Crisis

It’s War: The New Dilemma for Corporations and Social Issues

Posted LEVICK

LEVICK | April 7th, 2021

It’s War: The New Dilemma for Corporations and Social Issues

 “Our private sector must stop taking cues from the Outrage-Industrial Complex…From election law to environmentalism to radical social agendas to the Second Amendment, parts of the private sector keep dabbling in behaving like a woke parallel government.”

Senator Mitch McConnell (R- KY)

The gauntlet has been thrown.

How do companies maximize shareholder value while minimizing brand risk at a time when a generation demands that brands stand for something while at the same time GOP leaders just announced that “woke” companies are the issue they can win on in 2022. How do we lead?

Brand neutrality is dead. Since the murder of George Floyd and the insurrection of January 6th, everything is different. There is “no middle ground” as Merck CEO Ken Frazier and former American Express CEO Ken Chenault have forcefully articulated. Companies may not want to be pulled into politics because it’s not a winning proposition – but they also cannot avoid it.

Like Missourians caught between the Union and the Irregulars during the Civil War, we’ve become ensnared by the battle.

The Arc of History

In 2010, after Citizens United, we wrote that the unintended consequences of the Supreme Court’s split decision to find First Amendment rights in corporations also meant that companies would have First Amendment responsibilities. Going forward, companies would be judged not just for their brands but for their political activity. The Court majority’s assumption that independent spending would be transparent first proved to be incorrect, but is lately becoming a transparency albatross for companies. Public Citizen just identified the corporations that collectively spent $50 million funding candidates supporting voter restrictions.  Popular Information– with their two-person staff – has been doing such a remarkable job tracing the issue of corporate PAC funding since before January 6th that the traditional media follows them. For the past two years, the Center for Political Accountability has been making formerly opaque 527 contributions public. If you fund them, you now own the consequences.

Political contributions have become the new supply chain liability. But so is your DEI, environmental footprint, labor practices and more. Like it or not, corporations may not be the new “woke parallel government” but they are judged by the company they keep and the things they do outside of what they sell.

Last winter, when the federal government failed to act to prevent the growing Covid crisis from devastating America, we wrote that crisis abhors a vacuum and that if the federal government would not act at the start of a national crisis then others would. We saw the NBA, state governors and pharmaceutical companies, to name a few, fill the void like so many boats at Dunkirk. While the Covid infection invasion is the most remarkable example, it comes after more than a quarter-century of a largely ineffective federal government. Constituents look to other venues to fill the abyss. Now, it is common practice for Americans to look to the courts, state governments, athletes and corporations for leadership. Government cannot abandon its federal responsibilities — either out of laissez-faire faith or partisan gridlock – or others will fill the chasm.

Historically, power has conveyed back and forth between Washington and Wall Street. When the federal government doesn’t act, corporations do. And when the government acts, corporations go back to the business of business. In 1907, J.P. Morgan locked the leading bankers in the library of his Madison Avenue home; overnight they developed the Federal Reserve to get the American economy back on track. On the other hand, during FDR’s Administration, Assistant Attorney General for Antitrust, the soon-to-be-great Robert H. Jackson, remade antitrust law in 18 months. He would declare: “We cannot permit private corporations to be private governments. We must keep our economic system under the control of the people who live by and under it.”

This country has – understandably – been tussling over the proper role of government since FDR and Jackson’s New Deal. But the terms of the debate have been flip-flopped: now, it’s the controversy surrounding the proper role of private companies that has been ramped up beyond all recognition.

Milton Friedman’s truism, that “a firm’s sole responsibility is to its shareholders,” may have once been true, but how can you reconcile that to an age when brand neutrality is dead – and younger consumers expect their brands to have purpose?

Georgia On My Mind

The Georgia corporate community’s uneven handling of the state’s new voter suppression law is instructive – and a cautionary tale about just how complicated the new rules are. Big Atlanta-based companies like Coca-Cola and Delta weighed in against the bill as debate got underway in the statehouse.

Delta’s CEO Ed Bastian’s memo on the issue went public with a now-famous (infamous?) quote: “The legislation signed this week improved considerably during the legislative process, and expands weekend voting, codifies Sunday voting and protects a voter’s ability to cast an absentee ballot without providing a reason.”

