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Analysis: Take a stance or tiptoe away? Corporate America's battle with social activism

[October 27, 2020] By Anna Irrera, Jessica DiNapoli and Imani Moise

(Reuters) - Earlier this year, a flood of major U.S. companies pledged to address racial inequality and promote social justice after Minneapolis police killed George Floyd, a Black man, setting off protests across the country.

Companies that rushed to take a stand include household names like Home Depot Inc <HD.N>, Procter & Gamble Co <PG.N> and Coca-Cola Co <KO.N>. Corporate America pledged billions to promote diversity in employee ranks and the communities in which they operate, including banks like JPMorgan Chase & Co <JPM.N>, which recently made a $30 billion commitment over the next five years.

Another set of companies, particularly in Silicon Valley, are turning more cautious, according to interviews with more than a dozen investors, entrepreneurs, executive coaches and recruiters.

Companies and employees should avoid taking public stances that stoke controversy in an increasingly polarized America, proponents of this view and their advisers told Reuters. Instead, they should focus on strategic initiatives and meeting financial targets, they said.

Management teams and boards of directors are discussing how to handle the issue, sources said, with some staying silent as a strategy and others laying out formalized ground rules detailing how executives can discuss sensitive social and political issues.

"People are struggling with employees expecting companies to solve problems that are beyond the purview of the company," said executive coach Stephen Miles of the Miles Group.

Miles has spoken to at least 10 CEOs in recent weeks who commiserated with Brian Armstrong, the chief executive of Coinbase, whose Sept. 27 blog post explaining why the cryptocurrency company would remain apolitical brought the debate into the public square. (Blog: https://bit.ly/2IG9BMm)

Coinbase and its employees should pay attention to the corporate "mission" and not delve into broader societal problems that distract and decrease productivity, Armstrong wrote. The company declined to comment further for this story.

After he shared it on Twitter, some founders and former senior executives of prominent tech companies replied supportively. The view may be shared even more widely in corporate America than it appears.

"People aren't taking a public stand about this, but they are asking about it in the boardroom: 'What should we do?'" said Kathleen Utecht, managing partner at venture-capital firm Core Innovation Capital.

Utecht agrees with Armstrong. His position is more common than people may realize, she said, especially at smaller companies where management teams do not want to devote limited resources to fixing complex societal issues.

The unprecedented outpour of corporate support for racial justice lately follows several years of companies taking a stand on other issues that activists criticize them about, including climate change, the gender wage gap and LGBTQ rights.

Blue-chip corporations have not wavered from their announcements and smaller companies have taken a stand, too. On Friday, Expensify CEO David Barrett emailed the software company's 10 million users urging them to vote for Democratic presidential contender Joe Biden.

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A local resident stands in front of a makeshift memorial honoring George Floyd, at the spot where he was taken into custody, in Minneapolis, Minnesota, U.S., June 1, 2020. REUTERS/Carlos Barria

These declarations get attention, partly because of how unusual they are historically, said Harvard University professor Mike Toffel, who has studied CEO activism. It is more common now than it was five or 10 years ago, but still rare, he said, and the feeling that companies should get involved in politics is far from universal.

"You can count on a couple of hands how many examples you can find," he said. "Many are not engaging."

Roughly half of the companies in the Russell 1000 did not make statements about racial inequality last summer, according to preliminary data from As You Sow, a nonprofit that advocates for corporate accountability.

Of those that did make statements, 195 were in hard-to-find locations like a CEO's LinkedIn page or staff Facebook page, not the corporate website, said Andrew Behar, As You Sow's chief executive.

Lloyd Carney, a former tech executive who sits on the boards of companies including artificial intelligence provider Nuance Communications Inc <NUAN.O>, said "smart" companies are taking steps to address social causes internally, but not in a splashy way. That allows them to avoid backlash from employees, customers or politicians, he said.

"It's one of those things where it's better to make quiet noise," said Carney. "A press release is the worst thing you can do in this highly politicized environment."

About half a dozen companies outside Silicon Valley recently set up "guardrails" for how executives can discuss sensitive social and political issues, like Black Lives Matter, one adviser to boards told Reuters. Executives must make it clear that they are speaking in a personal capacity on certain issues and notify boards about their comments, the adviser said.

For instance, high-tech manufacturer Sono-Tek Corp <SOTK.PK> adopted a similar code of conduct in September that forbids employees from participating in politics on the job or with company resources.

The provision is especially important in today's tumultuous world and is meant to help employees feel comfortable at work, said the company's chief financial officer, Steve Bagley.

"Large businesses want people to buy their product, to support their company, whether they are hardcore Democrats or hardcore Republicans, or in between," said Ronn Torossian, head of 5W Public Relations, who talks to CEOs across a wide swath of industries. "A week doesn't pass that major companies aren’t discussing this."

(Reporting by Anna Irrera in London and Jessica DiNapoli and Imani Moise in New York; Editing by Lauren Tara LaCapra, Lisa Shumaker and Paritosh Bansal)

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