The Hallmark of New Stakeholder Risk

I always enjoy a good drama, and what happened at the Hallmark Channel this week did not disappoint. Ethics and compliance officers might want to consider what happened there since the same basic plot line seems to be happening at lots of large organizations.

You might already have heard what happened, although the whole thing happened so fast that maybe you didn’t. Hallmark had agreed to air several ads from Zola Inc., a wedding planning firm, including one ad that featured a same-sex couple. That ad (with two women) started airing several weeks ago, during what is normally Hallmark’s busy season of broadcasting schlocky Christmastime romance movies. 

Conservative activists didn’t like the idea of seeing same-sex couples while watching their Hallmark movies, so they began to complain. The complainers-in-chief were One Million Moms, a group affiliated with the American Family Association, a Christian fundamentalist group. One Million Moms started an online petition to get Hallmark to repeal the ad, and even reached out to relatives of Bill Abbott, chief executive of Hallmark Channel’s parent company Crown Media Family Networks. 

Now the pace accelerates. On Dec. 12, Abbott met with his lieutenants and decided to pull Zola’s same-sex ad. Word of the decision leaked to the media — and once the public heard about Hallmark’s acquiescence to One Million Moms, a backlash exploded on social media. 

People called for a boycott of Hallmark. The gay rights group GLAAD told Hallmark executives that GLAAD would be watching Hallmark over the weekend to identify the network’s advertisers, and then calling those advertisers starting this week. Even Ellen DeGeneres, queenpin of the gay community and hugely popular with female audiences generally, piped up. 

 

Isn’t it almost 2020? @hallmarkchannel, @billabbottHC… what are you thinking? Please explain. We’re all ears.

— Ellen DeGeneres (@TheEllenShow) December 15, 2019

 

We all know how a story like this ends. By Sunday Dec. 15, three days after Hallmark decided to pull the Zola ad, the company reversed course and apologized for pulling the ad in the first place. 

Stakeholders at War With Themselves

Hallmark’s predicament is so interesting because in one form or another, the same strife is happening to companies all over the place. One might think this mess is just the latest example of a company misreading consumer sentiment and suffering a black eye, but the dynamic goes much deeper. 

This is what happens when a large organization has a single stakeholder group at war with itself.

That tension is new. Or at least, the level of tension is new, because modern technology and social trends allow stakeholder groups to fight these civil wars so viciously. 

Companies are used to different stakeholder groups fighting among themselves. Shareholders bickering with management, or employees sparring with senior leadership, or the company litigiating with regulators: those are ordeals that companies have endured for decades. We know those fights. 

This isn’t that. This is a single group fighting within itself, because today we’re living in a period of unprecedented dissension over ethical values.

I chose that word “dissension” deliberately, because it means “disagreement that leads to discord.” Disagreement about ethical values has always existed. What’s new is that like-minded people can find each other more easily than ever before thanks to social media. So people with one set of ethical beliefs can form alliances to fight others with opposing beliefs, and to fight more forcefully. 

For large businesses trying to satisfy a stakeholder group — all consumers, for example, or all employees — when that group is busy organizing itself into warring factions, this is a nightmare. Because your organization is the prize they’re fighting over, and by definition war leaves one group with the prize and another without. Which is not a position any business wants to be in.

This is the same conflict that roiled the NBA in October when the Houston Rockets’ general manager spoke in favor of Hong Kong democracy protestors. Chinese audiences were livid over that, so the NBA published a half-hearted statement about respecting Chinese sovereignty, which made American audiences livid over the NBA’s failure to uphold American values. 

The NBA was trying to placate two warring factions within the stakeholder group it calls “consumers,” and failed. 

Or, this is the same conflict that has roiled Google for many months. The company has an internal chat board where employees could speak their mind on corporate policies or social issues generally — and they did, with zeal. Which led to internal dissension (there’s that word again) about whether Google was stifling conservative voices, or selling out its ethical principles by working with customers such as the Trump Administration or the Chinese government.

Google was trying to placate warring factions within the stakeholder group it calls “employees,” and failed. In August the company rolled out new guidelines for its messages that told employees not to talk about politics or controversial work projects. 

Stakeholder Risk and Third Parties

The challenge for businesses caught in these stakeholder wars is that eventually they need to choose a side, and that decision has consequences. People will interpret the decision as a statement about the company’s ethical priorities — and whatever their interpretation is, their views will inform how they interact with your company. Some of those interactions will spill onto the ethics and compliance officer’s desk.

For example, if your business decides to provide services to the Trump Administration, you might alienate some portion of your employees or customers. They might interpret that business decision as a statement about what’s important to the company: money over ethical values. They might protest, or leak secrets to the press. Strife like that is exactly what happened to Saleseforce.com in 2018, and to Wayfair.com earlier this year.  

Worse, employees might just decide, “Well, if the company will betray ethical values to make money, so can I.” Lord knows what will happen after that attitude takes root. 

And while the Trump Administration is a great example because President Trump is so divisive, this dynamic isn’t about Trump per se. Hallmark would have run into the same social media buzzsaw over its same-sex ad decisions no matter who was president, because technology allows us to be more sensitive too, and aggressive about, social issues all the time. 

This is a permanent change in how corporations interact with stakeholders. That will have implications for corporate culture and corporate policy. Warring factions will be able to grind away at each other like the French and the Germans in World War I, with your organization as the front line.