When Business Gets Political

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Several companies have taken a stance against North Carolina’s bathroom law. A professor of political economy explains why it may be worth their risk. | Reuters/Jonathan Drake

Mixing business with politics has never been a more high-profile and volatile endeavor.

Companies face an increasingly polarized political climate, 24-hour-news scrutiny, a social-media-fueled outrage culture, and activists eager to impact corporate reputations. Understanding the risks and rewards of taking a stance on political and social issues can be difficult, if not impossible. And yet, more and more businesses are crafting political identities and responding to social issues, from Hobby Lobby’s Supreme Court case over reproductive rights to Google and Walmart shying away from their traditional partnership with the Republican National Convention in response to Donald Trump’s divisive campaign.

Steven Callander, a professor of political economy at Stanford Graduate School of Business who researches the intersection of business and politics and will be teaching an executive-level course covering this issue, says that like it or not, many companies are going to be faced with difficult decisions on political grounds. Here, he discusses the upsides and downsides of corporate political activity, and outlines strategies that can help navigate the complex relationships between employees, consumers, activists, and policymakers.

Apple announced it would not sponsor this year’s Republican National Convention, and reportedly Google and Walmart are mulling a similar move. What’s the calculus behind the decision to support or not support a major political party?

Conventions are like the Super Bowl of politics. There’s a lot of attention around it, and you would think, given the audience size, they’d want to advertise. But while a company might advertise at both the Super Bowl and the NBA playoffs to reach different audiences, politics is a unique case where people inclined to dislike the “show” are watching as well. The lovers of one party are the haters of the other, and everyone’s paying attention. You’re bifurcating.

In the psychology of these things, you hear expressions like “one negative is equal to three positives.” There’s an asymmetry, in that one bad thing lingers with people a lot more than several good things. Building off of that, in a political situation where you’re taking a stand and pleasing half the population while angering the other half, that is going to be a net losing equation for your reputation. With this election, because of the increasing polarization of parties, it just becomes more stark and more costly. You’re not getting as much benefit and you’re getting a lot more pain.

Look at what happened with Chick-fil-A when the founder publicly opposed gay marriage. That led to all these protests at stores both for and against gay marriage. One side was boycotting. The other side reacted by saying, “We’re going to have Support Chick-fil-A Day.” So they show up one day and buy a bit more, but that enthusiasm wanes very quickly while the boycott is every day. It’s more long-lasting. If you’re inclined to have a queasy feeling about the brand, it’s permanently etched in your mind, whereas the positive vibes just don’t stick around as much.

Given those downsides, it might be natural for a firm to think that it’s just not worth it to get political. What about the upsides?

First of all, companies might not have a choice. Activists know that applying pressure to take a stand one way or another on an issue is a great way to attract attention. So even if companies are uncomfortable with politics, they’re targets and they’re going to get pushed into some tight spots.

Beyond that, companies often have specific business interests they want to advance by influencing laws, policies, or regulations. But how does that explain the NBA or companies like Google taking stands over the North Carolina bathroom law? Why are they wading into that? I think, for one, there’s enough progressive pressure that it’s worth the downside. It obviously depends on where your customers are, but on the margins, national retailers seem to have decided that the progressive pressures are the safer option. This reflects generally in the population that the progressives have won the cultural war. If you look at the grand sweep of history, this country looks very different than it did 50 years ago. So, there are surely people out there who now think a little less of the NBA for threatening to move the 2017 All-Star game from Charlotte if the law isn’t changed, and they might be three times as angry as the people who support it. But they’re just outnumbered.

For a company like Google that operates in a very progressive ecosystem, what the employees care about weighs a lot. It’s hard to boycott Google, so they’re just not that worried about consumer reaction. Whereas they’re very worried about their employees losing faith in them. And at a national level, if they’re going to go lobby, they want politicians to be able to look and say that Google is a very loved company.

Another recent example was Apple getting embroiled with the FBI over unlocking the iPhone. At some level, it was a legal dispute about whether they’d help the government. But Apple was aware that it was going to be a political issue, and so they had to decide whether to take a stand on that or not.

The angle they ended up taking was a lot about their employees and the U.S., but I think it was also a lot about the Chinese market, which is very important to them. They want to have good relations with the Chinese government. Taking a stand on the issue was a way to send the message, loud and clear, “We will not let the U.S. government crack into your iPhone.” It was a risky thing to do, but there was no more effective situation for Apple to get that message out.

If you have a message you want to communicate, these situations are an opportunity to get it out. The spotlight is on. People are paying attention. You can run ads to say this stuff, but no one’s going to listen.

What about companies that aren’t Google or Apple?

You want to understand not only who your stakeholders are but also how much they care and what their capabilities are. Your employees care what the company stands for, so it impacts how you attract talent in a competitive market. Will your supplier find another buyer? How consumer-facing are you? Can customers boycott you effectively? While it’s hard to boycott Google, gas stations are very easy to boycott, because there’s usually one on the opposite corner, and it’s very public. It’s down the street from your house. Your neighbors will see if you’re using Shell when you’re trying to boycott it. Whereas with Google, you’re in your home. No one can observe. That’s what I mean when I say you want to understand the capability of these stakeholders. How big is the stick they can hit you with?

Does taking a stand early or getting in front of an issue help?

It’s a good question. Does that protect you from pressure later on, or does that make you more likely to be pressured later on? Should you be at the forefront, or should you just hang around and wait, and see how it blows up and then take a position? It depends on the issue. This is a classic question facing companies that want to be environmentally friendly, who take a few steps and then get attacked by activists. They always respond like, “We took some steps! Why are you attacking us rather than them?”

One answer is that you’ve signaled a willingness to move by taking a few smaller steps, and so the activists think you’re actually movable. Another thing is you’ve invested some resources in a brand image around being environmentally friendly, and so the activists figure you’re a little more exposed. You’ve got more to lose if you don’t stay at the forefront.

Do you have any parting advice for companies stepping into the minefield of politics?

It is very risky, but it can be a helpful strategy. The addendum to that is you can’t just say, “It’s just all too hard. I won’t decide.” Because you’re pushed not only by natural forces but by activists and stakeholders who will deliberately push you in. It’s not something you can avoid. You’ll be a player whether you like it or not, because companies are big identifiable factors and activists have realized that getting companies to tilt one way or another on issues is a very effective way to get some leverage and power. So you have to see the big picture and try to take control of it.