Harris vs Trump: What should companies expect from the next US administration?

‘I think we can safely say the situation is as clear as mud,’ says Charley Grant, editorial and media access director at AlphaSense, in a statement that neatly sums up the campaign landscape – even as we close in on November 5. In an election where neither candidate has a significant lead, it is expected that narrow victories in a handful of swing states will likely determine the next US president. But the final result will have major implications for all US companies.

Ben Maiden, editor-at-large at Governance Intelligence, tells sister publication IR Magazine that neither candidate has put out very specific details on his or her regulatory agendas – which you wouldn’t necessarily expect him/her to. Still, he says, ‘you do know broadly where each one is headed.’

Changing faces
June Hu is special counsel at Sullivan & Cromwell, where she co-ordinates the firm’s ESG practice, advising on corporate governance, activism and takeover defense. The election ‘will have the most direct impact on the approach and composition of the federal executive branch, including federal agencies like the SEC that have been active in the ESG space during the Biden administration,’ predicts Hu.

Maiden also talks about potential changes around who leads key federal agencies if Trump wins. ‘Under Biden, the general direction has included tougher environmental regulation and tougher antitrust oversight from the Federal Trade Commission (FTC), including, if you saw last week, the US Department of Justice (DoJ) supposedly considering breaking up Google,’ he points out.

‘The DoJ this year also launched a pilot program to encourage more whistleblowers to report corporate wrongdoing. You’d expect that to continue if Harris wins.’

In a Trump win, Maiden describes things as likely ‘very different’ from a regulatory point of view. ‘For a start, you’d get a new head of the SEC and the FTC,’ he continues. ‘Dan Gallagher has been reported as the potential new head of the SEC if Trump wins. He was a commissioner there before and his bio on the SEC website says, He addressed the creeping federalization of corporate governance matters as well as the concerted efforts of special interest groups to manipulate the SEC’s disclosure regime to advance their political agendas. That gives you an idea of where he would be coming from.’

Republican change at the top of the SEC ‘would almost certainly mean the end of the climate-risk disclosure rule,’ says Maiden, though whether it would quietly disappear – ‘stay on hiatus as it is now’ – or whether a new head of the SEC would want to make a point of specifically nixing it, depends on the message he or she might want to send, he adds. Whatever happens with that rule, there remains the possibility of California climate legislation (currently facing litigation) or CSRD becoming a de facto requirement for companies anyway.

‘Another big thing that might be of significance to our readers is that, if there was a change of leadership in the SEC, there could also be change around 14a-8 decisions,’ continues Maiden, explaining that the SEC in recent years ‘reinterpreted’ those rules in a way that has ‘enabled a lot more proposals to get onto proxy statements’. That, Maiden says, is one of the things that would very quickly change [under Trump]: ‘word would come down from the commission to the staff to take a more restrictive interpretation that would prevent more resolutions getting onto the proxy statements.’

No trifecta
Despite the potential for leadership change at federal agencies, Hu points out that some other developments could stem the impact a new leadership might have. ‘I’m not expecting the presidential elections, at least in the near term, to alter trajectories of three key constituencies with considerable power to shape ESG policies in the US,’ she says.

‘Federal agencies, regardless of who’s leading them in a few months, will need to be mindful of the headwinds we have seen from the federal judiciary. The Supreme Court has recently issued decisions placing significant limitations on the power of the federal agencies. We have also seen agency rulemaking being challenged and overturned in the circuit courts.’

Then there is the federal legislature. ‘Unless there is a ‘trifecta’, where the president and a majority of both houses of Congress are from the same party, it will continue to be difficult to reach consensus on new legislation,’ notes Hu.

Her third point comes down to the growing polarization being seen around ESG at the state level. ‘If it remains difficult to make headway on legislation or regulations at the federal level, there will be more emphasis on the states,’ says Hu. Talking about the widening polarization on these issues, she adds that, over the last three years, there has been a trend of ‘red and blue states adopting laws and policies that seek to promote opposing policy objectives’.

All this creates a tricky maze to navigate, says Hu – and something she doesn’t see improving regardless of which candidate takes the win. ‘Today, many companies are facing significant uncertainty when navigating the complex and evolving international, federal and state regulatory landscapes on ESG issues, in no small part due to the actions of these three constituencies,’ she explains. ‘Unfortunately, regardless of the election results, I don’t see that uncertainty going away anytime soon.’

Like Hu, Maiden also points to Supreme Court rulings that companies should keep in mind. ‘SEC versus Jarkesy basically held that if an SEC enforcement could involve a civil penalty, the SEC has to bring that into federal court, rather than go through its in-house administrative process,’ he explains. ‘This makes it more difficult for the SEC to bring those types of cases because, in federal court, there are certain procedural standards that make it easier to be a defendant, which they don’t have in house courts. That’s potentially going to knock the wind out of SEC sails in terms of enforcement.’

Another case was the Supreme Court’s ruling on the Chevron doctrine. This, says Maiden, ‘limits the power of federal agencies to interpret federal laws and administer them in the way they see fit – essentially undermining the whole federal administrative regulatory state.

‘That is going to have a major effect on regulation throughout this administration and beyond.’

Cryptocurrency and marijuana
Even with the many uncertainties, Grant points out that the electorate, as well as companies and investors, largely know what to expect from each candidate: ‘Harris is new as a presidential candidate, but she’s not new on the scene. Donald Trump has been a mainstay of US politics for almost a full decade now. They’re not exactly unknowns.’

For Grant, it is key that companies look beyond the rhetoric and consider how likely a policy is to actually make it past the line.

‘You have to evaluate whether you could pass Congress with your policy proposals, and the one thing that seems pretty clear in the national polling is that the Senate seems likely to remain Republican,’ he notes. This means Harris policies like raising corporate taxes to 28 percent ‘would obviously be very impactful for public companies and IR teams – but, if the Republicans take the Senate, it is also very unlikely to happen’.

With that in mind, he also points to the down-ballot races, which he says get less attention, but matter ‘almost as much’ when it comes to taking what the presidential candidates have expressed as their views and turning that into actual policy. 

There are, of course, specific sectors where it is easier to see what might happen under one administration or another. ‘If you’re in the renewables sector, for example, a Harris win is great news and a Trump win means all the gains from the Inflation Reduction Act are at risk,’ says Grant. ‘Trump has been pretty friendly with cryptocurrency. Harris seems more likely to support marijuana decriminalization.’