in which the Chamber gets involved, added. “That certainly wasn’t the case a few years ago.”
That the Chamber feels at home in the Democratic Party ought to be cause for concern for the party’s progressive wing, Galbraith said. “The extirpation of any old line liberalism in the Democratic Party may have opened up space for them,” he said.