Corporations are Becoming more Powerful as Global Political Actors
“A rise in the mistrust of institutions and governments, the growing trend for corporations to engage in social and political responsibility, and changing consumer ideologies and expectations of corporations contribute to this new phenomenon. Consumers are increasingly looking to corporations to tackle traditionally government-handled issues. Some would argue that corporations are becoming a political moral compass. When looking closer at the rising tendency of corporations and their CEOs to speak out on socio-political issues, many of them are taking a progressive stance. This paper will examine the central question: Why are corporate executives, particularly CEOs, taking a progressive stance on socio-political issues?
To explore this question, this paper will examine corporations that have taken a political stance, and their various reasons for doing so. Previous research on this topic suggests these reasons fall into four categories: tragic events and public demand, brand image and reputation, alignment with the position of CEO, and profit value. The most likely reason is a combination of brand image and the position of the CEO, which are intrinsically linked in many corporations. There is evidence of corporations taking a stand on issues that fit with their brand image and CEO position, even when it does not contribute directly to profit gains. When discussing the responsibilities and motivations of corporations, profit is a given. CEOs and corporations will take steps to increase their revenue, market share, and consumer base. However, while corporations may engage in corporate political responsibility (CPR) for profit, at least sometimes, CEOs will take a progressive stance on socio-political issues for moral reasons. The evidence suggests that the personal opinion of the CEO and the brand image that they want to shape matters, even in spite of profits.
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To fully analyze the research question, it is important to consider what socio-political issues are, and what a progressive stance actually means. Socio-political issues can involve topics surrounding: gender, religion, sexuality, and politics, such as gun control or environmental legislation (Pew Research Center, 2014 and Zaidi et. al, 2016). Progressivism has a long history of meaning, changing to adapt to different political climates and parties. However, today, progressivism is generally thought to be a stance that “embraces growth, fairness, and opportunity for everyone” (Editorial Board, 2016). Julian Zelizer, a historian at Princeton University explains that progressives generally “view politics as a bottom-up progress” and support social change movements that promote equality (McKelvey, 2016).
The central question of this paper explores the relatively new concept of corporate political responsibility (CPR). Corporate political responsibility has not been widely defined or used, with other scholars referring to similar ideas such as corporate political advocacy, political CSR, CEO activism, and other names. CPR is different than corporate social responsibility (CSR), which has been a popular research topic in recent years, and has also become somewhat of a buzzword for corporations. CPR hinges on “an activity beyond the promotion of narrow economic interests. […This] advocacy seems to require the company to abandon its deliberative attitude in favor of a forceful and public stance for particular values or ideals” (Wettstein 2015). In other words, corporations and their executives taking a stand on social issues represents not only a new actor in the socio-political space, but also it also a marked shift in corporate strategy, attitude, and perceived responsibility. CPR involves donating corporate money to NGOs involved in political activism, signing petitions and filing lawsuits against political practices or laws that a corporation does not agree in, speaking out, as a corporation, for a specific piece of legislation to change, or taking steps inside the corporation that are for or against a specific policy. CPR is distinguishable because of “its proactive character, its focus on values and ideals, and its reliance on public advocacy, rather than on conventional lobbying strategies that often occur behind closed doors” (Wettstein, 2015). Many of the issues on which corporations and executives have decided to engage politically include those surrounding human and civil rights.
In the past, corporations were considered politically conservative, and usually did not take a stand on political issues in order to stay neutral and profit driven, avoiding alienating any consumers. Some scholars think that the only reason why corporations are speaking out on political and social issues, generally with a progressive stance, is contingent upon the business’s consumer base. If the wants and needs of the public shift away from inclusion, for instance, then they argue that the rhetoric and stances of corporations will change too (Chipman, 2016). Most research on this topic examines the effects of corporate social responsibility, and if corporations and their executives should speak out, instead of why they choose to do so. One study was conducted on whether it is beneficial for corporations to speak out on controversial socio-political issues. “For some companies it is better to disagree with customers rather than avoid a stand, while for other companies, it is better to avoid a stand rather than disagree with customers. The mediating mechanism is corporate hypocrisy” (Korschun, 2016). Consumers want companies that have a core mission and values to take a stand. However, if a corporation does not have a value-based corporate orientation, taking a stand will be seen as hypocritical (See Graph 1).
