Recent unusual comments and social positions were taken by numerous CEOs that got me to thinking about the limits to which CEOs should support or reject social, political, or personal causes within the business environment. Many CEOs on both sides of the aisle seem to be overstepping the boundaries or at least what was thought to be a boundary. How do we define those boundaries and what should be supported?
Values Leadership?
In The World Is Flat the author, Thomas Friedman, outlines an overarching vision that people work for companies that embrace their social, political, and religious ideologies. Friedman went on to indicate that governments deal with CEO's directly and the people indirectly. The idea is that people, the majority, would gravitate towards companies that hold popular beliefs and companies that hold unpopular beliefs would fade away or change. The political leadership then transitions from its current form to one of CEO politicians and aristocrats who oversee them. In a strange sensibility, political, religious, and personal views would be economically rationed and the government would no longer have elected leaders represent the people. In chapter four, Friedman points to comparisons between the Industrial and Information revolutions leading to a belief that the flattening could have been predicted by Karl Marx.
There has been trending in the direction that companies assume human-like qualities. In 1886, the case of Santa Clara County v. Southern Pacific Railroad Company the United States Supreme court ruled a corporation is the same as a living breathing organism. The ruling has become known as corporate personhood in which corporate law has been built applying laws intended for humans to the corporation. Complicating this position of corporate personhood is the emergence of the corporate governance that fundamentally changes and commingles personhood with governance. A corporation assumes under corporate governance, at some level, governing responsibilities. Among these governing duties, the corporation has a moral, ethical, and economic responsibility to its people.
Corporate governance which includes sustainability efforts institutionalized the infusion of political initiatives into business giving CEOs a venue to express their personal, political, and religious beliefs. CEOs from both sides of the aisle have jumped on this supporting nearly every personal, political, or religious cause regardless of merit. Political leadership in the US has also pursued state-owned enterprises, SOEs, which are also economic venues for advancing political ideologies. This has framed a debate to what extent should personal, political, and religious views of CEOs be infused into industry and business or should the people be empowered equally to follow their own personal, political, and religious beliefs as the United States founding documents guarantee.
Corporate governance which includes sustainability efforts institutionalized the infusion of political initiatives into business giving CEOs a venue to express their personal, political, and religious beliefs. CEOs from both sides of the aisle have jumped on this supporting nearly every personal, political, or religious cause regardless of merit. Political leadership in the US has also pursued state-owned enterprises, SOEs, which are also economic venues for advancing political ideologies. This has framed a debate to what extent should personal, political, and religious views of CEOs be infused into industry and business or should the people be empowered equally to follow their own personal, political, and religious beliefs as the United States founding documents guarantee.
Two companies recently embattled over the views of their CEOs are Starbucks and Chick-Fil-A. Their positions are diametrically opposite as are their approaches. Starbucks' CEO insists upon his personal views telling dissenting shareholders to sell off shares - leave. Whereas, the CEO of Chick-Fil-A speaks to principles and values that his company holds. The difference is one threatens dissent and the other sets principle-based values for the company. I need to pause here and frame the discussion. The merits of any specific social debate are not part of this discussion. This is a discussion about leadership style and the extent to which a CEO's personal value system should become part of the business.
The paramount question that must be addressed is what criteria apply to determine if a social concern is applicable to a business. The traditional purpose of business is a value-added process in which there is a redistribution of wealth in return for productive work and risk-taking. In short, labor is compensated for productive work and business owners are compensated for taking a risk. The business puts money in the pockets of people. An ancillary debate is under what system does this perform best; capitalism, socialism, or some other system which is not part of this post but is discussed a little in the post, Transitioning World - New Economy. Social concern must somehow couple to, at a minimum, optimizing risk and/or improving the workforce of a business. Most companies are connecting social concerns to sustainability initiatives that assure long term profitability. For example,
- Sustainable workforces
- Sustainable resources
- Sustainable markets
- Sustainable environments
The book Collapse: How Society's Choose To Fail or Succeed discusses an operationalized view of sustainability in complex economies. The author, Jared Diamond, looks to the capacity and capability of the ecology and economies. Diamond argues that societies that succeed make choices related to sage sustainability based on the carrying capacity of the economies and ecology. For the purposes of this discussion, societies are treated as companies. If work and resources are monetized then sustainability also applies to the wise use of available currency in the economy or business. In choosing social issues to support, CEOs must ask at least three questions:
- How does this assure long term profitability?
- How does this optimize operations and the business?
- Does support of this issue exceed the carrying capacity of the organization? For example, does supporting a social cause increase health care costs, result in the loss of the workforce, or place an unnecessary tax on the business such as to exceed the ability to support.
Many social issues do not advance profitability or optimize operations for the business. Both Chick-Fil-A and Starbucks have failed to demonstrate how their support for opposing sides of the same social issue benefits the business. In fact, the Starbucks CEOs encouraged negative outcomes to the business limiting the prospective pool of investors (and customers) if people opposed his personal view that has yet to demonstrate business value. Is that a wise business practice? Furthermore, there is little evidence that a CEO's personal, political, and religious views in support of a cause of the moment attract sustainable labor in the long run. Most labor is interested in two things; a reasonable paycheck and secure employment driven by natural causes as opposed to the perception of artificially held security.
In the United States, the appearance is that religious institutions no longer drive one's personal moral code but instead a system of CEOs and aristocrats economically ration values to the workforces. Oddly, the workforces are forbidden to speak about personal, political, and religious views in the workplace. Yet, CEOs are not only discussing these topics in the workplace but imposing personal, political, and religious views into business as a requirement for participation. For example, a mortgage management software vendor requires all employees to sign a document stating a belief in Global Climate Change and green initiatives in order to be employed. How are the CEO's views connected to the business and grander than any of those working for the CEO? Somehow, stacking the deck with politically sympathetic employees is good business?
I wonder from where do these CEOs get these values and how do we evaluate its honest merit when it is economically rationed via a paycheck? Is that the measure of virtue, a paycheck? The truth comes down to the virtue of the value, principle, ethic, or moral code. There are methods to assess the virtue but those methods are independent of the business. A high degree of confidence in an unsupported or poorly supported personal, political, or religious belief does not meet the test of virtue.
In the end, CEOs must use some sort of rule of thumb in selecting social causes to support. Whatever the cause, it should fit snuggly into a set of well known and understood criteria that has widespread support of not only the workforce but the customer base as well. In doing so, meaningful, productive, and reasonable outcomes have enjoyed that advance the business ensuring long term survivability.
References:In the end, CEOs must use some sort of rule of thumb in selecting social causes to support. Whatever the cause, it should fit snuggly into a set of well known and understood criteria that has widespread support of not only the workforce but the customer base as well. In doing so, meaningful, productive, and reasonable outcomes have enjoyed that advance the business ensuring long term survivability.
Diamond, J. (2005). Collapse: How societies choose to fail or succeed. Penguin Books: New York.
Friedman, T. (2005). The world is flat. (1st e.d.). Farrar, Straus, and Giroux: New York.
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