Business Takes Up Civic Engagement | Net Impact

Business Takes Up Civic Engagement

Business Takes Up Civic Engagement | Net Impact

Business is a Mirror - Corporate Allyship in Support of People

When national issues arise prompting companies to share a point of view, there’s a common refrain from some that “business should stay out of politics.” But what if the matters detrimentally affect people and planet? What if, in fact, they are the brainchild of narrow interests or dysfunctional legislators and reflective neither of popular public opinion nor the moral perspective? What should business do? What would you have business do?

 

Not Right Versus Left, Right Versus Wrong

I’ve frequently said during my last two years with Net Impact, that we, as an organization, won’t have an opinion on Right vs Left (nonprofits cannot), but surely, always will, on Right vs Wrong. Isn’t this where all organizations should draw the line - Right vs Wrong?

 

The Hastened Pace Towards Stakeholder Capitalism Makes People a Priority

Back in 1997, the notion of business working for people, planet and profits - a triple-bottom line - was introduced by our friend, John Elkington. In the over twenty years that have followed, business has made incremental progress in the direction of good. With one in every  four dollars investing in the top quartile of firms based on their Environmental, Social and Governance (“ESG”) metrics, public companies are taking ESG seriously, as investors’ capital markets allocation decisions now factor in a triple bottom line. On August 19, 2019, the Business Roundtable, a collective of CEO’s from amongst America’s largest corporations, released a new “Statement on the Purpose of a Corporation.” Signed by nearly 200 Chief Executive Officers including Amazon, Apple, General Motors, and Oracle, the group’s new definition makes all stakeholders ratable with shareholders. Business’s purpose is to create benefits that inur to employees, the communities in which the corporation operates, consumers, supply chain, and of course, shareholders. The corporation itself, is not the amorphous manifestation of the collection of profit, but people joined through commerce with common purposes (of profit and human/planetary progress). 

 

Social Contract, It’s Extension to Business, and the Inexorable Movement of Business Toward Being a Force for Good

Two centuries before the emergence of the 19th century modern corporate organization, the idea of a social contract took root as the linchpin of relationships between individuals and between individuals and government. The great philosophers of the 17th and 18th centuries -  Thomas Hobbes, John Locke and Jean-Jacques Rousseau - put forward the earliest concepts of the rights and responsibilities of the state to its citizens and of citizens to each other. This early thinking was the precursor to modern concepts of democracy and the democratic state, wherein ultimate power resides with citizens who willingly delegate certain authority to the state so that individuals may fruitfully participate in a social arrangement that enhances the shared prospects of all participants in a defined community. 

There is a social contract, too, that exists between businesses and the community that affords them license to operate. Governments grant corporations this license because it is in the public interest to do so. While the government is a fiduciary, the community - people, are the stakeholders. Wealth creation sustains and enriches what might be considered the three societally shared assets – nature, the community and culture – that are inherited from one generation, used by the present and preserved for the future. 

 

Business and People Step in Where Dysfunctional Systems and Lawmakers Will Not

The notion that political pundits and narrowly interested parties might be pressed to chide business for voicing opinions related to civic, social or climate justice begs the question: “why does business feel compelled to speak, to act?” Our human endeavor has four key constituencies that must work together to forge a more just and sustainable world: 1) all people, 2) business operating as a force for good, 3) the capital markets, driving and financing innovation and improvement, and 4) a functional sovereign, working on behalf of its people and in collaboration with all world governments to improve the lot of all inhabitants of a shared planet. But what do these consitutiencies do when any one of them operates in ways perceived to be incompetent, dysfunctional, and/or immoral?

It’s telling that in the last few years business has felt obliged to provide a floor on moral and market acceptability. When auto emission standards were repealed, car manufacturers announced their continued adherence to the more environmentally-conscious standards, as it was both the right thing to do for the planet and because customers wanted it. In the first six months of 2021, there have already been 17 anti-LGTBQ+ bills enacted into law (note: by lawmakers, not by vote of the people). In an open letter penned by executives representing Danone, Unilever, Mars and Nestle, the corporations said, “This issue is not political. Providing the same basic protections to LGBTQ+ people as are provided to protected groups under federal law is the right thing to do for businesses and for society.” Between January and May 2021, 14 states enacted 22 new laws that restricted access to voting. This prompted over 200 companies, including Capital One, Dow, JetBlue and Microsoft, to sign a Joint Statement on Protecting Voting Access, insisting that “lawmakers work across the aisle to assure that every eligible American has the freedom to easily cast their ballot and participate fully in our democracy.” 

