Corporate Ethics & Politics: It’s Gonna Get Worse

Corporations, especially those in the consumer and tech sectors, are in a tough spot these days.

Last week’s crisis of the Trump Administration separating migrant children from their parents was a company’s worst nightmare: a ferocious clash of moral values, political agendas, and business objectives, all squirming under the unblinking eye of social media. Every choice was certain to upset someone.

We had activists identifying the companies working with the Trump Administration on migrant detention, and then publishing the contact information of senior executives. We had U.S. airlines asking immigration agents not to bring detained children on their aircraft. Employees of Microsoft protested their own company because ICE uses its Azure database product. Google and Amazon endured employee backlash for their work with the federal government on surveillance technology.

We saw this drama played out in the small, too. Protesters heckled Kirstjen Nielsen, the secretary of homeland security, while she ate at a Mexican restaurant. The owner of a Red Hen restaurant in Virginia kicked out Trump Administration press secretary Sarah Huckabee Sanders when she arrived there for a Friday night meal.

Consider the words of that Red Hen restaurant owner. They go directly to the hardest part of corporate ethics and compliance:

“I’m not a huge fan of confrontation. I have a business, and I want the business to thrive. This feels like the moment in our democracy when people have to make uncomfortable actions and decisions to uphold their morals.”

Every CEO in the country would agree with her sentiment. Then they would plead under their breaths, “Now please make it go away!”

Here’s the thing: this strain upon Corporate America is not going away. On the contrary, it will get worse before it gets better. If it gets better at all.

Politics and Ethics in Tension

The fundamental problem is that political power in this country is not aligned with public sentiment. So the majority of Americans, who did not vote for President Trump in 2016 and don’t support the Republican agenda now, feel alienated from the political system. They can’t exercise their dismay at the ballot box yet, so they’re directing their frustration to the other big institution in this country: Corporate America.

Consider these facts:

• The counties that Hillary Clinton carried in 2016 were responsible for 64 percent of the country’s GDP, according to the Brookings Institution.
• The counties that Hillary Clinton carried in 2016 had more people, according to the U.S. Census. Clinton’s counties had roughly 177 million residents, compared to 146 million for Trump. Clinton Country accounts for roughly 55 percent of the population.
• No president in at least a generation (if ever) has won the office while most of the country lives in regions that do not support him. Even in 2000, the last time a president won with a minority share of the vote, George W. Bush’s counties had more people than Al Gore’s.
• 272 of the Fortune 500 are headquartered in the 20 states Clinton carried.
• Sixteen of the 25 largest U.S. companies by market cap are based in Clinton Country, according to data provided by Calcbench. Those companies that are headquartered in Trump Country tend to be in large cities — Houston, Philadelphia, Atlanta — where Clinton added votes in the surrounding wealthy suburbs, compared to prior Democratic performance.

Meanwhile, in Congress, the Republican Party lost seats in both the House and Senate in 2016. They lost more in 2017. They will, in all likelihood, lose more in 2018. As I said 18 months ago, several weeks after Trump won:

We should dispense with the canard that the Republican Party won the election. That’s not accurate. The presidential candidate pretending to be Republican, who really was a populist, protectionist, political neophyte willing to lie to get votes — that candidate emerged victorious over a weak Democratic opponent undercut by an unprofessional FBI director, in an electoral system that favors small rural states.

I belabor this point because ethics and compliance officers already know we live in an age of heightened reputation risk: one where activists can quickly paint you as guilty by association with the third parties you keep and then flay your company on social media. That’s not news.

The facts above explain where that heightened risk comes from. Systemic imbalances in the United States have divorced political power from the majority, and that political majority also happens to be the economic majority. If that majority can’t exert its will through the political system at the moment, it still remains a well-educated and successful bunch with fewer and fewer qualms about exerting its will through the economic system.

And thanks to social media, we all live in a highly organizable age, that lets us channel that frustration in ever more pointed, effective ways.

Compliance and Ethics in This World

It’s not hard to see some practical steps compliance functions can take to tread carefully in this world. For example, policy management will become more critical, so that one part of the enterprise doesn’t contradict the other with some action that triggers a political tripwire. (This will be especially true for consumer-facing companies.) So will analytics, because more accusations will come over the transom of social media; your company will need an ability to investigate and respond quickly.

Still, let’s not kid ourselves about what really occupies your boardroom’s mind here. They are going to struggle with the ethics involved in navigating today’s business and political climates. They will, as the Red Hen restaurant owner said, hate confrontation that might get in the way of doing business. Then, as she also said, they’ll wonder whether the time has come to make uncomfortable actions and decisions to uphold their morals. (This is exactly the stress ABC confronted with Roseanne Barr and her racist tweet in May.)

No easy answers exist here, since every choice will upset at least 40 percent of the population. I feel worse for tech companies, since they can’t live without their best and brightest employees — who are, many times, the frustrated people I mentioned above. But what would Microsoft, Google, or Amazon do when confronted with well-educated employees whose brain power holds the key to future value? Fire them? Does anyone think workers like that will suffer economically?

What we can say about last week’s events is that they are not new. Uber went through this in February 2017 with the Trump Administration’s first attempt at a Muslim ban. The chieftains of many more companies endured the same treatment again when President Trump failed to denounce white supremacists after the Charlottesville, Va., protests in May 2017 — a political mess that ended with CEOs abandoning Trump’s advisory councils.

Now we’re here. Next month Trump will drag a majority of America somewhere else it doesn’t want to go. Tough choices for Corporate America about what it wants and what it stands for — they’re piling up. And they won’t go away.