By Casey Kermes
Covid-19 has forever changed the status-quo operating procedures for businesses in America. Combined with the Black Lives Matter movement, there is greater awareness of the role that businesses can play in the overall fabric of society. Money in American politics is extremely convoluted—at best it’s opaque, at worst it’s impossible to trace. However, businesses donated over $39.9 billion to political campaigns between 1998 and 2014. With money comes influence, which business can exert to support changes they wish to see in their communities.
For instance, the new Georgia voting law passed early April has led to the threat of a business exodus, with the MLB already moving the all-star game out of Atlanta. In August 1965 Lyndon Johnson signed the Voting Rights Act, which was supposed to give voting access to all American citizens regardless of race. However, since the 2020 election ended with Trump claiming mass voter fraud, there have now been 253 new laws proposed across the country to suppress mainly minority voters. A look back in history can show us how businesses are able to influence social policies.
Historically the business edict has been to extract the maximum amount of value from its pool of capital for the longest amount of time possible. It was not until after World War II that businesses started to recognize the need for what is now called Corporate Social Responsibility (CSR). In 1964 Coke threatened to move a factory out of Atlanta after the White Elites refused to honor Martin Luther King Jr for being awarded the Nobel Peace Prize. Upon accepting the prize MLK Jr. was subject to being called a “joke,” and shunned by the white business establishment at a banquet in his honor. Coke decided to honor MLK themselves, making it clear to the rest of Georgia which side of the moral argument they were going to be remembered for. The chairman of Coco-Cola at the time, Robert Woodruff, is quoted as saying “Coca-Cola cannot stay in a city that’s going to have this kind of reaction and not honor a Nobel Peace Prize winner.”
Today any organization that does not have a plan for how it will coexist within the societies in which it operates is unlikely to prosper. Harvard Business Review posits that we are now moving away from simply CSR and into corporate social justice (CSJ). CSJ is described as “a reframing of CSR that centers on the focus of any initiative or program on the measurable, lived experiences of groups harmed and disadvantaged by society.” Consumers are now demanding that organizations not just pay lip service to improving society, but actually improving the lived experiences where they do business. Organizations realize that the act of staying silent is still an act. If they choose to allow situations that actively disenfranchise groups of people, this is a choice that the overall market is likely to punish them for.
The hypocrisy of measuring CSR is highlighted by the fact that in 2017 AT&T was given a perfect score in the Human Rights Campaign’s Corporate Equality Index. However, in that same year they donated more than $2.5 million to anti-gay politicians. No longer do consumers stay quiet and tolerate these divides. Amazon was recently forced to stop selling AI facial recognition software to police departments after it also tried to support protesters who were actively being surveilled by their software in 2020.
In March 2016 the North Carolina Legislature passed a bill that banned transgender people from using bathrooms and locker rooms. As a result of this bill, which clearly targeted a minority community, many businesses spoke up and chose to leave the state. The NCAA moved locations of championship events, planned business investments were shifted, and concerts were cancelled. In total the AP projects that North Carolina lost $3.76 billion over the span of 12 years due to the passing of this law. Despite Republican claims that this law had no economic impact on the state, it has clearly left the average North Carolinian worse off. Due to the choices that businesses made the law was rescinded on March 30th 2017, although the damage had already been done.
Over the summer of 2020 the Black Lives Matter protests gained prominence and businesses began supporting charities focused on equality. While businesses were not threatening to leave states or areas over the politics, they were clearly picking a side in a social issue and actively funding it. No longer is enough for organizations to simply say they are for or against a social policy. Media, and to a large extent individual consumers, are calling out organizations that do not back up their words with tangible actions that lead to meaningful change. With the transparency offered from political donations, to the increased use of social media, it’s easier now than ever before to see through what an organization says and judge their daily actions.
Over the last several years businesses have been increasingly pushed by consumers to act ethically and morally. However, who chooses these morals, Senate minority leader Mitch McConnell recently said
“From election law to environmentalism to radical social agendas to the second amendment, parts of the private sector keep dabbling in behaving like a woke parallel government. Corporations will invite serious consequences if they become a vehicle for far-left mobs to hijack our country from outside the constitutional order.”
As in all disagreements, there are two sides to every battle. While many consumers are pushing for businesses to support progressive causes and treat the world more sustainably, there are those who choose to continue arguing for the antiquated business ethos of the early 1900s. However, we now live in a world where we can tangibly feel and see the impact of these decisions every day. Organizations are increasingly going to be remembered for how they choose to react to the social changes currently underway. Organizations can either be remembered for allowing the society they helped build crumble under the immense changes that need to occur, or for standing up when the time is right and fighting for the world they wish to raise their own children in.
The views expressed in this article are the author’s own and may not reflect the opinions of the St Andrews Economist.