All of this is true, but unfortunately, when a company weighs in on a controversial matter, it owns it in the public eye; suddenly, Delta was seen as supporting voter suppression efforts, including criminalizing the handing-out of water to someone standing in line to vote. Within days, Major League Baseball – no NBA – would take the 2021 MLB All-Star Game away from Atlanta and make it clear to politicians in Texas, Arizona, Florida and Washington, D.C. that North Carolina’s experience in 2016, losing an estimated $3.6 billion in revenue — after it passed a law limiting legal protections for LGBT people — is the new calculus. At a remarkable speed and despite Minority Leader McConnell’s comments to the contrary, we saw the white flag waived by Arkansas’ Governor Asa Hutchinson (R) on the first business day thereafter when he vetoed a ban on gender-affirming medical care for transgender youths. He called it a “vast government overreach” but really it was a “nothing to see here” moment. Corporate activism, when unified, is an incredibly powerful form of democracy in action.

The New Rules

How does a company walk the tightrope that looks more like a Gordian knot? Here are a few rules to get you started:

  1. With apologies to Rod Serling, you have entered the perception zone. The first casualty of war is truth; on high-tension issues such as universal suffrage, truth is not going to be a defense. The Georgia law is complex; in some ways, it extends voting hours and access, and in others, clearly targets traditional Democratic strongholds. If your company is going to weigh in on a highly controversial issue, make sure your team is interdisciplinary. If just your public affairs or legal executives are looking at it, they will miss perception issues the way your brand and communications professionals alone would miss legal issues. Silos are no longer an effective way to make decisions.
  2. As author Simon Sinek writes, “start with the why”. It is no longer satisfactory to be in business to maximize profits. What is your raison d’etre? Michelin sells safety, not tires. Starbucks sells a lifestyle. Apple sells creativity. Nike sells the inner athlete. Each company knows precisely why it is in business, which allows them to approach theology, more than just a brand. When you read something in the Bible that you don’t believe, you don’t lose faith. You just carve out that one story, that parable. The same is true for brands which are disciplined enough to have an umbilical connection with their customers. Know they self and to your customers be true.
  3. Track trends like your business life depends on it. It does. Too many businesses look at big data like an accountant. Instead, look upon it as if you worked at the CIA. A couple of coincidences may portend a trend. Have people who understand business, politics and the cycles of history track the news including, of course, social activity. Lots of screaming can often be ignored while sometimes a single high-authority blogger or lawsuit can mean change is afoot.
  4. There is no Las Vegas – nothing “stays here.” What happens in Georgia can happen in Texas. What happens to a competitor can happen to you. Plan for it and view what happens to others as your laboratory. Activists look for companies domiciled in battleground states. If you are headquartered there, there is no excuse to be surprised.
  5. Don’t fret calls for boycotts. The reason the 1965-1970 grape boycott led by Cesar Chavez captured the nation’s attention and changed buying habits is because of the rarity of the strategy. Today, there is a call for a national boycott nearly every hour, one of the most recent, of course, being against Major League Baseball. Calling for a boycott is a click away; acting on them takes both tremendous organizing and a public willing to be impassioned by the cause more than the inconvenience of new purchasing habits. Over the past few years, boycotts and threats of boycotts by more progressive causes seem to be more effective than those by the right. Nike did exceptionally well after calls for boycotts when it embraced Colin Kaepernick. It was no accident. They planned for it.
  6. Be genuine. Calls for boycotts against Chick-fil-A have never had any momentum, despite their original anti-LGBTQ position. Why? Not because of the politics of it, but because they effectively explained their position as stemming from sincere religious beliefs, not bias or hatred. Audiences can parse issues and intent, given enough time and the integrity of the company.
  7. Nothing is an accident. In 1971, Saul Alinsky wrote Rules for Radicals. While few activists today have read it, they have all stolen pages from its playbook and applied it to the Internet. There are no accidents. Have you wondered why apologies don’t work as well as they used to? It’s because part of the playbook is to leak damaging information after the apology. You need to think like activists. Be in their head. “What would I do if I were them?”
  8. Pick your issues carefully. Companies should not become vocal on many issues. It is just another version of brand extension; the market won’t support it. Be strategic about your ESG and CSR so you have a history of investment before an issue lands at your front door. If you do comment on an issue, be deliberate and highly selective.
  9. Issues about protecting democracy and Civil Rights are sacred. There is a scale of social issues that the general public cares about – fewer care about tax cuts, more about minimum wage, and more still about the environment. Support for democracy, franchise and diversity are at the top of the list. Treat them with reverence.
  10. DEI and PAC contributions are indivisible. You cannot support diversity and inclusion while also supporting candidates who perpetuate voter suppression any more than you could support Members of Congress who failed to vote for presidential certification. There is no wiggle room. The murder of George Floyd and the #BLM protests are a movement – not a moment. There is no going back. DEI support and support for universal franchise are inseparable.

The country is split but it is not as divided as you think. Large numbers of Americans support the direction the country has taken over the past few months, including infrastructure, diversity, vaccinations, environmental stewardship and other issues. Your goal is not to find a place to offend no one, but to understand your corporate “tribe” – and speak to them as your partner to the future.

