Wednesday, August 16, 2017

The CEOs of Corporate America vs. The CEO of America

Business leaders probably didn’t think the honeymoon would be over so fast. A CEO as President, a deregulation czar, billionaires in the cabinet- what could possibly go wrong?

When Ken Frazier, CEO of Merck, resigned from one of the President’s business advisory councils because he didn’t believe that President Trump had responded appropriately to the tragic events in Charlottesville, I really didn’t think it would have much of an impact. I had originally planned to blog about How (Not) To Teach a Class on Startups, and I will next week (unless there is other breaking news). But yesterday, I decided to blog about Frazier, and to connect his actions to a talk I gave to UM law students at orientation last week about how CEOs talk about corporate responsibility but it doesn’t always make a difference. I started drafting this post questioning how many people would actually run to their doctors asking to switch their medications to or from Merck products because of Frazier’s stance on Charlottesville. Then I thought perhaps, Frazier’s stance would have a bigger impact on the millennial employees who will make up almost 50% of the employee base in the next few years. Maybe he would get a standing ovation at the next shareholder meeting. Maybe he would get some recognition other than an angry tweet from the President and lots of news coverage.

By yesterday afternoon, Under Armour’s CEO had also stepped down from the President’s business advisory council. That made my draft post a little more interesting. Would those customers care more or less about the CEO's position? By this morning, still more CEOs chose to leave the council after President Trump’s lengthy and surprising press conference yesterday. By that time, the media and politicians of all stripes had excoriated the President. This afternoon, the President disbanded his two advisory councils after a call organized by the CEO of Blackstone with his peers to discuss whether to proceed. Although Trump “disbanded” the councils, they had already decided to dissolve earlier in the day.

I’m not teaching Business Associations this semester, but this is a teachable moment, and not just for Con Law professors. What are the corporate governance implications? Should the CEOs have stayed on these advisory councils so that they could advise this CEO President on much needed tax, health care, immigration, infrastructure, trade, investment, and other reform or do Trump’s personal and political views make that impossible? Many of the CEOs who originally stayed on the councils believed that they could do more for the country and their shareholders by working with the President. Did the CEOs who originally resigned do the right thing for their conscience but the wrong thing by their shareholders? Did those who stayed send the wrong message to their employees  in light of the Google diversity controversy? Did they think about the temperament of their board members or of the shareholder proposals that they had received in the past or that they were expecting when thinking about whether to stay or go? 

Many professors avoid politics in business classes, and that’s understandable because there are enough issues with coverage and these are sensitive issues. But if you do plan to address them, please comment below or send an email to mweldon@law.miami.edu.

http://lawprofessors.typepad.com/business_law/2017/08/the-ceos-of-corporate-america-vs-the-ceo-of-america.html

Business Associations, Corporate Governance, Corporate Personality, Corporations, CSR, Current Affairs, Ethics, Law School, Marcia Narine Weldon, Shareholders, Teaching | Permalink

Comments

I think it's worth pointing out to students that there hasn't been much coverage (at least, that I've seen) of whether the CEOs in these groups did (as did Merck's), or felt that they were required to, consult their boards, or any of the other directors individually, about whether they should stay or leave-- and about whether they did, would, or should have, consider(ed) themselves bound by any reaction expressed by the board. And I'm not sure than any boards took it upon themselves to express a decision(?)/recommendation(?) to a CEO who didn't expressly invite their input.
There are also some interesting questions about whether a CEO who left or stayed because that's what the board wanted would be breaching his or her own fiduciary duties by expressing disagreement with the board publicly; or whether a director who disagreed with the CEO's decision and/or with the other directors would similarly be breaching any fiduciary duty by publicly airing his or her own views.
Best wishes to all for the new academic year!
Walter

Posted by: Walter Effross | Aug 17, 2017 6:45:19 AM

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