Q1 2020 Texas CEO Magazine

Feature
A convoy of Walmart trucks waited to enter New Orleans on Sept. 1, 2005,
after the city was battered by Hurricane Katrina. Government agencies said the
massive storm taught them that big-box retailers need to be an integral part of
hurricane preparation and relief efforts.
Nicholas Kamm/AFP/Getty Images
communities rather than as self-interested gifts that maximize
their tax deductions. In his essay, Friedman coined the term “the
cloak of social responsibility” to describe how CEOs transform
self-interested actions into exercises in social consciousness.
So, CEOs taking positions on social issues and committing
corporate resources to support these positions is nothing
new. The relationship between CEO and shareholders took
its most recent turn on August 19, 2019, when 181 CEOs
signed the Business Roundtable’s “Statement on the Purpose
of a Corporation.” The statement posits that a company has
stakeholders beyond its shareholders and that profit and return
is not its only objective. This is an extreme departure from the
historical objective of a company: it has long been held that
fiduciary duty to the shareholder is the driving factor in the
strategic objectives of a company. Some even argue that acting
on behalf of “stakeholders” who are not shareholders may
violate that fiduciary responsibility. Yet at least one signatory
of the agreement has doubled down on its commitment to
social responsibility. Almost two months after the release of the
“Statement on the Purpose of a Corporation,” Amazon created
a webpage outlining “Our Positions” on a wide variety of social
issues, including the minimum wage, climate change, and
immigration.
What would motivate CEOs and their respective companies to
take controversial positions? Companies, especially publicly
traded companies, live and die on quarterly and annual results.
A few percentage points on the top or bottom line can mean the
creation or destruction of billions of dollars of value. Many of the
controversial issues that are in the public eye today reflect the
split that exists in our country. The split is not only political—that
is, Democratic or Republican—but also geographical: the two
coasts versus the vast middle. We see a bifurcation in our cities
versus our rural areas, in our age demographics, and in our racial
makeup. Against this backdrop, taking a position on an issue
could have a massive impact on a company. Companies taking
positions on political issues (or politicians) can find themselves
on the wrong side very quickly. Since World War II, the majority
party in Congress has changed seven times (even more if you count
only one party controlling either the House or the Senate) and the
presidency has changed parties nine times. If you are going to take
a position, be sure it is one that you can stand on, because recent
history has shown that political cycles are much shorter than
business cycles.
Across two centuries of American business history and
thousands of executives, CEO activism remains a relatively rare
activity, with only a handful of CEOs—public or private—ever
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