LEVICK | April 7th, 2021

It’s War: The New Dilemma for Corporations and Social Issues

 “Our private sector must stop taking cues from the Outrage-Industrial Complex…From election law to environmentalism to radical social agendas to the Second Amendment, parts of the private sector keep dabbling in behaving like a woke parallel government.”

Senator Mitch McConnell (R- KY)

The gauntlet has been thrown.

How do companies maximize shareholder value while minimizing brand risk at a time when a generation demands that brands stand for something while at the same time GOP leaders just announced that “woke” companies are the issue they can win on in 2022. How do we lead?

Brand neutrality is dead. Since the murder of George Floyd and the insurrection of January 6th, everything is different. There is “no middle ground” as Merck CEO Ken Frazier and former American Express CEO Ken Chenault have forcefully articulated. Companies may not want to be pulled into politics because it’s not a winning proposition – but they also cannot avoid it.

Like Missourians caught between the Union and the Irregulars during the Civil War, we’ve become ensnared by the battle.

The Arc of History

In 2010, after Citizens United, we wrote that the unintended consequences of the Supreme Court’s split decision to find First Amendment rights in corporations also meant that companies would have First Amendment responsibilities. Going forward, companies would be judged not just for their brands but for their political activity. The Court majority’s assumption that independent spending would be transparent first proved to be incorrect, but is lately becoming a transparency albatross for companies. Public Citizen just identified the corporations that collectively spent $50 million funding candidates supporting voter restrictions.  Popular Information– with their two-person staff – has been doing such a remarkable job tracing the issue of corporate PAC funding since before January 6th that the traditional media follows them. For the past two years, the Center for Political Accountability has been making formerly opaque 527 contributions public. If you fund them, you now own the consequences.

Political contributions have become the new supply chain liability. But so is your DEI, environmental footprint, labor practices and more. Like it or not, corporations may not be the new “woke parallel government” but they are judged by the company they keep and the things they do outside of what they sell.

Last winter, when the federal government failed to act to prevent the growing Covid crisis from devastating America, we wrote that crisis abhors a vacuum and that if the federal government would not act at the start of a national crisis then others would. We saw the NBA, state governors and pharmaceutical companies, to name a few, fill the void like so many boats at Dunkirk. While the Covid infection invasion is the most remarkable example, it comes after more than a quarter-century of a largely ineffective federal government. Constituents look to other venues to fill the abyss. Now, it is common practice for Americans to look to the courts, state governments, athletes and corporations for leadership. Government cannot abandon its federal responsibilities — either out of laissez-faire faith or partisan gridlock – or others will fill the chasm.

Historically, power has conveyed back and forth between Washington and Wall Street. When the federal government doesn’t act, corporations do. And when the government acts, corporations go back to the business of business. In 1907, J.P. Morgan locked the leading bankers in the library of his Madison Avenue home; overnight they developed the Federal Reserve to get the American economy back on track. On the other hand, during FDR’s Administration, Assistant Attorney General for Antitrust, the soon-to-be-great Robert H. Jackson, remade antitrust law in 18 months. He would declare: “We cannot permit private corporations to be private governments. We must keep our economic system under the control of the people who live by and under it.”

This country has – understandably – been tussling over the proper role of government since FDR and Jackson’s New Deal. But the terms of the debate have been flip-flopped: now, it’s the controversy surrounding the proper role of private companies that has been ramped up beyond all recognition.

Milton Friedman’s truism, that “a firm’s sole responsibility is to its shareholders,” may have once been true, but how can you reconcile that to an age when brand neutrality is dead – and younger consumers expect their brands to have purpose?

Georgia On My Mind

The Georgia corporate community’s uneven handling of the state’s new voter suppression law is instructive – and a cautionary tale about just how complicated the new rules are. Big Atlanta-based companies like Coca-Cola and Delta weighed in against the bill as debate got underway in the statehouse.

Delta’s CEO Ed Bastian’s memo on the issue went public with a now-famous (infamous?) quote: “The legislation signed this week improved considerably during the legislative process, and expands weekend voting, codifies Sunday voting and protects a voter’s ability to cast an absentee ballot without providing a reason.”

All of this is true, but unfortunately, when a company weighs in on a controversial matter, it owns it in the public eye; suddenly, Delta was seen as supporting voter suppression efforts, including criminalizing the handing-out of water to someone standing in line to vote. Within days, Major League Baseball – no NBA – would take the 2021 MLB All-Star Game away from Atlanta and make it clear to politicians in Texas, Arizona, Florida and Washington, D.C. that North Carolina’s experience in 2016, losing an estimated $3.6 billion in revenue — after it passed a law limiting legal protections for LGBT people — is the new calculus. At a remarkable speed and despite Minority Leader McConnell’s comments to the contrary, we saw the white flag waived by Arkansas’ Governor Asa Hutchinson (R) on the first business day thereafter when he vetoed a ban on gender-affirming medical care for transgender youths. He called it a “vast government overreach” but really it was a “nothing to see here” moment. Corporate activism, when unified, is an incredibly powerful form of democracy in action.

