Business Day
The Moral Voice of Corporate America
By DAVID GELLESAUG. 19, 2017
The nation has split into political tribes. The culture wars are back, waged over transgender rights and immigration. White nationalists are on the march.
Amid this turbulence, a surprising group of Americans is testing its moral voice more forcefully than ever: C.E.O.s.
After Nazi-saluting white supremacists rioted in Charlottesville, Va., and President Trump dithered in his response, a chorus of business leaders rose up this past week to condemn hate groups and espouse tolerance and inclusion. And as lawmakers in Texas tried to restrict the rights of transgender people to use public bathrooms, corporate executives joined activists to kill the bill.
These and other actions are part of a broad recasting of the voice of business in the nation’s political and social dialogue, a transformation that has gained momentum in recent years as the country has engaged in fraught debates over everything from climate change to health care.
In recent days, after the Charlottesville bloodshed, the chief executive of General Motors, Mary T. Barra, called on people to “come together as a country and reinforce values and ideals that unite us — tolerance, inclusion and diversity.”
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Jamie Dimon of JPMorgan said, “The equal treatment of all people is one of our nation’s bedrock principles.”
Walmart’s chief executive, Doug McMillon, criticized Mr. Trump by name for his handling of the violence in Charlottesville, and called for healing.
And in a rebuke to the president, who suggested that both the racist groups and the counterprotesters marching in Charlottesville were to blame for the violence there, a wave of chief executives who had agreed to advise Mr. Trump quit his business advisory councils, leading to the dissolution of two groups.
The forthright engagement of these and other executives with one of the most charged political issues in years — the swelling confidence of a torch-bearing, swastika-saluting, whites-first movement — is “a seminal moment in the history of business in America,” said Darren Walker, the president of the Ford Foundation and a board member at PepsiCo.
“In this maelstrom, the most clarifying voice has been the voice of business,” he said. “These C.E.O.s have taken the risk to speak truth to power.”
This transformation didn’t happen overnight. Chief executives face a constellation of pressures, and speaking up can create considerable uncertainty. Customers can be offended, colleagues can feel isolated and relations with lawmakers can suffer. Words and actions can backfire, resulting in public relations disasters. All this as a chief executive is expected to constantly grow sales.
Even this past week, it was easy to discern careful calculations made by executives who chose to speak out against Mr. Trump. Many faced calls to resign from the presidential advisory councils, and the prospect of boycotts if they did not.
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But they also faced notable and new kinds of pressure from within — from employees who expect or encourage their company to stake out positions on numerous controversial social or economic causes, and from board members concerned with reputational issues. In the past week, business leaders have responded with all-staff memos and town-hall meetings.
In short, while companies are naturally designed to be moneymaking enterprises, they are adapting to meet new social and political expectations in sometimes startling ways.
“Not every business decision is an economic one,” said Howard Schultz, the chairman of Starbucks, who was one of the country’s first company leaders to proactively address social issues. “The reason people are speaking up is that we are fighting for what we love and believe in, and that is the idealism and the aspiration of America, the promise of America, the America that we all know and hold so true.”
Looking for Controversy
Companies have reckoned with issues of race, class and gender for generations now.
On Feb. 1, 1960, four black college students sat down at the segregated lunch counter at a Woolworth’s store in Greensboro, N.C. The civil rights sit-in movement was born, and five months later, Woolworth’s desegregated.
Decades later, activists called on American companies to divest from apartheid South Africa. Under pressure, many big companies, including General Motors and Pepsi, pulled out of the country.
But for the most part, companies got political only under duress. Rarely have chief executives gone looking for a controversy. Instead, the prevailing view was one articulated by the economist Milton Friedman in The New York Times in 1970: “the social responsibility of business is to increase its profits.”
By the 1990s, some corporate actors began taking the initiative. Apple, Disney and Xerox extended health care benefits to partners of gay and lesbian employees, helping to pave the way for broader acceptance of gay rights. Still, promoting inclusion and advancing diversity were hardly part of the curriculum for emerging titans of industry.
“When I went to business school, you didn’t see anything like this,” said Marc Benioff, the founder and chief executive of Salesforce. “Nobody talked about taking a stand or adopting a cause.”
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Now, Mr. Benioff is at the vanguard of a group of executives who are more connected — to customers, employees, investors and other business leaders — than ever before, and who are unafraid to use their influence.
In 2015, after Indiana passed a law that would have made it easier for religious conservatives to refuse service to gay people, Mr. Benioff canceled all Salesforce events in the state and threatened to relocate employees away from Indianapolis.
The outcry from Mr. Benioff and other business leaders helped force politicians, including Vice President Mike Pence, then the governor of Indiana, to reverse course. Ultimately, lawmakers passed a watered-down version of the law.
