Corporate Political Conscience

In January of this year, Larry Fink, the chairman of BlackRock, the world’s largest asset manager, sent an open letter to over 1,000 CEOs around the country, urging them to look beyond their bottom lines and “respond to broader societal challenges.” Fink’s letter was more than the traditional good corporate citizenship mantra; he called on companies to take an active role in shaping reform, largely, he argued, because government no longer does. “We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector,” he wrote. After the February school shooting in Parkland, Florida, Fink followed his own advice and sent inquiries to American Outdoor Brands and Sturm Ruger, gun companies in which BlackRock had significant holdings, and asked them what they planned to do to address gun violence.

Within weeks of the tragedy, Dick’s Sporting Goods, Walmart, and Kroger had all announced that they would no longer sell guns to people under 21. More than 20 different additional companies, including Delta, United, Hertz, Avis, and MetLife, cut ties with the National Rifle Association. Until recently, corporations have typically been reluctant to address the sorts of controversial issues that divide Americans, for fear of offending potential customers. Today, however, these same companies are increasingly willing to speak out on guns, climate change, transgender rights, and immigration. It is no longer enough to be socially responsible. Companies are now embracing the idea of corporate political responsibility.

The pressure on businesses to take on this function in addition to their obligations to stockholders stems from a number of different sources. Modern-day customers want to buy from brands that share their values; a recent study found that 66 percent of American consumers believe it is important for companies to have and articulate positions on political issues. Even investors like BlackRock have also begun using their financial leverage to encourage less proactive companies to focus on creating sustainable, healthy communities. And firms seeking to attract the best employees, especially millennials, feel the need to signal their political virtue along with their fiscal viability. It’s not that these companies have suddenly realized that their voice is needed in politics. They’re just opening their eyes to how important political involvement is to their profits.

One major force behind this phenomenon is America’s political gridlock. An Associated Press–GfK poll from 2016 found that almost 80 percent of Americans are dissatisfied or angry with how government works today. That sentiment is widely shared across partisan lines. Regardless of party, Americans simply feel that politicians can’t be trusted. As one Michigan man who was polled told a reporter, “There are too many lobbyists and people who are not really working for the people anymore. They’re working to line their own pockets.”

Partisan gerrymandering only contributes to the pressure on businesses to act. There’s an old quip that voters do not choose their elected officials so much as elected officials choose their voters. Safe seats mean that general elections, pitting the two parties against each other, rarely matter. The real election is the primary; and that reality translates into extremist candidates with little incentive to compromise.

In this environment of political idleness, Americans have started to discover that consumer-oriented businesses are sometimes more responsive, and more accountable, than elected officials. In 2013, gun control advocates, angry at Congress’s failure to enact meaningful reform after the shooting at Sandy Hook Elementary School in Newtown, Connecticut, used a series of social media campaigns to push two of America’s biggest chains—Chipotle and Starbucks—to ban customers from bringing guns into their stores. Sonic, Target, and Panera Bread soon followed suit. In contrast to elections, which happen only every few years, the marketplace allows consumers to vote every day. And companies that depend on a broad customer base don’t have gerrymandering to protect them from the demands of We the Consumers.

Corporations also give people influence in places where they cannot vote. When the state of North Carolina enacted HB2 in 2016, a law restricting transgender people’s bathroom access, residents of Los Angeles and New York had no electoral means to stop it. But they could, nonetheless, demand that their favored brands assert their opposition. Paypal, Deutsche Bank, Adidas, and other companies that boycotted the state had to respond to a national constituency; North Carolina’s feckless senators and representatives did not. That’s why today’s corporations obsessively monitor social media: Any complaint about them anywhere has the potential to go viral.

Companies can no longer afford to wait for the latest tweetstorm before getting involved on political issues. To protect their brands and remain attractive places to work for the top millennial talent, businesses at least have to consider leading the charge from the boardroom. Even without much public pressure, Halliburton and ExxonMobil, hardly known for their progressive impulses, participated in 2017 in the campaign to defeat a Texas anti-transgender bathroom bill.

