PRovoke Podcast: Increased Oversight + Affordability = Turbulence Ahead

0:01The Provoke podcast brought to you by Provoke Media and produced by the international broadcast specialist Marketeers.

0:16Hey everybody and welcome to a pre-midterms edition of the Provoke Media podcast. podcast. I'm joined here today by Tucker Warren of Penta Group. And Tucker, why don't you tell us a little bit about yourself, your background, your current role, that kind of thing. Thank you, Paul. Hi, everyone. I'm Tucker Warren. I'm a senior partner at Penta. I've been in Washington, D.C. since 99. I've spent most of my career as a consultant to corporates, helping them navigate brand risk, public affairs and crisis litigation matters, and certainly political environment like what we're going to talk about a bit today.

1:06One of the things in my career I did that is germane to this conversation is I spent two years directing communications for the Financial Crisis Inquiry Commission, which is a bit of a form of oversight. I know we're going to talk a bit about oversight today, but ultimately when the U.S. Congress finds itself running up against an issue that it feels it needs deeper exploration on, maybe because Congress doesn't feel like it has the right structure to get after it or it has a certain level of immediacy, it will establish a commission. It did so after 9-11. It did so after the BP oil spill. It did so after the financial crisis.

1:48And so our job was to examine the causes of the 2008 financial crisis. And we held some 21 days of public hearings. We called CEOs to testify. We had subpoena power. So it was a form of oversight. And that gave me a front row seat into how evidence in that context is assembled and how for public hearings, those narratives are established before you actually even get into the courtroom of sorts and how those narratives play out as they're covered by the media. Right. Right. So because we have a global audience, I'd like to spend just a minute or two explaining what will and won't change. If the Democrats take either the House or the Senate and the polls right now seem to show that the House is likely to switch parties, the Senate is a little more in the balance.

2:58Is that is that your understanding as well? It is. I think that's the most likely outcome at this point. But it's worth noting that polling has had a tough go of it over the last decade or so. And it's been difficult to get a real good bead on the traditional Trump voter. I mean, what we're seeing right now, based on polling, is that there are some red states that were thought to be pretty safe territory for the Republican Party that we're seeing Republicans spend an awful lot of money in in the last moment. So that does tend to signal maybe a little bit of last minute panic. But that doesn't necessarily mean that that seat will flip.

3:39It could just be more of an insurance policy. So, you know, the tide does feel like it's moving away from Republicans going into the midterms and we'll know just in a few days time. But I do think for the purposes of this conversation, I will kind of base some of the discussion on the notion that Democrats will likely have the House, not the Senate. And I think that does have an impact in what an oversight agenda looks like and really kind of the broader business context of what corporations will be facing over the next couple of years. Right. So in terms of what that means, I think it means that the Democrats will have a much freer hand when it comes to oversight, but very little power to actually pass legislation that goes against what the Trump administration has been doing for the last couple of years.

4:36And I think the conventional wisdom is that for that reason, the focus will be very much on oversight. So what does that mean and what power will the House have to make life interesting for people in the corporate world? The House has a good bit of power. So when we talk about oversight, what we're really talking about is there is an official House Oversight Committee. That committee has broad latitude to look into a range of different issues. They're just a broad jurisdiction. They've got subpoena power. Then you have other committees that have specialization within health care or technology or homeland security, things like that.

5:26Each committee also has the ability to conduct its own oversight investigations. They just don't have as much latitude. It's also worth noting that in the House, it's a much lower bar to issue a subpoena to compel a witness to appear or to produce documentation. Whereas in the Senate, you actually need those committee heads, both the committee chair and the vice chair, to agree to issue a subpoena. So that means you need a Republican and a Democrat in the Senate to agree to that. So generally speaking, when people talk about oversight, though it exists in both chambers, the House tends to have a little more muscle to it.

6:06It also has the ability to be a little more freewheeling in how it conducts its agenda. And that really gets to the point of the risk factor for companies who are navigating what's going to happen over the next couple of years. I mean, regardless of what happens in the midterms, you do have a weaker President Trump going into his last two years of office. That doesn't mean that he doesn't have extensive powers and support, but certainly there's been an erosion in his popularity. And you have seen members of Congress that spent the last two years getting very cozy with him and inviting him into their districts who have spent really the last six months creating a little more distance going into the midterms.

