An issue that has surfaced for me in my classes this semester, particularly when discussing the challenges firms face in deciding their position on controversial issues such as the new Georgia voting laws, is the extent to which firms should be proactive or reactive in the actions they take. As indicated in the article in the url below, firms are increasingly finding themselves caught in a ratcheting of expectations – the more they engage in such issues, the more they are expected to do so:
"Civil-rights activists pressured Delta and Coca-Cola to take public stands against the law, which the groups have called restrictive and racist. Some of the companies' own employees echoed those concerns. After an initially muted public response, CEOs at both companies, which said they had been lobbying lawmakers behind the scenes, ultimately spoke out against the law."
But by waiting, the article argues, the firms end up pleasing no one and annoying everyone:
"In the end, their statements came too late to please many activists on the left and angered many on the right. Georgia House members voted to revoke a tax break for Delta, though the effort didn't go farther before the legislature adjourned last week. Senate Minority Leader Mitch McConnell accused big businesses of 'behaving like a woke parallel government,' and threatened 'serious consequences' for companies, though he later tempered his stance. The companies found themselves in the strange position of facing boycott calls from critics on both sides."
The more I thought about this, however, the more I realized that this might simply be another mistaken attempt to anthropomorphize large organizations (something the mainstream discussion around CSR does as a way to deflect blame from the real source of any problems they see – people). It seems to me that traits we might see as unprincipled in individuals might actually be a strength in corporations. In other words, another way to think about firms that wait to see which way the wind is blowing before issuing strong public statements on a particular issue is that they are waiting to see which issues their key stakeholders clearly care about. The article focuses on how customers react to such issues:
"According to a 2020 survey of 8,000 consumers by public-relations giant Edelman, about 63% said they choose, switch to, avoid, or boycott a brand based on its stand on social issues. And in a more recent Edelman poll of 33,000 consumers, 86% said they expect CEOs to publicly speak out on social issues, while 68% said companies should step in when the government fails to fix social ills."
But, there are two problems with thinking through this challenge only from the perspective of customers. First, it is unwise to rely on a survey to understand how people will really act and, second, there are many other stakeholders than customers to consider. Instead, if firms were to proactively determine their stance before an issue becomes part of the social discourse (an issue of principle that we might admire in an individual), the set of stakeholders who are able to participate in the decision is narrowed to the executives (and possibly the board). Since firms are non-agentic entities and it is only people who can act, in order for the firm to decide what to do ahead of time the firm's executives will need to decide on its behalf. This means potentially that a narrow set of interests/values/morals, etc. are represented in the decision that is announced. By waiting, however, the firm is effectively expanding the set of stakeholders who weigh in on an issue, determine it is important, and signal to the firm how they want it to respond.
This is not to diminish the value of a strong, values-based culture that can unite the firm and its stakeholders in achieving the firm's purpose. But, in particular on issues that can be so far removed from core operations and areas of expertise (like voting laws), it might pay firms to wait and see, instead of issuing premature statements that represent what the firm's executives think they should say/do, rather than what their stakeholders as a whole want them to say/do.
The key in all cases, of course, whether proactive or reactive, is that the firm is genuine in its intentions, and not just issuing a statement designed to appease stakeholders without committing to substantive action.
Take care
David
David Chandler
© Sage Publications, 2020
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The New Business of Business is … Politics
By Chip Cutter, Suzanne Vranica, and Alison Sider
April 10-11, 2021
The Wall Street Journal
Late Edition – Final
B1, B9
