Opinion: CEOs Advocating for Democracy is Good Business, But Employees and Shareholders Must Keep the Pressure

On April 14, hundreds of US CEOs added their names to a public statement protesting a new law in Georgia restricting access to the polls. The action was announced in a two-page publication in the New York Times under the title “We defend democracy.” Seventy-five black executives were the first to sign; Signatories view the new measure as a form of voter suppression, especially targeting black voters in Georgia and across the country where similar measures are being considered.

The business press had a field day with the story. Reporters called both the individual CEOs who had signed up and the missing, as well as a number that he personally signed without invoking the name of his corporation. Communications staff make a living trying to keep things in order: the need to manage the preferences of their leaders and the expectations of employees who want their interests and values ​​represented in critical debates in the public square. Concern over employee reaction is so acute that Walmart’s Doug McMillan issued a statement to his workforce explaining his commitment to democratic principles even though he had not joined. Not all executives are willing to leverage their brand for highly divisive social issues outside of their control, but in more recent years, CEOs have issued statements or engaged in networks targeting a number of topics with only the most indirect links. with business objectives. including weapons, immigration and human rights. It seems like a new chapter in how companies use their voice, for a number of reasons. One is the sheer scale of business engagement. Business leaders and groups are becoming more vocal in two key areas: climate change and racial equity. After more than a decade of silence on a warmer climate, the Business Roundtable, the voice of big business in America, released a comprehensive political statement in 2020 calling on Congress to price carbon and invest in alternatives. to fossil fuels. In the wake of George Floyd’s assassination last year, the Business Roundtable formed a special committee of its board to identify “significant action,” including legislation to reform the police. Prior to this, the Business Roundtable had largely stayed out of areas like climate change and avoided taking positions on social issues. A telling moment came after the January 6, 2021 insurrection in the United States Capitol, when dozens of corporations announced that they were pressing the pause button on political spending altogether. Where this will lead is not yet clear, but at the very least, greater transparency in political spending will become the norm. Yet while business commitments on climate change and racial equity are important, cynicism prevails. Many citizens and activists see the corporate call to action to save democracy as a form of “greenwashing” that will not really do much. To make this moment truly different, CEOs will need to follow these steps: 1. To be seen as authentic and trusted leaders, executives must deliver on their promises: Overcoming cynicism requires a fresh look at operational decisions and protocols, from from the boardroom to the supply chain. It especially requires a willingness to explore blind spots and unexamined practices that directly impact the health of the commons, and that must come to light to ensure that the country’s economic and political systems serve the majority, not just the 1%. 2. When it comes to racial inequality and the creation of quality jobs, companies have many levers to pull: Top management and the board control everything from who is hired or trained and the structure of jobs to allocation of jobs. wages, benefits and earnings. One of the “third rail” problems is the heavy reliance on contracted and outsourced labor. Another is the design of executive compensation, which is still based on shareholder primacy and defies definitions of equity. A blind spot refers to the rules that return the majority (90% +) of the profits of public companies to investors and traders through stock dividends and buybacks, while further enriching top executives and squeezing a significant investment in the workforce. In the United States, the growth of contract labor is a major factor contributing to poverty. Board directors who aspire to build trust in their company brand will question the impetus to convert jobs to contract labor with few entitlements and no financial security or upward mobility. Boards should also question the purpose of the share buyback, which until 1982 was considered illegal as stock manipulation. Boards must also reconsider the practices and assumptions under which CEO pay continues to rampage. They should ask, “What are we paying the CEO for?” – and test whether executive incentives and metrics support or undermine good job creation. Another blind spot has to do with tax evasion: the deployment of tax advisory services to eliminate loopholes, such as transfer pricing. Is a company paying for vital public services and supporting the rule of law that business leaders equate with a healthy democracy? This is where business leaders and boards have real agency. Today, activists trying to assess the seriousness of promises made about racial equity are subject to a whiplash between compromises and reality. 3. When the system itself is at risk, collaboration and new operational protocols are also needed across industries – individual company commitments are valuable, even critical, but suboptimal. For example, sufficient progress on climate change will require a fundamental reset and price revision at the national and global levels to send signals to both consumers and producers, well beyond the ‘net zero’ targets already proclaimed by dozens of companies. For the executive working to deliver on his promises, collective action requires refining the government relations function to ensure that policy signals, lobbyists, and membership fees are well aligned with public commitments. We need business support to change and repeal laws that undermine workers’ voices and suppress the collective power that unions once had. We need companies to revise their aversion to an alternative minimum tax to support infrastructure and safety net and education and skills development, and we need companies to do everything in their power to put a price on carbon emissions. carbon, pollution and waste efficiently and effectively. As citizens and consumers, we all hold companies accountable, but the true allies are company employees. Employees have a close view of the actions of their company and exercise power in the complex dance between public will and private action. After all, it was the employees who denounced the hypocrisy of corporate contributions to politicians that undermined election results. On April 14, when CEOs launched the “We Defend Democracy” call to action, employees with a keen interest in social justice looked to see if their own leader was on the list. They ask executives to be true to their promises. These workers are not likely to retire when political contributions begin again. Judy Samuelson is Executive Director of the Aspen Institute Business & Society Program and author of The Six New Rules of Business: Creating Real Value in a Changing World (Berrett-Koehler Publishers, 2021). Also read: Biden‘s tax reform should build on the ‘Buffett Rule’ to make the rich pay their fair share More: With the trickle economy failing, Biden sees an opportunity to invest in the American people