Friday, March 2, 2018
I live in South Florida and have friends who live in Parkland, Florida, the site of the most recent school shooting. Like many, I've found solace and inspiration in the young survivors and their families who have taken to the streets and visited Washington, D.C. to demand action to prevent the next tragedy. Who knows whether they will succeed where others have failed. I certainly hope so.
I'm more surprised though, with the reactions of major companies such as WalMart, Dicks, REI, United Airlines, Hertz, Symantec and others that have cut ties with the National Rifle Association or have changed their sales practices. Skeptics have observed that corporations take "controversial" stances only when it's cheap or easy and that this stance against the NRA isn't even that controversial. But, it certainly hasn't been "cheap" for Delta Airlines. Notwithstanding the fact that the airline employs 33,000 people in the state, Georgia has passed a bill to eliminate a proposed $50 million tax break because Delta announced plans to end its discount for NRA members.
The gun control issue is the latest in a string of public policy debates that have divided corporations over the past year. CEOs have taken positions on the travel ban, Charlottesville, the NFL protests, the Paris Climate Accord, transgender bathroom laws, and immigration. Some of these positions are more closely tied to their core business than others, and some have been driven by social media activism.
Cautious companies have guidance and momentum on their side when deciding whether to weigh in on social issues. According to the Conscious Capitalism credo, “.. business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence and it is heroic because it lifts people out of poverty and creates prosperity. Free enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to even more.” This movement focuses on a higher purpose than generating profits; a stakeholder orientation; leaders that cultivate a culture of care and consciousness; and a conscious culture that permeates the people, purpose, and process.
Blackrock, with $1.7 trillion under management, made that even more clear in its January 2018 letter to CEOs, which stated, among other things:
Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth...
Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?
What does this mean for the future? Is corporate social responsibility more of a business imperative than ever? Boards are now entering proxy season. Will shareholders demand more? Will state and federal governments use their power, as Georgia has, to send a message to the C-Suite? Will consumers engage in boycotts or buycotts? (See here, here, here, here) for my views on boycotts). I look forward to seeing how whether the corporations sustain this conscious capitalism over the long term even when it is no longer "cheap" and "easy."