Business’s role in social good has transformed dramatically in recent years. From the beginnings of only the wealthier businesses dabbling in philanthropic endeavors to a more recent shift in corporations becoming socially conscious of the impact they have on society and the ways in which they can make their communities a better place, the past year has seen an even more drastic change in businesses taking an outright stance on social and political issues. In a time where people have lost trust in institutions—most especially their governments—many companies have become a platform where citizens can feel their voice can be heard via which brands they choose to support and spend their money on.
Businesses and their leaders have become more and more involved in these large societal issues and they have amassed near government-levels of power. While a company’s aspiration to create real social good is undoubtedly a positive, businesses lack the power-checking mechanisms that governments possess when making decisions, which could lead to companies causing real dramatic harm. This ultimately raises a critical question: should a company’s ability to act with the same power as a government be a cause for celebration or concern?
While corporations have played a major role in politics and society since the beginnings of the U.S. government—lobbying, making contributions to candidates and political action committees, and campaigning on public policy issues related to their business—the shift towards business’s internalizing a sense of corporate social responsibility in recent years has seen to businesses not only becoming more involved in efforts such as philanthropy and volunteer efforts, but also seen to companies changing the way they operate in order to become more economically, socially and environmentally mindful of their impact.
And while at first companies that successfully practiced Corporate Social Responsibility (CSR) were seen as symbols of ethical heroism, the practice of CSR has evolved and has now become a standard by which both consumers and employees expect businesses across the board to practice—and with the internet and as social media now at the disposal of consumers to use to investigate a company’s social track records, it’s easier now to hold brand socially accountable for their actions.
With such expectations in mind, it is no wonder that CEOs, corporations and brands have begun to react to and participate more actively in social and political activism. Whereas a mere year or two ago companies and their leaders taking an aggressive stance on any social or political issue would have been considered alarming, the increasingly extreme political partisanship and major social upheavals of recent times have made it commonplace for companies to make a stand, lest their silence be considered tacit approval of society’s woes.
From race and gender to sexual orientation to immigration and the environment, business leaders are becoming just as key to policy decision-making as policy makers themselves. Even more importantly, these leaders are quickly finding that speaking out on issues not only can help them focus and enhance their core corporate values, it can also create a greater sense of purpose in their business beyond revenue.
Of course, business leaders taking a stance on social and political issues isn’t simply limited to press releases. Through social media platforms businesses have taken to participating in activism by raising awareness of social issues they consider important or relevant to their cause. Through their “The Truth is Hard to Find” campaign, for example, the New York Times magazine used TV ads, print media, and social media to respond to fake news and highlight the harm it can cause as well as promote the importance of quality journalism and true fact-finding—a campaign that ended up increasing both awareness and subscriptions to the New York Times. Similarly, in another case, CEOs from several major food companies sent an open letter to government officials asking them to create an accord that would be able to effectively address the reality of climate change during the UN’s climate-change agreement negotiations. While in both cases businesses didn’t directly shape public policy, they were able to shift public attention towards their causes and leverage social opinion during divisive times of decision-making.
Where companies really begin to behave like governments, however, is in their use of leveraging financial power to put economic pressure on governments to reject or overturn certain pieces of legislation. With the introduction of Indiana’s Religious Freedom Restoration Act (RFRA), for example, companies such as Salesforce and Angie’s List threatened to remove all employee activity in the state and cancel planned expansions into the area. Other organizations such as the National College Athletic Association said it was considering moving its headquarters out of Indianapolis if the act were to go into effect—all of which put enough pressure on Indiana’s economy that a revised version of the law was eventually put into place instead. Similarly, many other companies have turned to donating to third-party groups that promote their causes—such as Lyft pledging $1 million to the American Civil Liberties Union to fight in the cause against president Trump’s immigration ban.
While these causes may be noble at heart, there are potential risks for both business and society when companies act with the same power governments do in public policy making. For companies, revealing affiliations with political leaders and controversial causes can be extremely risky in today’s politically charged atmosphere, and how consumers respond to this political climate can change in an instant—Armour CEO Kevin Plank’s praising of president Trump, for example, led to the creation of #BoycottUnderArmour and the company’s stocks seeing a noticeable drop. Similarly, a company finding itself on the “wrong side” of a cause—or simply staying silent in a time when it may be expected of them to speak out—can harm a company’s image and brand. Most of all, the more a company takes a moral and ethical stance and becomes involved in a cause, the more it risks having past wrongdoings exposed, thereby damaging its credibility, rendering past supposedly-sincere efforts untrustworthy, and damaging their ability to participate in further activism efforts.
