Will California's Big Businesses Get Behind a Recall of Gavin Newsom?

California businesses have their issues with Gov. Gavin Newsom: Age-old concerns about the state's high tax rates and barriers to development have been compounded by recent spats over Newsom's signing of labor-friendly legislation and his handling of business regulations during the pandemic.

But the state's major corporations and their wealthy executives have so far steered clear of a burgeoning effort to recall Newsom from office.

"I would say still at this point, big business is not participating in the recall," said Tom Del Beccaro, chair of Rescue California, one of the committees driving the recall.

And if history is any guide, these companies — with war chests capable of transforming the recall campaign overnight — are likely to remain on the sidelines until Newsom's fate is more clear.

"Honestly, I think big business is willing to continue to play the game of trying to get along with the governor, or they're leaving the state," Del Beccaro said. "I think that's a mistake and it hurts the people of California and hurts the businesses that remain. They need to step up and participate in this process."

The recall campaign has until March 17 to collect nearly 1.5 million valid signatures and trigger an election, which could take place in the fall. Two groups are spearheading the effort: California Patriot Coalition, the official recall petitioner, and Rescue California, a committee raising money and organizing signature-gathering campaigns.

Recall organizers say they've raised around $3.5 million from the two committees through 14,000 donations.

The largest donations to date have come from Orange County entrepreneur John Kruger's consulting firm Prov 3:9 LLC, developer Geoff Palmer, venture capitalist Chamath Palihapitiya and DGB Ranch, a mysterious Los Angeles-based company.

Businesses in the state are not a political monolith — though they occasionally can unite to form a political force, as with last year's $76 million campaign to defeat property tax increases proposed in Proposition 15.

A wide array of businesses fumed when Newsom signed Assembly Bill 5 in 2019, which restricted the ability of employers to classify workers as independent contractors. Several gig companies including Uber and DoorDash tossed in more than $200 million dollars to push Proposition 22 over the finish line, granting themselves an escape hatch from AB 5 in the labor code.

And anger has only grown over the past year. Companies have complained that the Newsom administration left them in the dark when crafting coronavirus regulations.

But the inherent political cautiousness of large businesses is holding them back from turning their anger against Newsom into action, said Sean Walsh, a Republican adviser to Arnold Schwarzenegger during the 2003 recall campaign.

By backing a recall, companies would be betting on an undefined replacement — while running the very real risk of making a permanent enemy should Newsom survive and remain in office. And the current recall calendar likely ensures the election would take place in the fall, after the governor has decided the fate of hundreds of bills on his desk.

"There are bills that come up that directly affect individual businesses," Walsh said. "And some could say it would be irresponsible of that business to take on a governor when he could veto something that could be very, very important."

It explains why during California's last recall election, in 2003, many large corporations stayed out of the fray or backed Democratic Gov. Gray Davis — until they had no other choice.

Companies including Chevron, Citigroup, Genentech, HP, Intel and the so-called Big Four accounting firms poured hundreds of thousands of dollars into Arnold Schwarzenegger's campaign, after the celebrity actor had emerged victorious in the October election — helping Schwarzenegger pay back millions of dollars of loans that he took out during his run.

And corporations that backed Davis in the election — including AT&T, the mortgage giant Ameriquest, and Mercury General Insurance — had no qualms about contributing to Schwarzenegger's recall committee in the months after the votes were counted.

That hedge-betting approach is commonplace in Sacramento, where large business interests typically spread campaign donations to legislators in both parties.

And it's a dynamic that favors Newsom in a potential recall campaign, as his allies in organized labor are expected to spend heavily to keep him in office.

"The business community is innately conservative and conservative insofar as they like certainty," Walsh said. "So even if you've got the devil, it's the devil you know, and you try and work through the devil that you know — that's just how the business community in California works."

The one exception, Walsh said, is Silicon Valley — where an executive could use their own fortune to propel the recall, like Congressman Darrell Issa did in 2003, when he spent more than $1 million to gather enough signatures to trigger an election.

"Something that could upset the apple cart is the fact that we have so many fantastically wealthy Silicon Valley business people," Walsh said. "Their egos are huge in business, but their egos are also huge, thinking that they, too, could be the governor."

Venture capitalists Palihapitiya (who briefly flirted with a run) and David Sacks are among the top donors to the recall, which they have promoted in recent weeks on their All-In podcast.

"If you have the means to donate, please do," Sacks said on a recent episode. "We’re not going to get any positive change in this state until the politicians are held accountable, and this recall is the starting point for that.”

But it remains to be seen if others follow suit; in his 2018 run for governor, Newsom was able to win over Silicon Valley donors who had supported Republicans in the past, including venture capitalist Peter Thiel and Yahoo co-founder Jerry Yang.

Ultimately, businesses will have to consider how going against the governor will affect both their state policy interests and their public image.

"You don't want to piss off a governor who may survive, but also you don't want to be branded as a Trumpist ally," said Republican consultant Luis Alvarado.

At this stage, the recall push is strictly partisan: A poll released last week from the Berkeley Institute of Governmental Studies finds just 11% of Democratic voters support recalling Newsom, compared with 84% of Republicans.

And the Republican operatives who have been pursuing a recall against Newsom since his first year in office have yet to solidify a coalition with corporate interests inflamed by pandemic-related business restrictions and school closures.

"I don't think they've actually met in the middle yet, but they are much closer than they have ever been," Alvarado said. "Once the signature gatherers reach their mark and the recall is officially called on the ballot, then members of the business community will have to make a decision if they want to be a part of it financially or not."