 

Business is a Mirror

We people, that are business’s current and future employees, that consume their products and live in the communities where they operate, are a diffuse but mighty cohort. Corporations are dependent on us to do our part of the bargain: to do our jobs, consume, contribute to a stable and predictable existence in order for the corporation to succeed and plan out into the future for longer-term relevance and value. People are integral. If in fact the corporation is better described as people joined through commerce with common purposes (of profit and human/planetary progress), and business recognizes, in fact, cedes agency to broader constituencies, then it would be a violation of management’s fiduciary responsibility to ignore them. The pundits or politicians who simplify and distill this matter into something like, ‘business is just trying to make them (some narrow group, BIPOC, young people, liberals, democrats) happy’ misses, or chooses to ignore, the idiocy of this argument. Business cares to wade in where national issues arise that can negatively impact their employees, their consumers, the communities where they operate because it is good business and it is their fiduciary obligation to do so. 

With 85% of next gen reading and looking deeper into company sustainability reports before taking employment interviews, with 85% willing to take a pay cut of 10% in order to work for companies they’d be proud to work for, business recognizes that it must weigh in because it matters to current and future employees.

When lawmakers enact legislation that impedes the rights of BIPOC or LGBTQ+ employees, consumers, community, business wade in because it matters to employees, consumers, and community.

And with $68 trillion descending intergenerationally to next gen over the next 20 years, with one in every four dollars invested in only the best companies evaluated by ESG scoring, business cannot ignore these issues because it matters to current and future shareholders.

 

Nothing About Us Without Us

With the heightened agency of all stakeholders now acknowledged by business, well-run organizations do not take to the bully-pulpit without first holding up a mirror to us all. Perhaps it’s a coming notion that a company’s greatest asset may be the power of influence. Seeing and knowing us, they can promote civic engagement to their customers and employees to encourage habits like voting or getting involved in social issues. Consumers increasingly demand that the brands they support take a stand on the social issues important to them. The Harvard Kennedy Ash Center for Democratic Governance and Innovation recently conducted a study of eight large corporations in the United States that put their corporate social responsibility dollars towards civic engagement. It included public opinion polling on the expanded role of companies in civic engagement. The poll found that 79% of those surveyed agree companies should take action, and 87% believed that business has the power to make a difference. Additionally, a new Pew Research poll found the number one action that was considered “very important” in being associated as a good citizen was to “vote in elections.” Business’s involvement in civic matters is a reflection of the people making up their stakeholder constituencies.

 

Let Me Be Cynical a Moment, to Make a Point

Let’s say that corporations, despite being run by people, have no humanity per se, that moral choice - right versus wrong - is simply a calculation predicated on what maximizes the net asset value of the enterprise. The company competes against rivals/alternatives for employees, consumers, and shareholders. Next gen is predisposed to choose to work for companies that they admire and take a pay cut to do so. Consumers want to buy products from companies that they respect and that share their values. Finally, next gen are the coming majority of shareholders (directly or through decisions made for institutions) and care equally how money is made as well as its financial return. Presuming then that any actions taken by politicians or interest groups would hurt any of these stakeholders, how is it not the fiduciary duty of corporate leadership to step in and support moral outcomes that coincidently help the corporation too?

 

Business and People are in Allyship Toward a Just and Sustainable Planet

They have to be, particularly when narrow interests would potentially corrupt a lawmaker more interested in staying in power than doing the right thing. It is, in fact, our governance, our lawmakers - the sovereign - that must be fixed. The same punditry bemoaning business’s involvement in politics seems sanguine with regard to business making campaign contributions. In the meantime, while we wait for functional governance, business can influence civic engagement and social and climate justice matters. An engaged and informed citizenry will ultimately not tolerate the election of lawmakers not representing their interests and plausibly nudge a key constituency in line with the interests of people, business, and the capital markets to hasten change for the better.

US Trust Insights on Wealth and Worth – The Generational Collide, 2017