Market Watch: Should CEOs be openly political?

It isn't news that a number of CEO and corporate leaders from large American companies are openly revealing their stances over controversial political issues. CEOs are picking sides in ongoing debates such as immigration, gay marriage, gun control, abortion rights, and race relations. In the current American political situation, opinions toward these issues are diverged among the masses. For example, Starbucks announced they will hire 10,000 refugees to counter President Donald Trump’s recent policy on banning certain travelers from politically unstable Muslim countries. With such action, Starbuck is showing the world that they are aligning with the liberal ideology of not discriminating people based on their origin. With modern digital media, news like this can spread like wildfire in a dry savannah; it spreads throughout the population via different communication channels quickly.

Like famous celebrities, large corporations attract high amounts of media attention. The CEO and the top products/services in which the company provides are usually the most prevalent subject when mentioning that company, as they are the representatives. Whenever these representatives address the public, they are making impressions for themselves and creating an image for their company. Therefore, it is very important for a CEO to choose what are they going to say and do in front of people; any negative representation will damage the company’s public image.

When CEOs and corporate leaders are openly affiliating politically, it is more likely that they are doing it for their business instead of themselves. The reasons can range from maintaining customer loyalty to having supports from the government. For example, Apple and Starbucks are openly supporting liberal social ideologies, while oil companies are maintaining close ties with the GOP. To stay in business, Apple and Starbucks will need to keep their liberal based consumers satisfied, while oil companies will need to keep a close tie with the GOP as some GOP politicians deny climate change and oppose alternate green energy. A donation to a favored party during an election or a political public relation campaign can increase the loyalty of consumers that share similar political viewpoints. In addition, companies have easy access to customer information with today’s cutting-edge data mining technology.

Besides external (consumer and public relation) factors, internal factors (employees) can play an important role to a company as well. BuzzFeed’s CEO Jonah Peretti terminated a Republican National Committees’ $1.3 million advertising campaign during the 2016 Presidential election due to most Buzzfeed employees’ liberal orientation. They had negative impressions of Donald Trump’s rhetoric toward Muslims and immigrants during political debates throughout the presidential election. If Peretti continued the advertisement campaign for the Republican National Committee, his employees’ morale would have been likely to decline due to their dissatisfaction. The cost of having unhappy and unproductive employees in a daily business operation may exceed $1.3 million in the long run. To play safe, Peretti had to terminate this project.

Silicon Valley workers protesting about Trump's immigration policy in Pi day.   ( Ben Margot / AP)

Silicon Valley workers protesting about Trump's immigration policy in Pi day. ( Ben Margot / AP)

It’s interesting to see how heads of major companies only reveal their stances during the course of hotly debating social issues They rarely mention economics issues such as unemployment, inflation - or international issues like the sanctions of Iran, the Trans-Pacific Partnership…or other non-domestic social issues. Besides the possibility of the majority population not be interested in such political issues, there’s no reason why corporate leaders would want to publicize all of their political opinions that may not be helpful (or even potentially harmful) to their business. Besides, not all socially liberals share the same political mindset in other topics like economy and foreign policy, and vice versa on socially conservatives. When a CEO reveals too much information, chances of having diverged opinions with certain customers increase. Consumer loyalty may decrease when they see that the CEO is disagreeing with them on some issues. In addition, when CEOs reveal their political stances over hotly debated social topics, the media will do a free advertisement/public relation campaign for their loyal customers. Eventually, this attention may transition into positive revenue for their balance sheet.

Of course, there are some corporate leaders who are willing push their personal believes and stances onto their business. For example, Chick-Fil-A’s executives have religious conservative viewpoints on the LGBT group - believing that being gay is sinful. They donated money under Chick-Fil-A’s name to groups that oppose same sex marriage. Although they may lose some potential LGBT or liberal customers that support same-sex marriage, Chick-Fil-A's conservative reputation of defending traditional marriage and value will grow slowly within their religious conservative population. As result of its actions, there were boycotts on Chick-Fil-A when the media revealed the donations; fans of the fast food chain responded with a “Chick-Fil-A Appreciation Day.” After all was said and done, Chick-Fil-A managed to retain their core customer base while subsequently gaining a free public relation campaign to the religious conservatives.

In conclusion, when CEOs reveal their political stances in a hotly debated topic, it can draw the media’s attention and potentially lead to changes in their financial statements. If taking a public stance on a controversial social issue can bring customer loyalty and more profit, there’s no reason why a CEO wouldn’t do it. Also, whatever the CEO announces to represent their company may not represent what they truly believe in, but the announcement can win hearts of their niched customers and employees. Hence CEO and corporate leaders are more likely to strategically reveal their stances whenever it is potentially beneficial to the company image, their customers, and employees. In the end, what the CEO and corporate leaders announce to the public may not be the same to what they truly believe in, but they will receive public attention and even more potential revenue increase.