The biggest risk of all when governance becomes privatized and companies hold real power over public interest, however, is that future standards and norms will be made with a lack of accountability, transparency, and mechanisms that traditional governments are held to ensure that the will of the people is met. For example, the Cybersecurity Tech Accord—which is a public commitment made by more than 80 tech companies to protect citizens online by improving the security, stability, and resilience of cyberspace—shows tech companies attempting to increase their governing power over cyberspace in a way that governments have notoriously had a difficult time doing. In fact, recent years have seen governments willingly offloading their responsibility to govern the internet to tech companies, with bodies such as the European Court of Justice’s ruling that it is in a company’s right to remove websites from search results in respecting the “right to be forgotten.”
While tech companies’ intimate knowledge and know-how of the internet make them arguably more capable of governing cyberspace than traditional national and international governments, the lack of safeguarding mechanisms in decision-making ultimately makes these companies attempts at governance disastrous. Take Facebook’s mishandling of user data as just one example. It is imperative that we do not let these private initiatives go unquestioned and that a company’s involvement in activism and governance be measured by its merits—not just taken at face value. Most importantly, it is crucial that as companies will undoubtedly continue to become involved in social and political issues, that we make sure that they are not the only body in charge of decision-making and that multiple stakeholders—from civil society representatives to field experts to the government—are all included in the decision-making process.
Ultimately, consumers’ demand that companies take positions on sensitive will not be stopping anytime soon. As people’s trust in the government dwindles and they are left feeling their voice is unheard by policy makers, they will continue to support brands they feel signal their identity and values by purchasing their merchandise. However, while a company’s role in activism can create real social good, the lack of transparency and accountability that governments are held to when dealing with the same process could lead to disastrous consequences. It is crucial that if companies continue to play government they are held to the same standards.
a global affairs media network
When Companies Act Like Governments
November 6, 2019
Business’s role in social good has transformed dramatically in recent years. From the beginnings of only the wealthier businesses dabbling in philanthropic endeavors to a more recent shift in corporations becoming socially conscious of the impact they have on society and the ways in which they can make their communities a better place, the past year has seen an even more drastic change in businesses taking an outright stance on social and political issues. In a time where people have lost trust in institutions—most especially their governments—many companies have become a platform where citizens can feel their voice can be heard via which brands they choose to support and spend their money on.
Businesses and their leaders have become more and more involved in these large societal issues and they have amassed near government-levels of power. While a company’s aspiration to create real social good is undoubtedly a positive, businesses lack the power-checking mechanisms that governments possess when making decisions, which could lead to companies causing real dramatic harm. This ultimately raises a critical question: should a company’s ability to act with the same power as a government be a cause for celebration or concern?
While corporations have played a major role in politics and society since the beginnings of the U.S. government—lobbying, making contributions to candidates and political action committees, and campaigning on public policy issues related to their business—the shift towards business’s internalizing a sense of corporate social responsibility in recent years has seen to businesses not only becoming more involved in efforts such as philanthropy and volunteer efforts, but also seen to companies changing the way they operate in order to become more economically, socially and environmentally mindful of their impact.
And while at first companies that successfully practiced Corporate Social Responsibility (CSR) were seen as symbols of ethical heroism, the practice of CSR has evolved and has now become a standard by which both consumers and employees expect businesses across the board to practice—and with the internet and as social media now at the disposal of consumers to use to investigate a company’s social track records, it’s easier now to hold brand socially accountable for their actions.
With such expectations in mind, it is no wonder that CEOs, corporations and brands have begun to react to and participate more actively in social and political activism. Whereas a mere year or two ago companies and their leaders taking an aggressive stance on any social or political issue would have been considered alarming, the increasingly extreme political partisanship and major social upheavals of recent times have made it commonplace for companies to make a stand, lest their silence be considered tacit approval of society’s woes.
