C Gopinath

US firms playing politics

C Gopinath | Updated on April 28, 2021

They must weigh the costs and benefits of the new stance

Corporations are treated as persons in the eyes of US law. They can sue and be sued. Then why can’t they be openly involved in the politics of a democratic society? That is an issue that is agitating many political and business minds.

End-March, 72 CEOs of major corporations, many of whom like Delta Airlines and Coca Cola are based in Atlanta, Georgia, put their names down to a joint open-letter published as an ad in a newspaper. They called on corporations to fight legislation that would limit voting access to minority voters that are being initiated in many states. These legislative measures are being pushed by Republicans. But the CEOs saw it as a moral issue of equity in voting rights.

When companies exited South Africa due to its apartheid policies, that was a moral issue. When companies criticise legislation that they feel affects voting rights of minorities, then it is a political and not a moral issue.

Georgia had recently passed legislation that changed voting rules pertaining to absentee voting, voter identification, early voting and so on. Liberals believe that these changes will affect black and minority voters who generally vote for the Democratic party. Hence this is seen as a measure by the Republican party legislature of Georgia to stack the rules against the Democrats. Democrat leaders, including President Biden, have been vocally protesting. Never mind that many of the new rules exist in states that are ruled by the Democratic party.

Responsibility widening

Businesses have always had to deal with politics. They actively engage politicians through the lobbying process to inform the lawmakers about what can hurt or help their businesses. Committees of Congress (i.e., US parliament) summon business leaders to question them on actions their corporations have taken on issues of health, safety, the natural environment and so on.

But the safe and sensible business approach has always been to stay away from openly taking positions on purely political issues. Then why did the CEOs take this stand?

One clue can be that their definition of who they are responsible to is widening. In 2019, the Business Roundtable, a prominent business lobbying group, declared that henceforth the ‘purpose of a corporation’ is to be relevant to all stakeholders and put customers, employees, suppliers, communities on a list ahead of the shareholders they used to be focussed on.

When corporations take a political stance, this impacts several stakeholders, in particular employees, customers and investors. When I buy a product, I do not reflect on which political party the CEO supports — because I do not know. But if I do, will that influence my purchase decision? As with employees, we already have a clue. Employees of social media organisations like Google and Facebook have been critical and vocal about the dominant political ideology of their top management. Will that hurt the ability of these companies to attract the best talent they seek?

Judges in America are already seen as political, as they are championed by political parties for selection and approval. Will a ‘Republican’ judge view a case brought before her by a ‘Democrat’ company? How far down this slippery slope do we go?

One relevant criticism against the new-found courage of business leaders is this: If they have such strong feelings about election rules and minority rights, will they stop doing business in China and Hong Kong? Google was reportedly willing to allow its algorithms be manipulated to meet the needs of censorship in China.

In 2010, the US Supreme Court, in a landmark decision in Citizens United v the Federal Election Commission, declared that labour unions and corporations are free to spend money on electioneering communications and to directly advocate for the election or defeat of candidates. The CEOs seem to have taken that to heart. They are smart enough to weigh the costs and benefits of their new stance. We will have to wait for the next annual meeting of these companies to see if their shareholders support their courage.

 

The writer is an emeritus professor at Suffolk University, Boston

 

Published on April 28, 2021

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