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Corporate America takes a stand: Indiana latest to feel sting of new CEO activism

Tristin Hopper 

April 2, 2015 

 

It is shaping up to be one of the largest U.S. boycotts of modern times.

 

When Indiana legislators passed a “religious freedom” act that effectively cleared businesses to deny service to gay customers, they unwittingly spawned a harsh round of sanctions from the U.S. private sector.

 

Marc Benioff, chief executive of Salesforce Inc., led the charge by initially promising to “dramatically reduce” his company’s Indiana investment, before cancelling “all programs that require our customers/employees to travel to Indiana.”

 

Angie’s List, an online review website, upped the ante. CEO Bill Oesterle, a self-proclaimed “proud” Republican, put brakes on a $40-million headquarters expansion in Indianapolis. Meanwhile, Yelp promised to keep its “corporate presence” out of states with Indiana-style laws.

 

In nearby Arkansas, plans to implement similar “religious freedom” legislation were put on hold by the state’s governor thanks in large part to the intervention of Wal-Mart Stores Inc. In a public statement, the retail giant headquartered in the state’s northwest warned that the bill threatened to undermine the state’s “spirit of inclusion.”

 

“For these reasons, we are asking Governor [Asa] Hutchinson to veto this legislation,” it read.

 

For years, major corporations have tried desperately to remain as apolitical as possible. They’ve stayed on the sidelines as the world’s governments brought down sanctions on apartheid South Africa and the entire civil rights movement passed without much of a peep from Corporate America.

 

But something’s changed. Starbucks Corp. is trying to shoehorn its way into race debates with its #racetogether campaign. Facebook Inc. chief operating officer Sheryl Sandberg has made herself into a modern Betty Friedan with the feminist manifesto Lean In. Even Apple Inc., which grew into the world’s largest company on an unofficial “no politics” credo, is taking a stand on gay equality. Entering the culture wars — once the forbidden fruit of corporate relations — now appears to be fair game.

 

At Starbucks’ annual general meeting in 2013, shareholder Tom Strobhar, founder of the Corporate Morality Action Center, stood up to criticize the coffee giant’s decision to support same-sex marriage. The position had made Starbucks the target of a boycott by social conservatives. In the words of Mr. Strobhar, this had led to sales that “were a bit disappointing.”

 

In response, Starbucks CEO Howard Schultz essentially told him to get lost.

 

 “If you feel, respectfully, that you can get a higher return than the 38% you got last year, it’s a free country,” he said to booming applause from the Seattle crowd. “You can sell your shares in Starbucks and buy shares in another company.”

 

Just last month, the company also launched its Race Together campaign. Although widely mocked, it encouraged baristas to mend ethnic relations by openly discussing race issues with their customers.

 

Steve Jobs, the founder of Apple, made it a point to keep out of politics as much as humanly possible. But last Wednesday, his successor, Tim Cook, spoke on behalf of Apple to publicly denounce the Indiana law and others like it.

 

“America’s business community recognized a long time ago that discrimination, in all its forms, is bad for business,” he wrote in an op-ed for The Wall Street Journal.

 

Last week, the Harvard Business Review took note of what it called the rise of CEO activism. Increasingly,  the heads of public companies were “intentionally courting controversy by weighing in on contentious issues without any obvious pretense of raising profits.”

 

And according to Harvard professors Aaron Chatterji and Michael Toffel, this is a good thing. The pair noted that corporations have always sought to influence politics, but traditionally they did it with hidden networks of “Super PACs, trade associations, and think-tanks.”

 

The classic example is the billionaire Koch brothers.

 

Charles and David Koch have funnelled hundreds of millions of dollars into Republican races and libertarian causes, but few Americans would be able to name them as the makers of Lycra, Dixie cups or Brawny paper towels.

 

“Preserving a robust democracy requires that such engagement be visible to shareholders, customers, employees, and citizens more broadly,” write Messrs. Chatterji and Toffel.

 

Like most things, this tide of corporate idealism can be partially blamed on Silicon Valley. Not only are companies intimately plugged into consumers as never before, but the tech sector has made it a virtual cliché for corporations to promise to “change the world.”

 

“The Facebook generation is used to having a dialogue with brands,” said Steven Lewis, president of Toronto’s XMC marketing agency. “There is now, more than ever, an expectation that companies act as good corporate citizens.”

 

CEO activists will claim they are just doing what they think is right. For instance, Howard Schulz at Starbucks has defended the company’s support of marriage equality by saying “not every decision is an economic decision.”

 

This maxim might be true of eccentric business tycoons such as Howard Hughes or Henry Ford, but Mr. Schulz answers to a board of directors which, on the issue of gay rights, just happens to agree with him.

 

“Where CEOs can get a backbone on political issues is when the board is unified,” said Marvin Ryder, a marketing expert at McMaster University in Hamilton. Ont. “Most boards, I think, would say, ‘No.’ ”

 

To be sure, the majority of corporations are steering clear of CEO activism. As Mr. Ryder noted, major conglomerates such as Procter & Gamble Co. are remaining strictly neutral lest they accidentally inspire public ire against Crest toothpaste, Duracell batteries or Pringles potato chips.

 

The modern incarnation of CEOs taking on social issues might be new, but throughout history corporations have always been prepared to take on political causes that enjoyed virtual unanimity among the populace.

 

Coca-Cola Co., like many other U.S. corporations, went whole-hog on the Second World War. The soda maker promised to bring five-cent Cokes to every possible front line in the global conflict (a promise for which two of its employees lost their lives). In addition, it launched a massive ad campaign showing images of deployed U.S. soldiers sharing Cokes with wide-eyed civilians everywhere from the Philippines to Italy to Newfoundland.

 

Two generations later, the mind reels at the PR backlash if Coca-Cola had published Iraq War-era images of benevolent U.S. soldiers sharing bottles of Coke with smiling Iraqi children.

 

Meanwhile, the issue of gay equality is rapidly becoming one on which it is economically safe — and even advisable — for companies to take a stand.

 

Hotels, casinos and cruise ships once risked waves of cancellations for opening their doors to gays. And, it was only seven years ago that Heinz U.K. was forced to pull an ad for its Deli Mayo that featured two men kissing.

 

But gay marketing has just gone mainstream, with conventional brands like Honey Maid, Hallmark and Miller Lite now deciding to feature same-sex couples in their ads.

 

Fast food chain Chick-Fil-A, meanwhile, is a lesson to any company that decides to take a stand against gay equality. CEO Dan Cathy spurred nationwide protests — and counter protests — after he said publicly that gay marriage was inviting “God’s judgment on our nation.”

 

The restaurant’s sales soared during the controversy, but Mr. Cathy has since vowed that he has learned his lesson about making his political views known.

 

In a 2014 interview with the Atlanta Journal-Constitution, the CEO said he regretted “making the company a symbol in the marriage debate,” and would be keeping quiet from now on.

 

Starbucks may have stuck its neck out when it became a same-sex marriage proponent two years ago, but a full “bandwagon effect” is now underway as companies crunch the numbers on supporting gay equality, and determine that it will attract more customers than it scares away.

 

Tellingly, the heads of nine Indiana companies signed a letter this week opposing the “religious freedom” legislation and called on lawmakers to “make it clear that Indiana is the welcoming state we all believe it to be.”

 

Of course, as Mr. Ryder noted, gay rights had to be brought right to the political tipping point before Corporate America considered getting involved. “Can you name me a company that’s pro-abortion?” he asked.

 

National Post

 

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