From race and gender to sexual orientation to immigration and the environment, business leaders are becoming just as key to policy decision-making as policy makers themselves. Even more importantly, these leaders are quickly finding that speaking out on issues not only can help them focus and enhance their core corporate values, it can also create a greater sense of purpose in their business beyond revenue.
Of course, business leaders taking a stance on social and political issues isn’t simply limited to press releases. Through social media platforms businesses have taken to participating in activism by raising awareness of social issues they consider important or relevant to their cause. Through their “The Truth is Hard to Find” campaign, for example, the New York Times magazine used TV ads, print media, and social media to respond to fake news and highlight the harm it can cause as well as promote the importance of quality journalism and true fact-finding—a campaign that ended up increasing both awareness and subscriptions to the New York Times. Similarly, in another case, CEOs from several major food companies sent an open letter to government officials asking them to create an accord that would be able to effectively address the reality of climate change during the UN’s climate-change agreement negotiations. While in both cases businesses didn’t directly shape public policy, they were able to shift public attention towards their causes and leverage social opinion during divisive times of decision-making.
Where companies really begin to behave like governments, however, is in their use of leveraging financial power to put economic pressure on governments to reject or overturn certain pieces of legislation. With the introduction of Indiana’s Religious Freedom Restoration Act (RFRA), for example, companies such as Salesforce and Angie’s List threatened to remove all employee activity in the state and cancel planned expansions into the area. Other organizations such as the National College Athletic Association said it was considering moving its headquarters out of Indianapolis if the act were to go into effect—all of which put enough pressure on Indiana’s economy that a revised version of the law was eventually put into place instead. Similarly, many other companies have turned to donating to third-party groups that promote their causes—such as Lyft pledging $1 million to the American Civil Liberties Union to fight in the cause against president Trump’s immigration ban.
While these causes may be noble at heart, there are potential risks for both business and society when companies act with the same power governments do in public policy making. For companies, revealing affiliations with political leaders and controversial causes can be extremely risky in today’s politically charged atmosphere, and how consumers respond to this political climate can change in an instant—Armour CEO Kevin Plank’s praising of president Trump, for example, led to the creation of #BoycottUnderArmour and the company’s stocks seeing a noticeable drop. Similarly, a company finding itself on the “wrong side” of a cause—or simply staying silent in a time when it may be expected of them to speak out—can harm a company’s image and brand. Most of all, the more a company takes a moral and ethical stance and becomes involved in a cause, the more it risks having past wrongdoings exposed, thereby damaging its credibility, rendering past supposedly-sincere efforts untrustworthy, and damaging their ability to participate in further activism efforts.
The biggest risk of all when governance becomes privatized and companies hold real power over public interest, however, is that future standards and norms will be made with a lack of accountability, transparency, and mechanisms that traditional governments are held to ensure that the will of the people is met. For example, the Cybersecurity Tech Accord—which is a public commitment made by more than 80 tech companies to protect citizens online by improving the security, stability, and resilience of cyberspace—shows tech companies attempting to increase their governing power over cyberspace in a way that governments have notoriously had a difficult time doing. In fact, recent years have seen governments willingly offloading their responsibility to govern the internet to tech companies, with bodies such as the European Court of Justice’s ruling that it is in a company’s right to remove websites from search results in respecting the “right to be forgotten.”
While tech companies’ intimate knowledge and know-how of the internet make them arguably more capable of governing cyberspace than traditional national and international governments, the lack of safeguarding mechanisms in decision-making ultimately makes these companies attempts at governance disastrous. Take Facebook’s mishandling of user data as just one example. It is imperative that we do not let these private initiatives go unquestioned and that a company’s involvement in activism and governance be measured by its merits—not just taken at face value. Most importantly, it is crucial that as companies will undoubtedly continue to become involved in social and political issues, that we make sure that they are not the only body in charge of decision-making and that multiple stakeholders—from civil society representatives to field experts to the government—are all included in the decision-making process.
Ultimately, consumers’ demand that companies take positions on sensitive will not be stopping anytime soon. As people’s trust in the government dwindles and they are left feeling their voice is unheard by policy makers, they will continue to support brands they feel signal their identity and values by purchasing their merchandise. However, while a company’s role in activism can create real social good, the lack of transparency and accountability that governments are held to when dealing with the same process could lead to disastrous consequences. It is crucial that if companies continue to play government they are held to the same standards.