6:52So that's an expression that perhaps his brand has weakened a little bit. And that's a little bit foreshadowing, I think, going into to 2028. The last point I would make on oversight is just that, you know, if you're a company thinking about your risk in this political environment and how oversight might be conducted. Yes, there are the official hearings and the letters that brands receive that ask them to produce documentation and evidence about how they've conducted their business over a period of time and to explain how profits have been generated out of a particular product or a relaxed regulation.

7:30regulation. But there's also simply the power of, well, simply the power of social media, who a number of members of Congress are quite savvy at, the Elizabeth Warrens and the AOCs of the world and the Jamie Raskins of the world. So yes, there's the official hearings, but that doesn't mean that your brand risk only exists in the most formal versions of oversight. There's also simply just the fact of being on the receiving end of criticism and the assemblance of some kind of evidence and fact pattern that a member of Congress or a committee finds concerning. That was sort of going to be my next question, which is how much does the public engage with and care about the oversight process?

8:17How much attention are they paying? Are they in any way driving the oversight agenda or are they more passive observers? I think it takes two forms, Paul. And this is what I expect will happen in a Democratic House and an oversight agenda. I think some of what you will see will be more in the form of political retribution. That'll be pursuits of the Trump family. That'll be things that have largely to with playing golf with the president and trips to Mar-a-Lago, plus some relaxed regulation and then a spotlight on profits. Okay, that might feel a bit icky. You might not love the access. Just to interrupt briefly there, I mean, there has been from very prominent Democrats a sort of warning that a lot of the financial dealing of the last two years will be scrutinized, whether it's the companies who paid for the demolition of the East Wing, for example, and some of the other sort of Trump personal projects that seem to have been very co-mingled with government projects.

9:44So in that sense, there are going to be, I suspect, quote unquote, corruption probes that have the potential to suck in some big Republican donors. Absolutely. And a number of companies that, you know, did some of the things that you just described that are, you know, within their legal rights to petition their government and establish a relationship with the president of the United States and his cabinet officials and play golf with the president and attend dinners at the White House. Plus, I mean, all of those things are perfectly legal. It's when you put some of those things together, plus donations to the new ballroom or something else, plus a very kind of when you put the timeline together.

10:34Oh, and what do you know, this regulatory thing that you've been pursuing for years all of a sudden got fixed shortly thereafter. And, oh, wow, look, your profits just went up over this. You put all that together and it has a – it leaves a perception of access and unfairness, which I think really gets to the heart of your question of whether the general public really cares. I don't think that the general public cares so much about being cozy with the president of the United States and playing golf with him. I think when they start to care, it's when it actually starts to hit their pocketbook. when they start to look at, well, is this something that has impacted what I'm paying price at the pump?

11:14Is what I'm seeing here out of this company something that impacts my meter on my electric bill? Is this something that's impacting the cost of eggs or beef at the grocery store? When those dots are connected, then I think you're into what I feel like is the broader conversation about oversight, which is really an affordability crisis that we're dealing with right here in America. Yeah, affordability is a broad spectrum, right? And, you know, there are always, at times like this, claims of excessive profiteering, particularly when companies have a huge divide between how much the people at the top are earning and how many people are being laid off at the bottom.

12:04And that, it seems to me, has the potential to suck in companies from a wide range of sectors and industries. So, you know, one would expect some of the fossil fuel companies, for example, to face fairly rigorous scrutiny, but also food companies and retailers. Are there particular sectors, and we'll get on to the technology sector, which I think is a whole other thing, but are there particular sectors that you think ought to be preparing right now for a difficult time? Honestly, I think they all should because I think corporate America writ large is in for a really turbulent few years. Um, when you look at the, the economic data right now of what people are experiencing, it's, it's really difficult.

