Last week, following the passage of Georgia’s controversial new voting laws, Major League Baseball pulled this year’s All-Star Game out of Atlanta. Soon after, more than 100 chief executives and corporate leaders discussed taking new action to combat the controversial state voting bills being considered across the country. In response to this growing corporate involvement, Mitch McConnell and other Republican leaders warned the business community to stay out of politics – except, of course, when it comes to making political donations.
This series of events yet again brings to the forefront the role of corporations in our society. The fact is that corporations play the predominant role in our nation’s economy – comprising more than 80% of the nation’s Gross Domestic Product (GDP). It employs four out of five working Americans. Consequently, the business sector has the greatest impact on the U.S. economy and our society and, therefore, a mandate to act responsibly, including speaking out against social injustice.
This is not the first time in our history that the business sector has weighed in on politically sensitive issues. In fact, corporate social activism increased during the Trump administration, albeit more behind the scenes.
After the “Unite The Right” white supremacist rally in Charlottesville, the ban on transgender persons in the military (which has now been reversed by the Biden Administration), and the killing of George Floyd, Fortune 500 companies published internal memos to their employees reinforcing that social, racial and gender tolerance and inclusion are embedded into their corporate cultures and human resource directives. Corporate CEOs forced the dissolution of two business advisory councils to President Trump following his Charlottesville comments.
When the Trump Administration rolled back emission and fuel consumption standards and targets for trucks and automobiles, several manufacturers – Ford, Volkswagen, Honda, and BMW – decided to fight the new proposed standards. In July 2019 they announced a voluntary agreement with the State of California that would bind them to standards that are substantially tougher than the Trump administration’s proposed new standards.
Cynics suggest that corporations make decisions driven by one motive – profit. While it is certainly true that shareholder return is a primary motive of any corporation, in recent years corporations have been increasingly driven by their responsibility to stakeholders as well. Stakeholders include employees, customers, the communities in which corporations operate, and the environment.
Today most major corporations have a Corporate Social Responsibility policy (or “CSR”). The key idea behind CSR is to pursue pro-social objectives, in addition to maximizing profits. Most companies develop CSR strategies and objectives and report on their progress in CSR reports that are published every year. While there are corporations that still give CSR more lip service than real action, an increasing percentage take CSR very seriously. Conducting business ethically and in an environmentally and socially responsible way reflects directly on their brand.
There are three pillars of CSR. In the business sector, they are also known as the three pillars of sustainability and may have slightly different labels. They all focus on the same principles.
The first pillar, economic responsibility, focuses on product quality, efficiency, pricing, standards, corruption and bribery, value creation, and job creation. The economic pillar can be considered more directly focused on corporate performance and profit by addressing those issues that most significantly impact the demand for companies’ products, pricing, and business continuity.
The second pillar, environmental responsibility focuses on energy use, emissions, waste management, use of water and other natural resources, recycling, and climate change.
The third pillar, social responsibility focuses on workplace health and safety, culture, community development, human rights, minority rights, inclusion, diversity, and equal opportunity.
It is within the context of the third pillar – social responsibility – that corporations have a right, in fact, a responsibility to speak out against actions that discriminate and deny social and human rights to their employees, shareholders, customers, and the communities within which they operate. Corporations give these diverse constituencies a united voice, a role that our legislators in Washington seem unable or unwilling to fill in our current political climate. And, comprising 80% of our economy, the business sector has a powerful voice, with tremendous economic power and influence.
In case anyone who is reading this is concerned about the corporate sector playing too powerful a role in our public discourse, remember that a corporation’s number one commitment is still to its shareholders.
Read “Why Corporate America Should Join the Fight Against Voting Restrictions” by Jim Bloom
This is where the concept of ‘brand’ is important. Corporations take stands that sustain and improve their brands. Generally, those stands will be aligned with their highest priority stakeholders, their employees, and customers. Corporations can leverage their brands to increase their market presence and market share, which translates into higher revenues and, yes, higher profits and shareholder return. Consequently, shareholder and stakeholder value are intertwined.
So how does this relate to taking a stand on more restrictive voting rights laws now under consideration by more than 40 state legislative bodies? According to the most recent survey conducted by Morning Consult in late January, the majority of Americans – 65% – believe the 2020 presidential election was free and fair.
A JUST Capital Foundation/Harris nationwide poll conducted in January found that 80% of Americans believe that corporations can be a force for positive societal change, and 70% of respondents want CEOs of large companies to take stands on important social issues.
So it would appear that corporations are simply giving their customers what they want, by taking stands and speaking out on social issues, including voter rights. For this, they should be acknowledged and their voices seriously considered, not threatened by politicians like Mitch McConnell who, nevertheless, still beg for their money.
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Rich Zacaroli
Rich Zacaroli had a long and distinguished career in the private sector, and has served for over 30 years on numerous boards of non-governmental organizations in the education, cultural exchange, community development, and banking sectors. He is chair of the board of directors of Greenheart International. He is a member of Rotary International, a Paul Harris Fellow, past-president of the Rotary Club of South Sacramento, Rotary District 5180 Global Grant Scholarship Chair, and serves on the Pastoral Council for the Cathedral of the Blessed Sacrament in Sacramento.
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