Although the social media platforms for spreading messages are new, corporate social responsibility, or CSR, has been a part of corporate strategy for decades. What began in the 1960s as a way for companies to satisfy both the public and shareholders by giving generously to charitable causes and promoting sustainability has evolved over time into a fundamental aspect of business practice, nearly—but not quite—as important as the bottom line.

The modern era of corporate political mobilization, meanwhile, traces back to the Powell Memorandum in 1971. Written by Lewis F. Powell Jr., a prominent Virginia attorney who would soon afterward join the Supreme Court, the memorandum advised the U.S. Chamber of Commerce how to fight back against consumer advocate Ralph Nader and the rising tide of business regulation by the government. The previous years had seen the passage of broad new laws protecting consumers and the environment, and Powell argued that American businesses, if only out of self-preservation, needed to drop their traditional reticence about political action on high-profile issues.

After Powell joined the high court, corporate America took up his ideas with vigor. First, it ramped up its lobbying efforts: Between 1968 and 1978, the number of “government affairs” officers representing corporations on Capitol Hill rose by more than 500 percent. Corporations and their executives began funding independent think tanks that conducted pro-industry research. There were even public service campaigns featuring television ads for children with cartoons touting the “competitive enterprise system.” Meanwhile, Powell was busy writing judicial opinions that expanded the free speech rights of corporations, which would one day—tragically, some would say—be relied upon in 2010’s Citizens United decision that controversially gave corporations the same right as individuals to pay for election ads.

Recently, though, corporate politics is no longer in the service of conservative, free market principles. Now it is also used to promote decidedly liberal positions. Corporations, surprisingly, often find themselves on the side of the modern-day versions of Nader. Unlike electoral politics, which tends to favor older and more conservative interests, corporate politics responds to the demands of a younger and more diverse base. Young people are more vocal on social media and, as polling shows, more likely to want their brands to take a stand on political issues.

Yet before liberals rush to celebrate the mobilization of business, it’s worth remembering that corporate politics is ultimately about corporate profits. Trusting corporations to shape American politics may, under the right circumstances, lead to progressive social policies: Fortune 500 companies have been strong proponents of affirmative action, even filing an influential amicus brief in a landmark 2003 Supreme Court case upholding race-conscious policies in university admissions. Big businesses have also often been valuable advocates for LGBTQ people. None of these good works necessarily took place because American business leaders are committed to fighting injustice. At least part of their rationale was that racism and intolerance can make it harder to identify and retain the best talent.

Meanwhile, on the economic and policy issues that impact inequality—taxes, pensions, wages, campaign finance, union protections, consumer protection, and environmental regulation—the pursuit of profit will inevitably lead to less favorable outcomes. As Fink wrote in his letter, the long-term threat to companies that ignore broader social concerns is “subpar returns to the investors.”

Just a few months before corporations began portraying themselves as warriors crusading against the intolerant gun politics of the Trump administration and the NRA, their executives were unapologetically lobbying the Republican Party to pass Trump’s tax plan, which has been widely criticized as a giveaway to big business—corporate welfare on a massive scale. For decades, elected officials have been falling all over each other to woo businesses into moving to their districts: Let’s not forget the cavalcade of tax breaks lobbed by cities at Amazon as it pondered the location for its next corporate headquarters. In other words, politicians are self-interested, and people may be sick of them, but it’s important to remember that the existential purpose of most corporations is to generate profit.

Consider gunmaker American Outdoor Brands, which responded to BlackRock’s pleas in March with a strong statement of respect for the Second Amendment. The company, echoing NRA rhetoric, said the country needed to “address the challenges of acute mental illness” rather than take “a politically motivated action” that would limit the rights of “law-abiding gun owners.” It had made a calculation based on consumer pressure: Its brand of corporate responsibility meant responding to the wishes of the gun owners who keep it in business.

When Americans trust corporations to shape their politics, what they are really doing is entrusting important decisions to the marketplace. And while sales are one way to gauge the will of the people, the marketplace is fickle. Americans ought to be cautious before making corporations their moral compass or primary vehicle for reform. The policy positions taken by U.S. companies on social issues today lean in the direction of inclusion. But tomorrow might be different, if the country—or a business’s particular consumer base—turns in a different direction.