What’s the point of corporate activism today under Trump?
This article is the final installment in a series of articles on corporate social responsibility in the age of Trump
Two weeks ago, we learned the definition of corporate social responsibility: a corporation's initiative to assess and take responsibility for their effects on environmental and social wellbeing. We also learned that corporate social responsibility can be further subdivided into two categories: (1) the direct manufacture of its products and the social provisions of its services and (2) corporate activism, the ability to act as a voice calling for larger societal change, even if it is not accompanied by direct business action.
Last week, we dove specifically into the history of corporate activism in the political and social spheres. We saw with examples ranging from Woolworth’s to Walmart that companies have always been creating and reacting to meaningful societal change. This week, we’ll look at how present-day corporate activism, especially in response to the Trump administration, is having an impact on larger society, as well as what it means for companies’ bottom lines. Do today’s efforts at corporate activism have a tangible impact, or are they merely pretty words? Like most things in life, the answer to this question is complicated and unclear. Nevertheless, we’ll do our best to break down the facts.
The Harvard Business Review writes, “Nowadays, hundreds of CEOs have weighed the risks against the rewards of speaking out and decided to speak publicly. They have spoken out on social, political, and environmental issues, such as climate change, LGBT rights, equal pay, immigration, gun control, and race relations. Most of these CEOs have been based in the U.S., but many lead global companies.” As discussed in the previous article in this series, public relations firm Weber Shandwick has analyzed 425 corporate responses to Trump administration happenings, and found that over three-quarters of corporate activist statements have come from CEOs.
These corporate responses appear to be motivated by two rationales. First, corporations feel compelled to speak out against events or trends that will negatively impact their business. The recent political event that garnered the most statements was the so-called “Muslim travel ban,” Executive Order 13769, which limited refugee entry and immigration from Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. Corporate outcry was instant, with CEOs focusing on the negative impacts of newly limited workforce mobility. Some of America’s largest and most powerful businesses were founded by immigrants – Apple’s Steve Jobs was the son of a Syrian immigrant, while Google co-founder Sergey Brin emigrated from the Soviet Union at age six. In describing his corporate activism, Apple CEO Tim Cook wrote in a memo to staff, later released publicly: “In my conversations with officials here in Washington this week, I’ve made it clear that Apple believes deeply in the importance of immigration — both to our company and to our nation’s future. Apple would not exist without immigration, let alone thrive and innovate the way we do” (The New York Times). Finance giants also mobilized against the order by focusing on the need for a diverse and highly-skilled workforce in today’s globalized economies.
Goldman Sachs CEO Lloyd Blankfein quoted company business principles, arguing that “For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be” (New York Times). Citibank even more directly expressed concern about “the impact immigration policies could have on our ability to serve our clients and contribute to growth.” The effect of corporate denouncements of the travel ban is difficult to isolate, but it was undoubtedly both an important barometer and inciter of public outcry against the ban. Despite many legal challenges, the US Supreme Court allowed the ban to go into effect in December.
Second, corporations have spoken out against words, by the administration, that were commonly agreed to be morally reprehensible and were condemned by politicians and the public alike. There is no better example of this than President Trump’s August 12 comments on the Charlottesville “United the Right” white supremacist rallies. Trump stated, “we condemn in the strongest possible terms this egregious display of hatred, bigotry and violence on many sides” (The Washington Post). This statement was commonly perceived as criticizing the counter-protesters and establishing a false equivalence between them and the white supremacists; it was quickly condemned by Republicans, including Speaker of the House Paul Ryan.
Although there would not seem to be a direct business connection between anti-racism efforts and corporate America, corporations vocalized their disapproval of Trump’s statements. This event became the second-most responded to event, after the travel ban. Merck CEO Kenneth Frazier arguably was the impetus by resigning from Trump’s Manufacturing Jobs Initiative and issuing a statement saying, “America’s leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy, which run counter to the American ideal that all people are created equal.” The vast majority of corporate responses to the president’s Charlottesville comments came after Frazier’s (Harvard Business Review). Corporate reactions to the Charlottesville comments were seemingly sparked by a desire to be seen as morally upstanding, which hopefully would indirectly translate to a heightened reputation and further positive exposure to potential customers and business partners. Additionally, herd mentality undoubtedly took over; no one wants to be the only or last CEO to condemn something universally seen as racism.
The most recent issue inciting corporate activism, however, doesn’t fit neatly into either category of an issue that directly impacts business or one that is universally agreed upon. As such, its impact is more difficult to measure. Since the Valentine’s Day shooting at Marjory Stoneman Douglas High School that left 17 students and one teacher dead, gun control has been a hot topic in the national discourse. While political action has been meager, The Hill notes that “Corporate America is taking the lead on gun control as Congress slides back into gridlock on the issue.” Dick’s Sporting Goods, Wal-Mart, L.L. Bean, and Kroger announced new restrictions on gun sales, while other companies have moved to cut relations with major gun lobbyist the National Rifle Association.
Although it is too soon to tell, retailers’ efforts to limit gun sales may actually have a tangible effect, and act as de facto gun control in light of the dearth of legislative efforts. Corporate responses to actions directly impacting their businesses, like the travel ban, or universally-agreed upon, like white supremacy, would seem to only lead to positive effects on revenue and prices. For more nebulous areas like gun control, however, the impact is yet to be seen. Delta Air Lines dropped the NRA from its discounted-fare program after the Parkland shooting, but after the airline revealed that only 13 passengers only used the NRA discount, the efficacy of this corporate activism was questioned. The act, while definitely symbolic, led to Georgia lawmakers killing a $40 million tax break for the Atlanta company. Will the publicity Delta received ingratiate it with pro-gun control customers? Will it be able to strengthen its image as a socially-conscious company? What are the impacts of corporate social responsibility, and does doing the right thing pay?
The Fordham Journal of Corporate and Financial Law argues, “Generosity and kind-heartedness are rarely the motivating factors behind corporate social responsibility initiatives. Many corporations engage in CSR to create good press, attract consumers and investors, and to cover up the very wrongs their CSR programs seek to correct.” Forbes similarly contends, “Corporate social responsibility programs do not do this, they are “add-ons,” not a way of operating. Indeed, they may detract organizations from making the fundamental changes necessary to perform in a sustainably effective manner.”
Studies have shown that a positive relationship between corporate social responsibility and financial performance exists, but that it depends on the levels of product differentiation, outside investment (Sunghee Lee), and competitive strategies (Chin-Hunag Lin). Seemingly, corporate social responsibility is correlated with strong financial performance, but the question of causation remains – potentially more successful companies are more driven to give back. The impacts of corporate social responsibility may be hard to quantify, but one thing is clear: corporate social responsibility is no passing trend. With Trump’s approval ratings at all-time historical lows, Americans are increasingly looking toward business leaders and corporations for moral actions and guidance.