CEOs are stepping outside the board room and into politics more and more it seems. This week, we saw the decision of many CEOs to condemn and abandon President Trump’s advisory councils. In recent months, we saw CEOs take opposition to North Carolina’s HB2 legislation.
The recent round of CEO social activism does not signal a sudden shift in corporate strategy. Corporations have long engaged social issues, directly or indirectly. But there may be a trend away from Milton Friedman’s insistence that socially directed efforts must have some demonstrably financial bottom line. There may also be a greater willingness for corporations to engage politically, knowing that public and private spheres are no longer as separate as they once were, and that remaining “politically neutral” may cost the support of key stakeholders.
Some academics and consultants would advise corporations to engage politically only where the company’s “core business” confronts threats or opportunities. But is unlikely that Apple’s Tim Cook or Salesforce’s David Benioff (or their Boards) saw anti-LGBTQ legislation as a financial threat to its “core business,” or that they decided to speak out to create financial opportunities for their companies. CEOs like Benioff and Cook are no longer willing to wait until all the evidence of an opportunity or threat has been carefully weighed and measured for financial benefits.
The world is too complex for a corporate manager or board of directors to know the probable the costs and benefits of all corporate decisions; there is such a thing as calculated risk, and corporate Boards and managers must measure what they can. But at the very least, a company’s comments and actions in the “social” arena should be calculated to not offend the vast majority of people in a particular place.
For example, even with a strong market position in Pakistan, Tim Cook is not about to espouse equal rights for women or take public positions against honor killings there. Values vary widely across this world, from state to state, and within states. Companies will wisely take national and local values into account before doing any sort of social or political advocacy. But where values are in flux, as with lesbian, gay, bisexual and transgender rights in the United States, companies and their CEOs are more likely to espouse social values consistent with their own company’s values and goals, goals such as “inclusion” and “diversity.”
Only 10 years ago, it might have been shocking for the CEO of a major public company to not only defend LGBTQ rights publicly, but also to threaten a boycott of a state for its anti- LGBTQ policies. But the trend toward greater tolerance is evident in the United States, and corporate strategy for some companies is bound to raise conflicts with proposed or existing laws.
Is CEO activism on social issues appropriate? It is, provided that the CEO, the Board, and major stakeholders are in general agreement. The politicians that find such activism disruptive to democratic values are mistaken. In civic discourse, corporations clearly have their place, and some CEOs are now more likely to comment on economic, social and environmental concerns. Depending on your point of view, the impact of these comments ¾ or the impact of corporate lobbying in general ¾ will seem benign or malign, but will continue to have a prominent place in policymaking in the United States.
Don Mayer is a professor of Business Ethics and Legal Studies at the Daniels College of Business. He recently published article “The Law and Ethics of CEO Social Activism” was published in the Journal of Law, Business and Ethics (vol. 23).