The New Rules

How does a company walk the tightrope that looks more like a Gordian knot? Here are a few rules to get you started:

  1. With apologies to Rod Serling, you have entered the perception zone. The first casualty of war is truth; on high-tension issues such as universal suffrage, truth is not going to be a defense. The Georgia law is complex; in some ways, it extends voting hours and access, and in others, clearly targets traditional Democratic strongholds. If your company is going to weigh in on a highly controversial issue, make sure your team is interdisciplinary. If just your public affairs or legal executives are looking at it, they will miss perception issues the way your brand and communications professionals alone would miss legal issues. Silos are no longer an effective way to make decisions.
  2. As author Simon Sinek writes, “start with the why”. It is no longer satisfactory to be in business to maximize profits. What is your raison d’etre? Michelin sells safety, not tires. Starbucks sells a lifestyle. Apple sells creativity. Nike sells the inner athlete. Each company knows precisely why it is in business, which allows them to approach theology, more than just a brand. When you read something in the Bible that you don’t believe, you don’t lose faith. You just carve out that one story, that parable. The same is true for brands which are disciplined enough to have an umbilical connection with their customers. Know they self and to your customers be true.
  3. Track trends like your business life depends on it. It does. Too many businesses look at big data like an accountant. Instead, look upon it as if you worked at the CIA. A couple of coincidences may portend a trend. Have people who understand business, politics and the cycles of history track the news including, of course, social activity. Lots of screaming can often be ignored while sometimes a single high-authority blogger or lawsuit can mean change is afoot.
  4. There is no Las Vegas – nothing “stays here.” What happens in Georgia can happen in Texas. What happens to a competitor can happen to you. Plan for it and view what happens to others as your laboratory. Activists look for companies domiciled in battleground states. If you are headquartered there, there is no excuse to be surprised.
  5. Don’t fret calls for boycotts. The reason the 1965-1970 grape boycott led by Cesar Chavez captured the nation’s attention and changed buying habits is because of the rarity of the strategy. Today, there is a call for a national boycott nearly every hour, one of the most recent, of course, being against Major League Baseball. Calling for a boycott is a click away; acting on them takes both tremendous organizing and a public willing to be impassioned by the cause more than the inconvenience of new purchasing habits. Over the past few years, boycotts and threats of boycotts by more progressive causes seem to be more effective than those by the right. Nike did exceptionally well after calls for boycotts when it embraced Colin Kaepernick. It was no accident. They planned for it.
  6. Be genuine. Calls for boycotts against Chick-fil-A have never had any momentum, despite their original anti-LGBTQ position. Why? Not because of the politics of it, but because they effectively explained their position as stemming from sincere religious beliefs, not bias or hatred. Audiences can parse issues and intent, given enough time and the integrity of the company.
  7. Nothing is an accident. In 1971, Saul Alinsky wrote Rules for Radicals. While few activists today have read it, they have all stolen pages from its playbook and applied it to the Internet. There are no accidents. Have you wondered why apologies don’t work as well as they used to? It’s because part of the playbook is to leak damaging information after the apology. You need to think like activists. Be in their head. “What would I do if I were them?”
  8. Pick your issues carefully. Companies should not become vocal on many issues. It is just another version of brand extension; the market won’t support it. Be strategic about your ESG and CSR so you have a history of investment before an issue lands at your front door. If you do comment on an issue, be deliberate and highly selective.
  9. Issues about protecting democracy and Civil Rights are sacred. There is a scale of social issues that the general public cares about – fewer care about tax cuts, more about minimum wage, and more still about the environment. Support for democracy, franchise and diversity are at the top of the list. Treat them with reverence.
  10. DEI and PAC contributions are indivisible. You cannot support diversity and inclusion while also supporting candidates who perpetuate voter suppression any more than you could support Members of Congress who failed to vote for presidential certification. There is no wiggle room. The murder of George Floyd and the #BLM protests are a movement – not a moment. There is no going back. DEI support and support for universal franchise are inseparable.

The country is split but it is not as divided as you think. Large numbers of Americans support the direction the country has taken over the past few months, including infrastructure, diversity, vaccinations, environmental stewardship and other issues. Your goal is not to find a place to offend no one, but to understand your corporate “tribe” – and speak to them as your partner to the future.

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