Saturday, October 28, 2017

When the CEO Wants to Be President

It seems that in the wake of Donald Trump’s remarkable political ascent, a number of CEOs have developed their own political ambitions.

Facebook’s Mark Zuckerberg famously embarked on an anthropological tour of the United States, rubbing shoulders with the struggling common folk in Iowa, as well as in Wisconsin, Ohio, and South Carolina.  Disney’s Bob Iger says a lot of people are saying that he should run.  Starbucks’s Howard Schultz (okay, former CEO, still Executive Chair) visited the Houston victims of Hurricane Harvey, later explaining, “I wanted to see the aftereffects, but mostly I wanted to talk to people. And you learn a few things that are heartbreaking. You know, 40 percent of American households don’t have $400 of cash available to them….I think the country needs to become more compassionate, more empathetic. And we can’t speak about the promise of America and the American Dream and leave millions of people behind.”

Now, I suppose one could ask all kinds of questions about whether the Trump phenomenon should be interpreted to mean that America hungers for a closer relationship between corporations and politics, but my immediate reaction is, how do you square the fiduciary obligations associated with running a company with the demands of the political sphere?

I mean, leaving aside the obvious pull on a CEO’s attention and time, Schultz – apparently while harboring presidential ambitions – announced that Starbucks would hire 10,000 refugees (a decision that, arguably, negatively impacted his company’s stock price).  Bob Iger has had to navigate such highly charged issues as his presence on Trump’s Advisory Council, and the political commentary of Jimmy Kimmel at ABC, and Jemele Hill at ESPN.  Facebook, of course, has had to address issues of foreign interference with American elections, and has recently announced that it will voluntarily require disclosures akin to those required of television ads.  And that doesn’t even get into any gratuitous political speeches.

I’m not taking a position over whether these executives did the right or the wrong thing in each instance, but I am concerned that when CEOs simultaneously run their companies and run for president, it’s difficult to discern whether their political moves are intended to benefit the corporation (including, as relevant, all stakeholders), or their own political careers.  Under these conditions, how can shareholders be certain that their CEOs’ actions – on everything from labor conditions to executive pay to environmental footprints – are intended to advance the best interests of the company?

http://lawprofessors.typepad.com/business_law/2017/10/when-the-ceo-wants-to-be-president.html

Ann Lipton | Permalink

Comments

Interesting phenomena. Perhaps more a reflection of the intersection of politics and commerce. As business continues to become more highly regulated, there is no real divide between commerce and business and thus it is more palatable to bridge the gulf. As "pay to play" grows in the US, the lines blur.

Posted by: Tom N | Oct 28, 2017 7:03:44 AM

CEOs buying influence strikes me as perfectly reasonable from a shareholder perspective. CEOs running for office strikes me as working to alienate half of the company's prospective customers with very little shareholder upside.

Posted by: Frank Snyder | Oct 31, 2017 1:14:42 PM

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