13:00Um, on average, about 30 % more is what people are paying from just a few years ago on just about everything they need. Um, you know, gas is at like 90 % more mortgages or a little north of 40 % more, you know, so these are things that people rely on every single, the electricity is I think, uh, somewhere in the sixties. So these are essential elements of the economy that people are really struggling with. And some of them seem fairly fundamental, as in like not quick fixes. I mean, certainly if the war with Iran were to end tomorrow, I think you'd see some relief on some of this stuff. But there's a long tail on some of these economic fundamentals.

13:43I mean, there are some first-time stats, though, Paul, that are worth noting. You know, for the longest time, the average first-time homebuyer in America has been in the 30s. It was at 30 for a long time. Just five years ago, it was 33. For the first time ever, it's now 40. So that is a really significant delay in people engaging with such an important part of wealth building in their lives. That's a major stat. The number of billionaires that we are creating here, on average over the last several decades, we average about 50 billionaires a year. We're already at 106 this year. Most of that is attributable to the rise in AI, which will bring us to the technology part of our conversation and the displacement that it's creating and the anxiety and the frustration that it's contributing to.

14:36But I think you have this just growing dynamic of the haves and the have-nots right now. And if you look at the pillars of where people would reasonably look to relief if they don't have trust in politicians to fix it, if they're concerned about whether they can trust information that they're getting from media, If nonprofits and higher ed and other kind of more cultural pillars are suffering from trust and credibility right now, you do have to wonder how much corporations are going to take it on the chin. And corporations really don't have an ally politically right now. If you look at what Republicans and Democrats alike are saying on the campaign trail, both of them are espousing increasingly populist policy ideas that you would have thought certainly one of those parties would not have said in recent years.

15:31But they're both saying it right now. And both of them are taking shots at corporate America. So I really do think over the next several years, I can't emphasize enough the importance of both preparing for an oversight agenda, but also really developing this broader narrative of in this moment in time, in this affordability crisis that we are facing, not just did your company follow the letter of the law, but rather, how did you show up and provide some measure of relief for what the consumer is dealing with every single day? And if your answer is insufficient and if it just seems like you've been profiteering from a particular type of a political environment, I think those questions are going to come fast and furious and the answers are going to seem insufficient.

16:16So let's talk specifically about the technology sector because there are a host of issues there, many of them revolving around artificial intelligence. and you guys are very data-driven and research-driven and so I'm assuming you have a sense of where the public stands on all of these issues. Is there a sort of ranking of AI safety? You know, is it going to kill us all? AI job losses, is it just going to completely blow up the economy as we've known it for the last hundred years? data centers and their impact on local communities and the environment. Sort of how do you rank those issues? Will they all get sort of co-mingled or will they be dealt with separately?

17:11And where does the public stand on all of that? Well, let's start with policymakers. I mean, policymakers tell us that not surprisingly, the economy is their biggest concern. That has been the case. We've studied policymakers, Paul, for nearly 20 years. And the economy tends to be the number one issue. We've had blips through COVID and through other parts of history where other things rose above it. But so number one issue. But this year is the first time since in over 15 years that that number has been over 60 percent. Specifically, 64 percent of policymakers tell us, and this is both Republicans, Democrats say, that the economy is the most important issue to fix.

17:52When you scratch within the economy, yes, there are things like healthcare costs and other specifics that they point to. But AI is the one that is the, I guess, kind of the big scary monster that they all talk about, in part because many policymakers don't understand it. And if you've watched some of the hearings, I mean, we had a hearing several weeks ago where one policymaker referred to it as A1. You know, that's, of course, become a bit of a viral expression, but it's not dissimilar from, you know, there was a meta hearing a couple of years ago where you had a policymaker who was responsible for regulating Facebook, now meta, who was asking Mark Zuckerberg, how does Facebook make money?

18:36And it was just the reality of when you have advanced technologies like this, not wildly dissimilar from the financial crisis hearings that we had where it was clear that you do have policymakers responsible for regulating these things, where the delta of what they know and understand that technology to be is quite significant from how it actually operates. It's, of course, incumbent upon those companies for many, many reasons, including the well-being of the general public, as well as to protect their own brands. It's incumbent upon them to spend time here educating those that are regulating them to ensure they understand them.