“C.E.O.s wield economic influence,” Mr. Benioff said. “Nobody wanted to lose those jobs in Indiana. But we had to make a statement that we were going to withdraw if they were going to create laws that were going to discriminate against our employees.”
The business community’s triumph in Indiana emboldened progressive executives, and many have become more willing to confront controversial topics unprompted.
Randall Stephenson, the chief executive of AT&T, recently reflected on racial tensions in America at a meeting of 2,000 employees. “Black lives matter,” Mr. Stephenson said, “we should not say, ‘All lives matter,’ to justify ignoring the real need for change.”
Hamdi Ulukaya, the founder and chief executive of the yogurt maker Chobani, has hired hundreds of refugees — drawing the ire of the far right, but making him a cause célèbre for progressives.
And even before the showdown in Indiana, Timothy D. Cook, the chief executive of the world’s largest company, Apple, came out as gay — the most prominent executive to make such an announcement. “I’m proud to be gay, and I consider being gay among the greatest gifts God has given me,” he wrote.
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None of this is to say that all corporate leaders are now beacons of morality. The Uber co-founder Travis Kalanick was ousted amid a mushrooming sexual abuse scandal at the company, and reports that he had cultivated a frat house culture. Martin Winterkorn, a chief executive of Volkswagen, resigned amid his company’s emissions scandal.
But faced with circumstances they cannot in good conscience accept, more and more chieftains appear unafraid to act. In June, after the president withdrew the United States from the Paris climate accord, Elon Musk, the chief executive of Tesla, and Robert A. Iger, the chief of Disney, resigned from presidential advisory councils, setting the stage for this past week’s revolt.
“The C.E.O.s of big public companies don’t walk out onto the plank of social and political leadership by default,” said Nancy Koehn, a historian at Harvard Business School. “But today, to keep silent is to jeopardize the reputation of the company.”
‘Many Sides,’ One Voice
Last weekend, as white nationalists protested the removal of a statue of the Confederate general Robert E. Lee in Charlottesville, chief executives were paying close attention to the president’s response. Among those watching was Kenneth C. Frazier, the chief executive of the drugmaker Merck and one of dozens of executives who had agreed to advise Mr. Trump on economic issues.
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Mr. Frazier disagreed with the president’s stances on immigration and climate change, but he believed it was important to have a seat at the table. Yet for Mr. Frazier, the son of a janitor and the grandson of a man born into slavery, the president’s remarks — in which he blamed the violence on “many sides” — were too much to bear.
On Monday morning, Mr. Frazier said he would step down from Mr. Trump’s manufacturing council. “As C.E.O. of Merck and as a matter of personal conscience, I feel a responsibility to take a stand against intolerance and extremism,” he wrote.
The president took to Twitter, lacerating Mr. Frazier and attacking Merck, bluster that alienated more chief executives. By the end of the day, the chiefs of Under Armour and Intel had dropped off the same advisory group. The following morning, three nonprofit business leaders also quit.
As the manufacturing council fell apart, another presidential advisory group was also tottering. The Strategic and Policy Forum, a group with chief executives of some of the country’s biggest companies, held a conference call and agreed to disband.
The reaction from business leaders extended well beyond the confines of the presidential advisory councils.
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James Murdoch, the chief executive of 21st Century Fox, pledged to donate $1 million to the Anti-Defamation League. The gesture was all the more remarkable because Mr. Murdoch is the son of Rupert Murdoch, a staunch supporter of Mr. Trump, and because his company operates Fox News, known for its favorable coverage of the president.
“What we watched this last week in Charlottesville and the reaction to it by the President of the United States concern all of us as Americans and free people,” the younger Mr. Murdoch wrote in an email to associates. “I can’t even believe I have to write this: standing up to Nazis is essential; there are no good Nazis. Or Klansmen, or terrorists.”
Technology companies severed ties with white supremacist groups. Google and GoDaddy dropped domain registrations for far right publications. Facebook deleted articles that celebrated hate crimes. Spotify took down music by white power rock bands.
And in Seattle, Mr. Schultz held a town-hall meeting for more than 1,000 employees where he condemned bigotry and called for unity. “I could sense the anxiety,” he said. “I felt a need to create a safe and loving environment.”
All week, the business world’s actions went beyond the donations to charity and pledges to plant trees that once defined corporate social responsibility.
“For a long time, corporate social responsibility was a buzzword marketing tool, walled off within an organization,” said Alan Fleischmann, president of Laurel Strategies, an executive advisory firm. “Now it has to be central for the C.E.O., part of their everyday responsibility and leadership.”