Speaking out on socio-political issues can respond to external pressure and consumer expectations, which can increase a corporation’s legitimacy and reputation. Researchers also think that more studies need to be done on the impact of CPR and under what conditions it can be beneficial for corporations to take a stand (Lyon, 2018). However, there is increasing consensus that corporations can fill the gap in governance due to polarized partisanship, and that consumers are increasingly evaluating companies through the lens of their stance on political and social issues. “Due to the decreasing power of governments, corporate actors play an increasingly important role in global governance (Ingenhoff, 2019). There is not agreement, however, on whether businesses and business leaders have a responsibility to speak out on social and political issues, or if their choice to do so is purely for profit gain.
Many scholars and journalists think that political activism on social media and shifting political ideology has played a significant role in the trend for more corporations and their executives to speak out about socio-political issues. Daniel Korschun, a professor at Drexel University, argues that a larger trend toward polarization and identity politics means that “As politics creeps into how we define ourselves, it is only natural that we use politics as a lens to determine whether a corporation’s values match our own” (“Corporations, 2016). Edelman, a global public relations company, found that the demand for corporations to take a stand on issues is rising based on consumer wants. “Nearly two-thirds (64 percent) of consumers around the world will buy or boycott a brand solely because of its position on a social or political issue” (Edelman, 2018). Edelman’s poll also found that people who are younger, and who have a higher income, are more likely to want brands to be advocates for social and political change. The study also found that the rising trend of belief-driven buyers is global: 78% of China’s consumer base are belief driven, 69% of Brazil’s, and 68% of India’s respectively (See Graph 2).
The research previously mentioned in the literature review and current trends sections provides alternative reasons why corporations might take a stand on political issues. However, a further analysis of why corporations and their executives would choose to take a progressive stance on socio-political issues needs to be further examined. To best analyze the potential causes, this paper will use evidence based on corporate case studies. These case studies have been chosen because they include well-known global corporations that have taken a stand on some of the most controversial socio-political issues.
The first category of corporate socio-political activism that will be examined is the issue of refugees and immigration. The issue has been increasingly politicized under the Trump administration, after calls for a “Muslim ban” on refugees and immigrants entering the U.S., discriminatory rhetoric against Latin Americans, and calls for a wall at the Southern border with Mexico. Many corporations have spoken out against President Trump’s immigration and refugee policy. Other corporations have stepped in to provide support for refugees around the world because they think that formal institutions are not doing enough, or should do more. These CEOs had little monetary incentive to speak out or implement progressive socio-political programs, but they did so. One of the most noticeable similarities between executives speaking out on these issues is the personal nature of their public advocacy.
Chobani, a U.S.-based company that sells yogurt, prioritizes hiring refugees. Their CEO, Hamdi Ulukaya, spoke out in favor of a progressive refugee and immigration policy and created an NGO called the Tent Foundation to support refugees around the world. Ulukaya said in an interview that the refugee crisis was personal to him: “I’m Kurdish. You know, I know this issue really well. And you know, these are the people I know; these are the people familiar to me […] When I came to this country, I didn’t know a word of English” (wbur, 2015). Chobani’s CEO made it a priority to hire immigrants and refugees, and to work around any barriers, such as language or transportation issues, in part due to his own experiences and personal understanding. His company’s product and revenue has nothing to do with supporting refugees, in fact, the company faced backlash in Twin Falls, the city where they are headquartered, for these corporate policies and activism. This suggests that the CEO’s public advocacy was more than good public relations or for profit. “Over the last few years in Twin Falls, as protests against refugees and an assault against a 5-year-old girl, known as the Fawnbrook case, became a catalyst for fake news, Ulukaya received threats, was subject to internet rumors, and was called out in Breitbart articles” (Sisson, 2017). However, the Twin Falls Mayor Shawn Barigar said that “Hamdi’s personal mission, part of the company’s worldwide mission, to address the refugee crisis has been a good fit for the community. It’s been an opportunity for us to appreciate it’s not all about the bottom line financially; it’s about doing the right thing” (Sisson, 2017). The company rhetoric, through the CEO’s public stance, makes it clear that their mission is “values-based” and “mission-driven,” adding to the evidence that Ulukaya spoke out because of the company culture and personal values that he wanted to advocate for (Sisson, 2017).