19:11Otherwise, you'll just get bad policy outcomes. So that's one thing we know. We also know that from an American public perspective, 65 % of Americans fear that job loss will come for them at the hands of AI. So the fear is real, as is, and this is going back to the affordability part of our conversation earlier, the divide between those that are actively using AI versus those that are not in this economy is really significant. So if you are earning$50 ,000 or less, on average, about 15 % in that cohort is actively using AI versus when you get to$200 ,000 annual salary or more, you're at like 66%, 67%.

20:01So you have a growing divide of who even really is accessing the technology, much less understanding it. And so I think what we will quickly find is that in this affordability conversation, while we're also finding data centers popping up in communities, whether some of those communities want the data center or not, you've got kind of their greatest fear getting parked in their backyard. a technology that they attribute to only just creating double the number of billionaires in this country that we had last year, while they're paying 30 plus percent more for all the things they need, only to have a data center shoved in their backyard that if you're making under$50 ,000, only 15 % are accessing.

20:51I think you put all that together. And what you end up with is a really, really pissed off universe of people who are going to be demanding answers, which is why I think corporations have really got to be very focused on how they're going to engage in this conversation because I think some of those questions are going to come from, well, who profited in this environment? And politicians are not going to be pointing any fingers back at themselves. As we know, they'll be pointing it somewhere else. So historically, I think it's fair to say that the oversight of this kind, particularly in the sort of arena, as it were, has thrown up plenty of examples of embarrassment for both CEOs who've been called to testify, and in many cases, politicians who've been asking stupid questions.

21:45how much energy should CEOs be putting into preparing for the testimony that happens you know in the house in front of the cameras and how much time should they be spending crafting a broader narrative outside of that arena so that it's an ongoing discussion not just a single flashpoint? Great question. I'll start with the first part. I mean, CEOs and their advisors need to know that the staffs around these policymakers are preparing now. I mean, that evidence is getting compiled. Many companies have received letters. Some of those letters have been a bit of a warning shot of if and when we take the house, you'll be hearing from us on day one.

22:38So that preparation should really be now. Now, of course, there are a number of CEOs that have high visibility who have are very comfortable in hearing environments and have navigated those very well. That said, even the most skilled CEOs have had moments where they've struggled. Some of that is because it is not a fair environment. Because evidence is assembled, that evidence is not necessarily shared, of course, with the witness or those representing the witness. A narrative is strung together, and then it becomes a performance on members of that committee during the hearing to land the political points that they want to land.

23:17That's not to say they're not interested in getting at the truth, but they're all on, as we've all seen in these hearings, they're all on very, very limited time. You do have witnesses that take the longer road to answering a question, so there's a little bit of filibustering happening there. The member of Congress gets frustrated, cuts them off and says, look, I just need a yes or no answer. We know some of these questions don't necessarily have easy yes or no pithy answers to be to be put into context. So there's a there's a huge performance aspect to the environment. And then there's also just the media environment that has rapidly changed so much in the last few years that it used to be in this is a particularly Washington context.

23:58But it used to be that your biggest concern if you were the head of comms is that, you your CEO might get a snarky headline and like CQ roll call or something for their performance. Whereas today, before your CEO even leaves the witness chair, you've got something on TikTok that has got a tremendous amount of engagement. That's a whole different ball of wax for a communications team to manage before it becomes. In terms of what happens in Congress, the testimony part of this, how much tension is there between legal advice and communications advice? You know, all of these CEOs go in there with their lawyers sort of sitting next to them, whispering in their ear, right?

24:43Is the communications person typically whispering in the other ear or is that all that work done in advance? Done well, the communications council has just as much standing and hearing prep as legal does. I will say having I've seen it done both ways and it doesn't always go poorly when communications doesn't have the same seat at the table. But I can tell you when it has gone poorly, I typically point to a witness that has been overly prepared by legal and underprepared by comms. And I don't think it's because they had bad comms. I think it's because they didn't appreciate the environment that a hearing really is today.