The Cost of Speaking Out
Kevin Plank, the founder and chief executive of Under Armour, the athletic apparel maker, built a brand that celebrates diversity, sponsoring athletes like the basketball player Stephen Curry and artists like the ballerina Misty Copeland. Yet when asked to serve on the president’s manufacturing council early this year, Mr. Plank agreed, voicing his optimism about Mr. Trump.
His star sponsors made their displeasure known. “I strongly disagree with Kevin Plank’s recent comments in support of Trump,” Ms. Copeland said. Mr. Curry also expressed his distaste for the president.
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So on Monday night, when Mr. Plank stepped down from his advisory role, he might have thought his troubles were over. Instead, Mr. Trump’s supporters have risen up, calling for a boycott of Under Armour.
“The leaders of corporate America have demonstrated the courage to call out something that is unacceptable,” said Mr. Walker of the Ford Foundation. “But speaking truth to power can come with huge costs.”
Because companies have inherently diverse customers and employees, taking a stand can be a no-win situation for chief executives. For every employee, investor and customer they make happy, they may well make someone else unhappy.
When Pepsi this year released an ad featuring Kendall Jenner offering a police officer a soda in the midst of an apparent Black Lives Matter protest, the condemnation was swift. Two years earlier, Starbucks drew wide ridicule when, as part of an effort by Mr. Schultz to start a national conversation on race relations, baristas were encouraged to write “race together” on coffee cups.
Companies on the conservative end of the ideological spectrum are also increasingly willing to stand up for their principles, and just as likely to face criticism. After it was revealed that the family behind the fast-food chain Chick-fil-A supported groups that opposed same-sex marriage, gay rights protesters targeted the restaurants.
Hobby Lobby, the craft-supply chain run by a conservative Christian family, challenged a provision in the Affordable Care Act that required family-owned corporations to pay for insurance coverage for birth control. Despite drawing the ire of the left, Hobby Lobby took its case to the Supreme Court and won.
Critics of Mr. Plank’s decision cast their net wide, going after all the chief executives who quit the president’s business advisory groups. “This is a remarkable moment in history,” said Lou Dobbs, a Fox Business Network host. “Every one of those C.E.O.s, mark my words, is a coward — and the president is exactly right — a grandstander in the service of the left. And no one should make any mistake: This is a coordinated, orchestrated attack against this president.”
John Carney, a business editor for Breitbart News, the conservative news site, wrote that “corporate America is part of the opposition.”
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“The confederacy of the media institutions, the American left, and Corporate America has aligned itself against the populist uprising that brought Trump to the White House,” Mr. Carney wrote. “The battle lines are clear.”
Those executives who go out on a limb know the risks. “We all recognize that with every decision we make, there is group of people that are not going to agree with us,” Mr. Schultz said. “But you must define you core purpose for being. We stand in the interest of something greater than just making money.”
A Diversity Paradox
Diversity — of opinions, ideologies and religions — is what makes taking a stand on moral issues so treacherous for C.E.O.s. Yet paradoxically, it is also diversity — of races, genders and worldviews, among customers and the work force — that makes many of the executives, when forced to take a stand, come down on the side of inclusion, tolerance and acceptance.
Business leaders looking to the future are accepting that it is unwise to isolate swaths of the population by coming off as racist, sexist or intolerant. Instead, for the sake of the bottom line, it is imperative that they appeal to the widest possible audience. “Business leaders aren’t threatened by an America that is browner, an America that is more diverse; they welcome that,” Mr. Walker said. “Business leaders are bullish on diversity.”
What’s more, some executives have concluded that speaking out on issues of morality can improve more than their reputations — it can benefit recruitment, morale and even sales. “Our employees come here knowing that this is something that is extremely important to us,” said Mr. Benioff of Salesforce. “Business is the greatest platform for affecting change.”
If the voices of business leaders seem amplified, that is perhaps because in such partisan times, few politicians can speak to both sides of the aisle, leaving a vacuum for business leaders to fill. This last week, the executives on Mr. Trump’s business advisory councils piped up, led by Mr. Frazier of Merck.
The black chief executive of a $172 billion company — a multimillionaire who was born in a poor neighborhood, a former lawyer who fought for civil rights and had agreed to advise the president — Mr. Frazier offered remarks that set the tone for the business world at large.
“Our country’s strength stems from its diversity,” he wrote, adding, “America’s leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy, which run counter to the American ideal that all people are created equal.”
The C.E.O.s had found their voice.
Follow David Gelles on Twitter @dgelles.
A version of this article appears in print on August 20, 2017, on Page BU1 of the New York edition with the headline: Executive Powers. Order Reprints| Today's Paper|Subscribe
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