Airbnb is another example of a corporation that has taken a stance on refugees and immigration through their policies. Their CEO, Brian Chesky, explained that his motivation for speaking out was because of Airbnb’s core message. He said that Airbnb is based on: “idea of acceptance, and anyone who doesn’t make people feel accepted, in particular because of the country or culture they’re from, what they look like, what their orientations are and who they worship, are things that we can’t stand for. […] We’re generally not taking political positions except when it violates this commitment (Vora, 2017). Chesky also started a program called Open Homes, which provides housing for refugees around the world. Airbnb could have stuck to its successful business model of providing home rentals. Instead, they used some of their revenue to provide free services for refugees, sacrificing their profits and capacity for paying customers. Airbnb encourages their hosts to also be politically active. In their 2016 wrap-up letter, they shared that: “In the US alone, hosts have sent more than 350,000 emails to elected officials, engaged with our mobilizers in over 14,000 one-to-one meetings, and more than 4,000 of you have participated in public hearings. You have been the difference-makers, and after this tremendous 2016, we expect to see 1 million interactions between hosts and government officials in 2017” (Airbnb, 2016). The CEO’s position on being politically active in relevant policies to their business model, like home sharing for refugees and discriminatory immigration policies, permeates through their corporate rhetoric and mission. Chesky is building a brand identity around advocacy and being a part of something doing good, because of the moral values that he prioritizes throughout his company.
Corporate activism on LGBTQ+ issues has been prominent in recent years, and CEOs have been taking the initiative to speak out. In a 2013 shareholder meeting, one shareholder told CEO Howard Schultz that the company was losing quarterly profits because of its pro-gay marriage stance. Schultz told the shareholder: “it is not an economic decision to me. […] We employ over 200,000 people in this company, and we want to embrace diversity. Of all kinds,” He continued by telling the shareholder that “You can sell your shares in Starbucks and buy shares in another company” (Allen, 2013). The CEO continued his active support for gay rights in 2016, when he signed onto a letter calling for North Carolina’s government to repeal HB2, a discriminatory law against LGBTQ+ people, because of their missions and values (HRC, 2016). Howard Schultz clearly wants to make Starbucks a company that takes a stand on issues that would detract from their fair and equal values-based organization. His willingness to lose customers over his stance on gay rights indicates that his own moral values, which he imparts on the company as well, are more important than short-term profits.
Apple CEO Tim Cook, “the first openly gay CEO in the Fortune 500,” has been extremely active on advocating in favor of gay rights, including speaking at the United Nations (Pressman, 2017). The Newseum gave Cook an award because he “used his spotlight to take a public stand on major societal issues, including racial equality, privacy, protecting the environment, access to education and LGBT rights” (Pressman, 2017). Cook has spoken against anti-gay rights legislation and events, and has even filed a lawsuit against discriminatory legislation. In an interview with The Washington Post, Cook said: “I think every generation has the responsibility to enlarge the meaning of human rights. I do view that a CEO today of Apple should participate in the national discussion on these type of issues” (Jena McGregor, 2016). Cook believes that as CEO, he has a responsibility to take a stand on issues, especially those that affect him personally. According to professors Aarron Chatterji and Michael Toffel, CEOs like Cook and Schultz, “are intentionally courting controversy by weighing in on contentious issues without any obvious pretense of raising profits” (Guo, 2016). The professors did a study on the effect of Cook’s statements on gay-rights. They found that “Even if his remarks weren’t particularly effective at changing public opinion, as a famous figure he drew attention to the debate” (Guo, 2016). Their study also found that prominent CEOs can shape the agenda and public opinion surrounding controversial socio-political issues (Chatterji and Toffel, 2016). However, their study also found that CEOs taking a stance on controversial issues can alienate consumers, which could negatively impact their profit (Chatterji and Toffel, 2016). According to a recent poll, only 29 percent of Americans think that CEOs and other business leaders should speak out on the issue of LGBT rights, and 44 percent of Americans believe they should not speak out (Weber Shandwick, 2017). As such, the decision of a CEO to take a stand on controversial issues like LGBTQ+ rights often come from a moral responsibility or personal connection to the issue, rising above the motivation of profits. The evidence suggests that Cook, and other CEOs in a similar position, spoke out in favor of a progressive stance on LGBTQ+ rights because they felt that their voice could make a change, not because they wanted to increase profits.
