Corporate America on the stump.

• Author: Macdonald, Lloyd
• Position: Campaign contribution regulations - Includes related article - Legal

It's election year, and your CEO's itching to throw company support behind a pro-business candidate. But before you cut that check, bone up on the intricacies of federal election law.

You're the CFO of a company with rapidly growing interstate business in a highly competitive market. The CEO walks in and vents her frustration about the "unresponsive and uninformed bureaucrats and politicians" she says are compromising the very future of the company. She states in no uncertain terms that she wants to change things, beginning with the present congressional delegation, and she wants to raise the level of understanding about the local community's economic stake in the company's future profitability. She's prepared to act and wants a plan now. But first she wants to know what the company is allowed to do. What do you tell her?

Contrary to conventional wisdom, corporations can put their political two cents in. In fact, in spite of the ban on direct corporate contributions to federal candidates, federal law allows companies to engage in political activities that range from spending money on "educational" activities for specific political causes to directly soliciting campaign contributions from shareholders and senior corporate personnel.

There are several key concepts, however, that you need to keep in mind to successfully navigate the sometimes tricky waters of the federal election law. Your company can say and do much more with its executives, senior administrative personnel, shareholders and their families (the so-called "restricted class") than it can with its employee corps (the "nonexempt class") or the general public. And as long as the company engages in "issue advocacy" where the general public is concerned - that is, educating the public on business issues - rather than "express advocacy," which means championing a named candidate, the company can spend its money within the bounds of federal election law. Given this framework, your company has several options for lending its political support.

Helping to elect public officials may be the most direct way for your company to get action on its concerns. The law allows your company to communicate directly with the restricted class to expressly advocate for an identified candidate. And you can coordinate the content and distribution of the materials with the campaign of the company's target candidate, although you risk "contaminating" subsequent communications to the nonexempt class and the general public, where this kind of coordination isn't permitted.

Your company can also directly solicit its restricted-class members to make individual contributions. In federal Senate and House races the limit on individual contributions is $2,000 ($1,000 for the primary, whether or not one occurs, and $1,000 for the "final"). Spouses and children can contribute separately. Although your company is subject to the limitations of soliciting only the restricted class and the prohibition against bundling (see box on page 49), its solicitation can generate significant and visible support for a candidate.

You should exercise some caution, however, even when you're communicating with the restricted class. The communications should...