CEOs Exit the Trump Era With Reputations Intact

U.S. chief executive officers had a pretty good 2020 despite the ravages of the pandemic and a severe economic contraction. Polls show that the country’s biggest companies and its leaders are enjoying the highest levels of approval among the public relative to almost any other institution. As a group, they are perceived as capable and competent.

This stands in sharp contrast to the ineptness toward the Covid-19 pandemic exhibited by governments at every level. State and local leaders showed a spectrum of incompetence, but the failure was greatest at the federal level. The White House exhibited weak leadership, confused the public with misinformation, failing to even encourage mask wearing. Highly effective vaccines were created in a miraculously short period of time, only to have the Trump administration botch the vaccination roll out.

The role corporate leadership plays in society – economically, socially or politically – is sometimes overlooked. As a group, CEOs have a large impact on everything from technology to public policy. I tend more toward critic than cheerleader of the C-suite, but even I couldn’t help but notice the immense differences effective leadership made between the public and private sectors. Businesses and their leaders have not always been recognized as competent and trustworthy. Bankers were rightly blamed for being a major cause of the 2008-09 financial crisis.

It’s too early to tell if this was a “one-off,” with executives rising to the occasion – something leaders tend to do – or the beginning of a permanent change in corporate behavior. Perhaps the high profile announcement in August 2019 by the Business Roundtable, a group that lobbies on behalf of Corporate America, that "shareholder primacy” is no longer the sole purpose of a corporation, but should include a commitment to “all stakeholders,” which includes customers, employees, suppliers and local communities, was more than a mere public relations ploy. Consider the role played by CEOs over the past 12 months:

 Reputation & Trust: The damage to reputations of institutions has been sharp. Trust in government is near record lows, and the media is hardly trusted. Worse still, Americans don’t seem to trust each other. Business is one of the very few institutions that have maintained the public’s confidence. The public even sees CEOs leading on a variety of issues historically thought of as governmental responsibilities, including “racial justice” and “information quality.” In its annual Trust Barometer, public relations firm Edelman notes:

“Business has emerged as the last institution standing, the only one rated as both competent and ethical and fifty points ahead of government on competence.”

This is a first for the sector, but given the past year’s events, it should be no surprise.  The vaccine work done by pharmaceutical companies impressed everybody. When it became dangerous to go to stores, retailers radically expanded their ability to delivery essentials directly to the home. After the election, business groups advocated for the peaceful transition of power. And when rioters invaded the Capitol, social media platforms banned both the insurrectionists and those viewed as their political instigators.

Saving the Post-Election Period: Soon after the results of Pennsylvania, Arizona and Georgia trickled in, the outcome of the Presidential election became undeniable. Partisans refused to acknowledge defeat, but “hundreds of major business leaders, many of whom had backed Trump’s candidacy and supported his policies, called on him to concede.”

On Nov. 7, the Business Roundtable, an association of CEOs, congratulated President-elect Joe Biden and Vice President-elect Kamala Harris on their election win. On Jan. 4, two days before Congress was scheduled to certify the electoral college votes, the Roundtable released a statement to Congress:

“With claims of electoral fraud having been fully considered and rejected by federal and state courts and state government officials, the integrity of the 2020 presidential election is not in doubt. There is no authority for Congress to reject or overturn electoral votes lawfully certified by the states and affirmed by the Electoral College. The peaceful transition of power is a hallmark of our democracy and should proceed unimpeded. Therefore, Business Roundtable opposes efforts to delay or overturn the clear outcome of the election.”

This is not the progressive caucus or a statement by a group of “Bernie Bros;” rather, the Roundtable represent the bedrock of corporate America. As a group they are far more Right than Left, more Republican than Democrat. Following the Jan. 6 insurrection, the conservative U.S. Chamber of Commerce, a pro-business lobby, excoriated President Donald Trump:

“The President’s conduct last week was absolutely unacceptable and completely inexcusable. By his words and actions, he has undermined our democratic institutions and ideals.”

When business leaders are emphasizing the Rule of Law and a peaceful transition of power even as the President of the U.S. refuses to, something unusual is happening. The public obviously noticed.

 Free Speech and De-Platforming the Insurrectionists: CEOs manage a delicate balancing act when deciding who is banned from their platforms. Social media sites such as Twitter, Facebook, Instagram, YouTube and TikTok generate revenue by keeping audiences engaged. If management becomes too heavy-handed in policing the voices of their customers, they risk users abandoning them en masse like what happened with MySpace or Friendster. But a purely hands-off approach allowing bad actors to chase off their users runs counter to their business models.

Before January, platforms had been criticized for tolerating too much hate and calls for violence.  Whatever reluctance there was to become more active in policing content was washed away by the breach of the Capitol. Companies, it seems, had little choice. A Harris Poll taken shortly after the insurrection showed a majority of Americans - 61% - agreed with the moves by the social media companies.

Corporate PAC Money: The effort by some legislators to block certification of legitimate electoral college votes sparked a revulsion. An immediate accounting by watchdogs of political action committee funding took place. Donors were embarrassed when it was pointed out whose monies funded the insurrections.

The attempt to decertify the electoral college results led to a crisis among “a growing list of America’s most powerful corporations,” according to the Center for Responsive Politics, a research group tracking money in U.S. politics. Campaign finance tracker OpenSecrets found that many companies decided to cut off future funding from those lawmakers who sought to disrupt the transfer of power.

I am one of the last people you might imagine as cheerleading corporate executives, having excoriated the recklessness, greed and irresponsibility of the financial sector. But the performance of corporate leadership over the past 12 months makes it hard to avoid the conclusion that America’s private sector chief executives were the best performing group in the country.

Scientists were the other major group that are still widely trusted and held in high esteem by the public.

Following several suicides, pressure had been building from anti-bullying groups for these platforms to take action.

The de-platforming of numerous extremists is not a First Amendment issue – that’s a protection against Congress infringing on speech, not private companies. Freedom means these private companies get to decide who uses their platform – not the government.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2021 Bloomberg L.P.

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