CEO activism is not exclusive to U.S.-based companies. Karl-Johan Persson, CEO of Hennes & Mauritz (H&M), a Swedish fashion retail company, spoke in favor of raising the minimum wage in Bangladesh (Hansegard, 2012). Persson was willing to raise his company’s prices, likely driving away many customers who shop at H&M for their low prices, in order to speak out in favor of worker’s rights. H&M has also advocated for LGBTQ+ rights through various campaigns and partnerships. Persson explains that H&M is a values-based organization, claiming: “It’s about the best value, not the cheapest prices” (H&M, 2014). H&M is distinguishing itself as a socially conscious brand that takes a stand on controversial issues like worker’s rights and compensation, in part due to their executives’ narrative and the values of the organization, even willing to risk profit to do so. Tata Steel, an Indian company, has taken a stance on LGBTQ+ rights through the advocacy of their CEO. India’s controversial law, Section 377, criminalized homosexuality (UNHR, 2017). Harish Bhat, CEO of Tata Global Beverages, said: “The LGBTQ lifestyle […] is a perfectly natural space that exists in our world” (Rangnekar, 2018). Other executives in India took to Twitter after the law was repealed. Keshav Suri, executive director of the LaLiT Group, a hospitality chain in India, is an openly gay advocate of gay rights. As CEO, he created programs to extend health care to gay workers, and claimed to be “the first hotel group to include same sex partners, adoptive parents and children, and children born through surrogacy under its employee health insurance cover” (Laha, 2018). Christopher Bailey, the first openly gay chief executive on London’s FTSE 100 index, spoke out of LGBTQ+ rights and made inclusion part of the mission of Burberry, his British fashion company. “My final collection here at Burberry is dedicated to – and in support of – some of the best and brightest organizations supporting LGBTQ youth around the world,” Bailey said (Conti, 2018). However, around the world, speaking out in support of gay rights is controversial, and can elicit backlash. French bank BNP Paribas is a French bank that operates around the world. “When it decided to sign the charter of l’Autre Cercle in 2015, it faced a significant backlash from a group strongly opposed to same-sex relationships, and the bank’s executive committee received some 12,000 external emails protesting its decision” (UNHR, 2017). Despite the backlash, BNP Paribas Group CEO Jean-Laurent Bonnafé was committed to speaking out on the issue, and received many awards for his advocacy, including placing “5th in the top 50 OUTstanding Ally Executives list” (BNP, 2017). The CEO has also spoken out for women’s rights, and considers that “large companies must contribute to a more equitable and ecological world. […] this is my personal responsibility as a business leader” (Bonnafé, 2018). Even though his company received backlash for speaking out on progressive social issues, Bonnafé continued to do so, and do so publically. This contributes to the idea that he considers the idea of advocacy critical to his position as CEO, even if it means losing customers.
Discussion and Conclusion
Much of the past research on CPR focuses on the effects of corporate and CEO activism, not the reasons why executives chose to speak out. Most researchers assume that everything business related is motivated solely by profit. Based on the case studies, my hypothesis was supported: There is evidence of corporations taking a stand on issues that fit with their progressive brand image and CEO position, even when taking a stand does not directly contribute to profit gains. However, more research needs to be done in order to single out the reasons why corporations speak out on progressive socio-political issues. The direct causes and effects of CEO’s and corporations taking a stand is hard to analyze because business leaders often speak out on issues that are already publicly accepted, or they might decide to speak out because other industry executives are doing the same. However, as a whole, CEOs are speaking out on progressive issues because of their moral values and personal experiences. This phenomenon is significant because it implies that the role of a CEO is changing. CEOs and corporate executives are taking on a thought leadership and moral advocacy role, instead of sticking strictly to business strategy. This trend brings up further questions, including whether it is the responsibility for CEOs to speak out, or if they should stay out of politics and advocacy all together. Additionally, the motivation of corporations and CEOs comes into question. Are corporations at the whim of consumers and their wants? Or, are we letting corporations shape our views and values? Executives will speak out on socio-political issues when it is profitable and in-line with their customer wants, and when there is a risk that it will hurt profits. The evidence suggests that regardless of profit, some CEOs will speak out on progressive issues because they feel that they can enact change and advocate for a progressive agenda.”
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Corporations are Becoming More Powerful as Global Political Actors. (2021, Jul 05). Retrieved from https://papersowl.com/examples/corporations-are-becoming-more-powerful-as-global-political-actors/
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