CEOs Can’t Stay on Society’s Sidelines Anymore
(Bloomberg Opinion) -- America’s chief executive officers can’t relish taking on the Republican Party.
After all, a lot more of them are Republicans than Democrats. Republicans push for lower corporate taxes while Democrats do the opposite — witness President Joe Biden proposing to pay for his infrastructure bill in part with an increase in the corporate tax rate. Republicans don’t much care how much CEOs make; Democrats do. For years, the Chamber of Commerce backed Republican candidates and Republican legislation almost exclusively with nary a complaint from its big business membership.
Yet here we are.
In the last 48 hours, big important U.S. companies such as Delta Air Lines Inc. and JPMorgan Chase & Co. have loudly denounced the attack on voting rights in the wake of a Republican-sponsored law in Georgia that makes casting a ballot more difficult, especially for Black citizens. After 72 Black executives signed an open letter calling on corporate America to take a strong stand on the issue — similar bills have been introduced in 43 states — several CEOs did just that.
In early January, dozens of business leaders condemned the assault on the U.S. Capitol and vowed to withhold campaign contributions from those Republican legislators who declined to affirm Biden’s victory in the presidential election. After George Floyd’s death in police custody in Minneapolis, companies large and small openly supported the Black Lives Matter movement, promising to seek greater diversity in their hiring practices and to back efforts to eliminate systemic racism.
Did CEOs applaud the corporate tax bill that reduced rates from 35% to 21% in 2017, which was pushed through by Republican majorities? You bet they did. But that didn’t stop many of them from criticizing President Donald Trump’s immigration policies, not to mention his defense of white nationalists after a rally in Charlottesville, Virginia, turned violent. Merck’s Kenneth Frazier, one of the country’s few Black CEOs, pointedly stepped down from a Trump advisory council. “As a matter of personal conscience,” he said, “I feel a responsibility to take a stand against intolerance and extremism.”
One more step back: to the bathroom bill that North Carolina Republicans passed in 2016, the one that required transgender people to use public bathrooms that corresponded with the sex on their birth certificate rather than their gender identity. After businesses froze expansion plans and companies and sports organizations like the NCAA boycotted the state, the legislature passed a different bill within a year — one without the bathroom requirement.
Do you remember when prominent television advertisers such as Procter & Gamble Co. would pull their ads from shows that were even slightly controversial? Companies didn’t want to be seen as even implicitly taking sides for fear of alienating potential customers. In Washington, and in statehouses around the country, companies lobbied for measures that would help their businesses (or hurt their competitors) while carefully avoiding the country’s larger social issues.
So what changed? The most important difference is the Republican Party itself. Most executives who lean to the right view themselves more in the mold of George H.W. Bush than, say, Senator Ted Cruz of Texas. Moderate Republicans may be nearly extinct on the Senate floor, but they still dominate executive suites. The extremism of the modern Republican Party is so far outside the norm that executives feel they have no choice but to speak out.
Then again, the modern Republican Party doesn’t much care about business, not the way it used to. Republicans tried to get rid of the U.S. Export-Import Bank, which companies such as General Electric Co. and Boeing Co. relied on to complete international deals. They heard chronic complaints about “crony capitalism.” The immigration restrictions favored by Republicans have hurt hundreds of companies. When Trump lashed out at companies, no prominent Republicans came to their defense. Once upon a time, the Republican base was businesspeople; now it’s Trump supporters.
A third difference is that companies are now being judged by both current and potential future employees about where they stand on the country’s critical issues. Young employees are pressuring their companies’ leaders to speak out. They want companies to take pride in their stands on issues such as climate change, income inequality and diversity. Companies that refuse to get involved risk alienating their workforces.
Companies are also more susceptible to pressure than they ever were before. Michael Useem, a management professor at the University of Pennsylvania’s Wharton School, told me that he thought that the pressure that activist investors have applied to companies has inspired other groups. That seems plausible when you look at Georgia.
After the voting bill first passed, Delta, Coca-Cola Co. and Home Depot Inc., all based in Atlanta, issued mild statements supporting voting rights without criticizing the new law. Then Frazier and Kenneth Chenault, the former CEO of American Express, wrote the open letter signed by 70 other Black executives opposing the law. On Tuesday night, Frazier and Chenault also began lobbying White CEOs behind the scenes.
By Wednesday, the damning statements were pouring in. “The entire rationale for this bill is based on a lie: that there was widespread voter fraud in Georgia in the 2020 election,” said Ed Bastian, the CEO of Delta. James Quincey, the CEO of Coke, said, “The Coca-Cola Company does not support this legislation, as it makes it harder for people to vote, not easier.”
Home Depot, JPMorgan, Facebook Inc., Apple Inc., Bank of America Corp. and at least a dozen other large U.S. companies also issued strong statements backing expanded voting rights and opposing the Georgia law. Mark Mason, the chief financial officer of Citigroup, wrote on LinkedIn, “I see it as a disgrace that our country’s efforts to keep Black Americans from engaging fully in our Constitutional right to vote continue to this day.”
The initial response in Georgia both from Governor Brian Kemp and key legislators was to push back. Kemp, for instance, said that Bastian was simply repeating the “false attacks” of “partisan activists.” But the truth is, the companies hold the cards. Think back to North Carolina. Once there was a concerted effort to hurt the state economically with a boycott — which cost the state an estimated $3.76 billion, according to the Associated Press — the legislature backed down. If companies stick to their guns, Georgia is likely to back down as well. No state wants to be a corporate pariah. And no state wants to leave billions on the table if it can avoid it.
There is one other thing. Business leaders want to be on the right side of history, especially on matters of race. In 1964, after Martin Luther King Jr. won the Nobel Peace Prize, Atlanta decided to throw a dinner in his honor. It sent out hundreds of invitations to the city’s elites — almost none of whom responded.
Mayor Ivan Allen went to see Robert Woodruff, the former president of Coke and still the most important man in Atlanta. “It is going to be an embarrassment for Atlanta,” he told Woodruff. Woodruff in turn went to Coke’s CEO, J. Paul Austin. In a New York Times article about the lack of response to the dinner, Austin was quoted as saying “Coca-Cola cannot stay in a city that’s going to have this kind of reaction and not honor a Nobel Prize winner.” On the night of the dinner, all 1,600 seats were sold out.
That story has two morals. First, companies like Delta, Coke and Home Depot have immense power in their home cities — if they are not afraid to use it. And second, that dinner, which took place 57 years ago, is still recounted. It was a key moment in the modern history of Atlanta. Does Ed Bastian hope to be seen someday in the same light as J. Paul Austin? I’m betting he does.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."
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