25:28Yes, you need to mitigate your risk and appreciate what you can't say in that environment so you don't open yourself up to exposure. But that's not to say that simply mitigating legal risk means that you will win the hearing. You can not get yourself in legal trouble, but get yourself in a whole lot of communications, reputation, tone, deaf environment that candidly, even the best lawyers who have done a ton of hearing prep, they're not spending their time every day thinking about how narratives travel in today's attention-driven social media economy. I mean, that's what communicators do. And so that's why it's so important for us to be in the room as well, providing that third leg of the stool of PrEP.

26:11So, I mean, we agreed early on that there's very little that's going to happen in terms of legislation or new regulation coming out of this. Is the real risk in that case reputational or are there other things that need to be taken into consideration, other possibilities in terms of enforcement actions that should trouble business leaders? I mean, look, you could see a Democratic House and a 50-50 Senate with like a Susan Collins as a tie-breaking vote. And she's someone that has demonstrated throughout her career, presuming that she wins, which I think she probably will. What's that again? Or Fetterman, maybe.

27:00Yes, that's right. You know, so there are a few that could provide for a bit of a swing vote in a 50-50 Senate. I mean, the interesting thing is that immediately after next Tuesday, all eyes will turn toward the 2028 presidential. And you will have candidates start jockeying and laying out what their vision is for what they think a winning narrative is in 28. I do think this oversight conversation and an affordability more broadly context is going to shape those views. and it will give candidates a sense of what will win. Obviously, Trump and the Trump brand and MAGA will have to reconcile with what is the next iteration of that.

27:47Is that going to be a Vice President Vance? Is it going to be a Marco Rubio? Is it going to be someone else, maybe not in this administration? But either way, nonetheless, both parties are going to have to show that they've accomplished something over the next two years. Whether that's a legislative vehicle, maybe, and they might need to – there will be some must-pass spending bills, whether it's defense or other things that you'll have little odds and ends get affixed to that parties will want to point to as having done something for homeland security and border control or both parties will try to take wins on those things.

28:25So, yes, I mean, there's going to be some things that will happen over the next couple of years, and some of those things might be helpful relief for corporates. I mean, there are certainly plenty of businesses that continue to advocate and lobby the administration on tariff relief. It's a perfect example of an idea that by and large didn't exist before Donald Trump in America in terms of how our trade policy was oriented here. Well, Trump passes it, Democrats criticize him, and then Biden comes into office, and the tariffs don't really go away. And part of it's part of it's actually what economists economists warned, which is that the problem with tariffs is that once you get addicted to them and you start orienting your economy around them, it's very, very difficult to unilaterally disarm when it comes to tariffs.

29:09And so you end up stuck with them for quite some time until you can do a more comprehensive renegotiation trade package, which those are increasingly hard to do in this environment, too. So we'll see what happens over the next couple of years. But, yeah, not big things, but some things. The other issue, I think, in terms of reputation more broadly, is whether this means that there will be sort of another dramatic shift in the corporate narrative and how companies interact generally with their stakeholders. Because I don't think it's necessarily hyperbolic to say that for the first year and a half of Trump too, we saw a lot of companies acting as if this was the new reality and that it would persist forever, really.

30:06So the abandonment of DEI and ESG commitments, for example, you know, felt like a permanent shift. Do you think that there will be another adjustment in how companies face their publics and communicate with their publics if Democrats do end up controlling either the House or the Senate or both? I don't think that we will see that shift over the next two years. But after that, I just think that Trump has demonstrated he is willing to go after anyone that opposes him on things that matter to him. I also think that people will take what they will from the midterm results, but not all of those, not all those takeaways will neatly apply to 2028 either.

31:02I mean, you are talking about a much more national conversation in that context. So, my prediction is that companies, you know, might soften a smidge around the edges. We'll take a little bit more of a wait-and-see approach. I mean, Paul, as we know, you spend a lot of time with CEOs and corporations, as do I. And what they all ask for is a more predictable environment. They can manage just about any environment so long as there's some measure of predictability. And if that predictability means that there needs to be a little more focus and intentionality behind DEI and ESG, okay, they can get on board with that.

