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Conscious Capitalism Or Partisan Profits? Why Firms Should Not Play Sociopolitics

By News Creatives Authors , in Small Business , at September 14, 2021

Aaron Poynton is founder and CEO of Omnipoynt Solutions, a strategy consulting and government relations firm.

In April, Major League Baseball Enterprises, Inc. announced moving the All-Start Game out of Atlanta in demonstration of changes in Georgia’s revised voting laws. In a survey by Morning Consult following the announcement, only 39% approved of MLB’s decision, with opinions strongly divided along political lines. One week later, Nielsen announced MLB saw a 12% decline in viewership.

This type of activism has played out across America over the past few years as companies increasingly became sociopolitical activists. Coke, Disney, Starbucks, Nike, Delta Airlines and other iconic American brands have taken positions on everything from gun control, immigration, abortion, LGBTQ and voting laws. When companies take these positions, the activism can become an integral and inseparable part of their brand. While firms hope their engagement will connect with consumers and establish them as moral leaders and change agents, they risk repelling customers, alienating employees and suffering financial losses. So, businesses that undertake controversial sociopolitical activism must be prepared for consequences.

In the not too distant past, brands avoided controversial sociopolitical issues and focused on specific legal and policy issues directly related to their business activities. For example, they lobbied for certain laws or exemptions that were directly in their narrow business interests. This aligned to a more classic view of business that a firm’s only responsibility is to its shareholders. Milton Freedman, the Nobel Prize-winning economist, was a champion of this concept. He went as far as to argue that when firms concern themselves with the community rather than profit, it leads to totalitarianism.

However, the more contemporary trend is that consumers and employees — especially Millennials — expect their brands to take a stance on environmental, social and governance (ESG) issues. Moreover, CEOs and boardrooms are under pressure from stakeholders to conform to principles of ESG and “conscious capitalism.” However, firms should understand there is a consequential difference between taking a stance on a more universally agreed ethical issue aligned to corporate stakeholder interests and a broader, politically charged and sharply divided sociopolitical issue.

For example, nearly all consumers believe their brands should give back to the community, treat workers fairly and not pollute. Yet, fewer than one in five (paywall) marketers think it is appropriate for a brand to take a stance on a politically charged issue. Approximately three in four people are willing to change brands if one supports an issue contrary to their belief, and according to one survey, about four in ten Americans are now boycotting at least one brand over that brand’s political stance. Given that most companies have a nearly even distribution of customers who identify as either democrat or republican, they cannot take a stance on a divided sociopolitical issue without alienating many of their consumers.

While consumers can switch brands relatively easily in protest, employees have fewer options if they find themselves working for a company that takes a sociopolitical stance contrary to their beliefs. Some CEOs and brands use the firm’s platform and resources to speak out on an issue, but they prevent their employees from doing so. This is a double standard and a form of “I know better than you” censorship. In the name of inclusion, I’ve even observed some activist businesses leverage their power to “bully” other stakeholders into compliance.

For example, when shareholders disagreed with Starbucks’ position on a sociopolitical issue, CEO Howard Schultz stated, “If you feel, respectfully, that you can get a higher return than the 38% you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much.” I believe this attitude leads to a less inclusive and more toxic work environment, where dissenting voices are shut out. 

Schultz’s intentions were more than simply virtue-signaling, an inauthentic version of sociopolitical activism practiced by many firms. He went on to say his decision was not a financial one, and that proved true the following quarter when sales slumped due to a boycott. I believe brands should not stray from their core business activities and mingle with heated sociopolitical issues at the cost of shareholders. This is a misuse of fiduciary power and a detriment to shareholders.

Of course, as citizens of a democracy that espouses free speech, we should not lay idle or remain apathetic on an issue we feel passionate about. We should engage in respectful dialog and take a stance for what we believe. However, in my opinion, this is the role of individuals and organized activist groups, not powerful corporations using their perched platform and shareholders’ resources.  

Companies have worked hard over the past decade to counter the false narrative of “evil capitalist,” characterized by greed, misconduct and exclusion. Capitalism has been a force for good, lifting people out of poverty, creating economic wealth and promoting cultural freedom. The emergence of conscious capitalism attempts to highlight these facts and broaden the purpose of business beyond the previously held narrow conception focused on shareholder returns. It optimizes value creation for all stakeholders, including employees, customers and the community.

But I’ve observed that some companies have gone too far and now misunderstand their role in society. Conscious capitalism does not mean activist capitalism. Firms that engage in activist capitalism should keep in mind that they will have partisan profits, shrinking their consumer base to only those who agree with them. 


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