To gauge whether — and how — to jump into the political fray, business leaders should consider an issue’s importance to company financial performance and relevance to stated values.
Consumers and employees now expect companies to engage on social, environmental, and economic issues that are part of the political discourse (think immigration, climate change, and trade). Given how politically polarized the world has become, that can put business leaders in a bind.
Here’s the dilemma as it’s usually understood: They can take a political stand and risk upsetting some consumers or employees, igniting oppositional behavior such as boycotts and strikes, and damaging the company’s reputation. Or they can remain silent, ceding the moral high ground and allowing others to write the narrative.
One company that found itself caught in this dilemma is Delta Air Lines. After a deadly shooting at a high school in Parkland, Florida, the company reexamined a discount it had offered to members of the National Rifle Association (NRA). Delta’s solution was, in a sense, to employ both extremes; it ended the discount in question but announced the action as a reflection of its “neutral status.” In the end, Delta got little reputational benefit for claiming neutrality, and NRA-friendly lawmakers pulled $50 million in tax benefits as retribution.
Framing the debate over corporate political activism in terms of this binary choice — take a stand or remain silent — ignores the reality that companies often seek less-extreme options and have different motivations for becoming active politically. In short, they need a more nuanced set of alternatives.
Figuring Out How to Engage
How might a company identify its alternatives? Our respective research on ethical leadership and corporate political activism suggests that when leaders decide how to engage politically, they need to consider the degree to which the issue is materially important to the company’s financial performance and how relevant it is to stated corporate values.
Customers, employees, and other stakeholders recognize that companies, as for-profit entities, are motivated in part by the bottom line. If a political issue could materially affect it, people will generally view the issue as appropriate for the company to address in some way. For example, they would expect a pharmaceutical company to speak out against health care legislation that could harm the business.
Many companies declare commitments to issues such as diversity or poverty alleviation in their values or mission statements. When they do so, stakeholders naturally expect them to honor those commitments. Failure to speak up when a core value appears to be threatened begs the question: What does the company truly stand for?
Examining issues on the basis of these two factors reveals four types of political positions that companies might reasonably take. (See “A Framework for Corporate Political Positions.”)
When to Take a Forceful Political Position
When a political issue is reflected in the stated values of a company and is material to its success, leaders should take a forceful position. Statements from the company should be unequivocal, explicitly making the connection to its values and its operations. Moreover, the company should be proactive, creating a track record on such issues so it means more when leaders speak up.
Microsoft took a forceful stand against President Trump’s decision to end the Deferred Action for Childhood Arrivals (DACA) program, arguing that the decision was anathema to its values and also harmed its ability to attract talented employees. Microsoft’s leaders not only signed an open letter in support of DACA but also spoke directly to Congress. The company promised to fund the legal defense of employees who are so-called Dreamers as well.
When to Take a Tempered Political Position
There are times when a company needs to address an issue but seeks an alternative to a forceful position. One of these times is when the issue relates to a stated core value but materiality to performance is low. In such circumstances, taking a staunch position may be offensive to some key stakeholders, so it’s better to frame the matter more broadly.
Khane Cinema, a motion picture association in Iran, took this approach when it called for voter participation in the 2017 Iranian elections. The organization’s leaders likely knew that higher turnout would favor reformers over hard-liners, so their strategy enabled them to act on their progressive values of tolerance without offending conservative moviegoers or government officials.
AT&T serves as another example. In a speech to employees, CEO Randall Stephenson said that racial tensions were ripping apart American communities and he urged listeners to act. The speech did not explicitly respond to the grievances of the Black Lives Matter movement, but rather made clear the organization’s commitment to inclusivity as a core value.
The degree of tempering required will depend on an assessment of stakeholders’ beliefs and expectations. The response should not be so strong that it could harm material interests of the company; equally, the company should not sell its values short.
When to Take a Pragmatic Political Position
When a political issue does not relate to the company’s core values but is of material importance to performance, a pragmatic stand is appropriate. The company should take a position on the issue and clearly explain the impact it will have on revenues, costs, or risks. Such an approach highlights practical rather than moral reasons — though it might invite reflection on whether core values should be reassessed.
Ryanair DAC, the Dublin, Ireland-based airline, has largely taken this tack on the thorny political issue of Brexit. CEO Michael O’Leary is a staunch opponent of the withdrawal of the United Kingdom from the European Union, mainly on pragmatic grounds. “The first industry over the cliff will be flights,” O’Leary said at a conference for airlines executives. “And I think maybe that’s the way you bring about the crisis that gets everybody in Britain to say ‘well, maybe let’s look at this again.’ ”
To that end, he’s even considering grounding Ryanair planes. O’Leary’s objections have not been ideological or moral; rather, he argues that Brexit will make travel in Europe cost more, which will reduce Ryanair’s profitability and its customers’ ability to travel inexpensively outside of the U.K.
When to Take a Neutral Political Position
Finally, if a political issue is neither linked to a stated corporate value nor highly material to performance, the company should abstain from taking a position altogether. Of the four strategies in our framework, this is the one that most closely reflects the traditional wisdom that companies should stay out of politics. In such circumstances, the company may acknowledge concerns of its stakeholders but should affirm its nonpolitical stand. We recommend abstention specifically on that issue rather than a blanket profession of nonpartisanship — the company will undoubtedly need to take a stand on other issues in the future.
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Being Apolitical Isn’t an Option
It’s not surprising that business leaders are often hesitant to take sides on political issues. Some concern is philosophical: Is commenting on a contentious issue a legitimate use of a corporate platform? After all, business leaders are not democratically elected officials. Some concern is pragmatic: Taking one side of an issue could alienate the customers, employees, and other stakeholders who hold the opposing view. As Salesforce.com director and former U.S. Secretary of State Colin Powell warned Salesforce.com CEO Marc Benioff, when Benioff advocated for more corporate activism, “Be careful how far you climb up the tree — it will expose your backside.”
But the days when companies could avoid making political statements are over. When issues come up, however, they need not be viewed in black and white. We urge business leaders to think through which ones are most material to performance and speak most directly to the values of the company so that they may plan ahead. Our prescription is for a less extreme — and more context-driven — playbook.
We acknowledge that there will be exceptions to the four strategies. For example, after a white supremacist killed a woman by ramming his car into a crowd of protesters in Charlottesville, Virginia, in 2017, President Trump said there were “fine people on both sides,” suggesting moral equivalence between neo-Nazis and counterprotesters. Many CEOs cited moral grounds — not arguments about materiality to the business or corporate values — as they forcefully rejected the president’s comments. Still, these four options provide some much-needed guidance for executives who are more typically seeking the middle ground.
An adapted version of this article appears in the Fall 2018 print edition.