31:42If it's going to be a punitive environment for them talking about that, okay, they can make adjustments. And they may still have values internally that still give credence and prioritization to some of those things. And we both know that many companies are doing that. I'll tell you from our policymaker research, policymakers on both sides are largely okay with companies sticking to those values to that point so long as those things are codified in the values of the company and it doesn't feel performative. The companies that really got penalized for it among Congress, it's not the president, the president is going to do his thing, but among members of Congress are those that very much felt like they were weighing in on issues that felt astray from their brand, maybe even not connected to their geography, their employee base, their customer base.

32:36Those are the ones that really, really lost some credibility with members of Congress. And in many cases, some of them lost credibility with their customers. And they're in the process of building those reputations back. Authenticity is the key to getting it right. And then you communicate with it in an unflinching way. You say, look, you may disagree with us, but here's why this matters to us. Here's what we're going to do. That doesn't mean that we don't have these other values as well, and we're going to talk about those. but like this is part of who we are and why we care about it and we can agree to disagree on it and move on.

33:09Most members of Congress say okay I can live with that. Yeah it does feel though I think that threading the needle between not making yourself a target of the administration and addressing stakeholder concerns even absent the oversight is going to be more challenging perhaps in the next few years and staying on top of sort of what feels like a very fluid, rapidly shifting public opinion and understanding how, you know, your stakeholders are feeling about these issues is going to be even more critical. Absolutely. I mean, when you think about the last, let's say, let's go back to COVID. When you think about what corporations have lived through, You have the COVID era.

34:03You have the George Floyd racial reckoning here in America. Not that this is unique to America. We've got a global audience here, but you've got other similar reckonings happening around the world and companies trying to navigate that. Oh, the George Floyd thing resonated in almost, I mean, you know, a little less the further you get away from America, but certainly in Europe, it got a lot of attention. Yes, yes, and as it deserved. And the thing that COVID brought about for global corporations is really the voice and the standing of employees who spoke out in what they needed. You certainly had a period of time where companies were really, not to say they aren't now, but I'd say kind of like the power dynamic between leadership and employees tilted a little bit.

34:57Employees had a substantial amount of power in that environment, and everyone was just trying to hold things together as best we all could. You come out of that. You've got George Floyd. Then you've got Donald Trump who comes in, who is for the first time in a long time, or he has a unique power of how he wielded then his Twitter handle. He was willing to take shots at companies, but he's also a Republican president. So that was a destabilizing dynamic. He goes directly after some name brand big companies. I think you just put all that together, and it's just been a very unstable environment for companies.

35:37And as sophisticated and savvy as a lot of CEOs are, not all of them come from, and in fact, few of them come from, a communications brand or even sort of political brain from the company. Many of them are engineers or they're from finance. They're from some part of the business, but they're not necessarily from the part of the business that spends time thinking about these dynamics, which is, of course, why we've seen a rise over the last 10 years in chief communications officers reporting directly to the CEO, although I know that's taken a bit of a downturn with recent retirements. We talked about that a bit in Chicago at the summit this week with a terrific panel with Frank Shaw and others.

36:20But I still nonetheless think that the value of what communications can deliver for a business, although it's incumbent upon us to continue to show up with metrics that actually connect to the bottom line in a real way. But political acumen, how a brand is affected in these kinds of environments, how communications can be the connective tissue that connects chief people officers and chief legal officers and chief marketing officers and the CEO. That is a place where CCOs operate in ways that other C colleagues don't have the same fluidity. That's our value. That's our that's our secret, our special power, our secret power.

37:04But we've got to we've got to maintain hold of it. We've got to continue getting better and showing up with increasingly better business outcome KPIs so that we maintain that seat at the table. And so that it isn't so that it doesn't get down leveled when you have a senior CCO departure. And all of a sudden that that reporting line changes. So it sounds like just another layer of complexity on top of 20 layers that have been added in the last five years. I feel like we're out of time, unfortunately, though this is a topic we could dive into at much greater length. Thank you, Tucker, for your time.

37:46And this is likely going to keep you busy for the next couple of years. So congratulations on that. thank you Paul it's a pleasure

38:02you've been listening to the Provoke podcast brought to you by Provoke Media and produced by the international broadcast specialist marketers