Sunday Scribblings
The Business of Business
In last week’s Scribblings, in which Derek Mooney and myself looked at the coming data transfer problems between the EU and the US, and maybe also the UK, we mentioned how shares in Elon Musk’s company, Tesla, had tanked and how Tesla sales of in European had gone south, way down south. Following on from this, Rick Warters and I look at the relationship between business and politics, especially when it comes to the politics of social change.
The Tesla share price drop may have several reasons, including that Chinese manufacturers are now eating Tesla’s lunch, with technically better models at lower prices.
However, the Tesla sales nosedive in Europe is clearly a reaction to what many see as the rabid political antics of Musk and his chainsaw massacre of US federal government departments and programs. As we write this, they are planning to feed the Department of Education into the wood-chipping machine.
The European reaction to Musk’s political antics shines a spotlight on the question of the relationship between business and politics, particularly the issue of the role of business in bringing about social change. Does it have such a role?
The business world has always engaged with the political world. Because the political world sets the rules within which the business world works. Whether those rules concern tax rates, regulations that must be adhered to, workplace safety standards, or zoning decisions, to name check just a few. Businesses establish personal relationships, work through trade groups, and sometimes employ lobbyists to encourage elected officials to see their point of view.
Trade unions engage with politics in many of the same ways, looking for decisions that promote their interests. For example, European trade unions are currently demanding that the law on public procurement be changed to favour businesses that recognise unions and/or are covered by collective bargaining agreements.
In turn, politicians make demands of business. Locate a factory or facility in my district. Do not cut jobs before the election. A campaign contribution would be appreciated. Politicians also make demands of unions. They expect trade unions will support their campaigns and deliver their members’ votes. And there was a time they actually could. A discussion on the seeming divorce between the trade unions and large sections of the working class is for another day.
Many will find this distasteful and repugnant. But it is the way it is and probably has been since whoever pitched the Pharaohs for the contract to build the Pyramids. Where there’s a quid to be had, there’s a quo to be asked.
Let’s call this “business politics”.
What has changed is the expectation by some that business should now also be an instrument of social change. That it should take a stand on the hot button political and social issues of the day. I have never been comfortable with this and have tended to the view that the “business of business is business”.
But many, especially in the HR function, have been the chief proponents for social change. They embraced the war for talent and noted, “The next generation of workers expect us to take a stand.” They argued that “If we’re going to win the war for talent, then we, too, have to take a stand.”
Great businesses do contribute to social change through the products they make or the services they offer. For example, how much did the invention of indoor plumbing, air conditioning, the motor car, and the aeroplane change the world and the way we live? Before indoor plumbing, women spent a great deal of their time carrying buckets of clean water into the house and buckets of dirty water out. Being able to turn on a tap or flush a toilet were acts of liberation.
When it comes to business and social/political change it seems to be that we have to think of this as two-dimensional. The first dimension is the internal dimension, and the second the external.
We came across this during the past week:
Andrea Lucas, the acting chair of the Equal Employment Opportunity Commission, the US agency that enforces laws banning workplace discrimination, has warned 20 major law firms, including Perkins Coie, Hogan Lovells, Ropes & Gray, and WilmerHale, that their employment policies meant to boost diversity, equity and inclusion may be illegal. Lucas said she was concerned that the firms' policies "may entail unlawful disparate treatment in terms, conditions, and privileges of employment, or unlawful limiting, segregating, and classifying" based on race, gender, and other protected characteristics. She has requested the name, gender and race of every lawyer who has worked at or applied for a job at the firms since 2019, and whether each one participated in diversity programs or "affinity groups." Some of the information should be in a "searchable Excel spreadsheet," Lucas said.
Personally, we would be surprised if any of these law firms engaged in “unlawful disparate treatment”. The clue is in the name. They are law firms. Prestigious ones at that. We suspect they know what the law is. We further suspect that they have followed the law as laid down by Congress and interpreted by the courts.
Lucas, as with others in the Trump administration, now appears to have decided that they are entitled to reinterpret the law to suit their ideological prejudices. The current administration does not like “DEI”. There is plenty of evidence from statements and actions to suggest that it believes that if a job goes to anyone other than a white man, it is a “DEI hire”.
Businesses are embedded in their local communities. It seems to us reasonable for those leading a business to take the view that the demographic of their business should mirror the demographic of the community in which they are embedded. Subject to the overriding consideration that no one should be hired who cannot do the job. No one should be hired because of who they are. Mind you, if that metric was applied to all the white boys and girls hired over the years because of “daddy’s contacts” a lot of them would still be looking for work.
When you are trying to correct things that may not be quite right, some degree of “reasonable adjustment” is appropriate. There is nothing wrong with hiring someone who may need additional training and development. Hiring on merit does not preclude hiring tomorrow’s stars today, even if those stars need some coaching to deliver on their potential.
Some years back, the MeToo movement washed in upon corporate shores. It protested the way women were being treated in the workplace, specifically the way large corporations too often turned a blind eye to the sexually harassing behaviour of powerful executives. It had some effect, and changed things, though that road is not yet fully travelled.
This is what we mean by internal social change. Making changes within the boundaries of the organisation. Good behaviour driving out bad.
Good companies don’t have to shout their beliefs from the rooftops. Good companies show their employees what they believe through their actions. You get more traction for “goodness” when it’s real – when it hasn’t been trumped up just to make the latest cash-for-kudos, “best of” award. Quid pro quo.
We read recently that Donald Trump Junior was promoting private companies that eschew ESG in favour of what he calls EIG — entrepreneurship, innovation and growth. The piece quoted him as saying: “The obsession with ESG and wokeness in corporate America has opened up a big space in the marketplace for those of us who think companies should be judged by the quality of their business and not how much they embrace left-wing political views.”
What he is doing as creating a network of MAGA-supporting companies. Will these companies attract many buyers of a liberal disposition?
When businesses become overtly political, they may pay a price. They’re banking there’s plenty to go around. Who cares if you completely alienate 30% of the population? Who cares if you give pause to another 40% who are in the middle? Capture your own rabid 30% in a market as big as America and you’ll have plenty to line your pockets and those of your friends and extended family.
Also this week, we saw this in the Financial Times:
Ben & Jerry’s claims its parent company Unilever has fired its chief executive after less than two years in the role as a row between the two sides over the ice-cream brand’s political activism escalates.
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The filing is the latest flare-up between the brand and its parent company over how Ben & Jerry’s communicates its “social mission”, including its call for a ceasefire in Gaza and support for Palestinian refugees.
This is the external dimension of “business and political and social change”. Here’s a question. What business is it of an ice cream maker, what competence does it have, to get involved in geopolitical issues? Because you can make decent ice cream, it does not mean you know anything about the complexities of an issue such as Gaza.
No question that individual business executives can have political opinions. They may even choose to express their individual opinions forcibly. But that is different from committing the business to a political position. If you take a political position, then those who disagree with the position you took will paint you with a brand. In the U.S., you’ll be a blue company or a red company. They won’t buy your ice cream, or whatever it is you make or sell. Just ask Tesla in Europe.
Isn’t it better just to be a company that conducts its business ethically? Isn’t it better to be a company where people live its values based on the day-to-day force of its actions? And might it not be better if people who might otherwise be shouting expletive-laden, politically-motivated insults could just sit down for a moment and talk about life over a bowl of Cherry Garcia?