Op-Ed: After Charlottesville, Where Does a CEO's Responsibility Lie?

 
 
Donald Trump, the "business president," has recently had serious disagreements with some of the most powerful CEOs in the country. Gautam Mukunda discusses the responsibility of business leaders to themselves, their companies, and their country.
 
 
by Gautam Mukunda
 

President Trump’s recent pullout from the Paris climate accord drew the ire of many high-visibility CEOs including Richard Branson, Lloyd Blankfein, Elon Musk, Tim Cook, and Jeffrey Immelt. But the president’s statements around Charlottesville appear to have created an even bigger break with business leaders. Those who had until then been willing to either support Trump or at least mute their criticisms clearly felt that his responses to the protests and violence made that stance no longer sustainable.

For example, JPMorganChase’s Jamie Dimon sent an email to all employees that began, “I strongly disagree with President Trump’s reaction to the events that took place in Charlottesville over the past several days. Racism, intolerance and violence are always wrong.” Even James Murdoch, the son of Rupert Murdoch and Chief Executive of 21st Century Fox (and therefore in charge of the strongly pro-Trump Fox News) wrote to all employees that he was donating $1 million to the Anti-Defamation League in reaction to the president’s statements.

This issue raises the question, where does a CEO's responsibility lie when business and government clash? Are corporate executives beholden to shareholders? Employees? The board? Themselves? Their community? Their country?

Business leaders in this situation face countervailing pressures. On the positive side, being seen as having the ear of the president—such as executives who serve on government advisory boards—is likely to open doors for even the most powerful and successful CEOs and companies, potentially resulting in extraordinary opportunities that might otherwise be entirely inaccessible or, worse, go to competitors.

Pressing on the other side, however, is the simple fact that the president’s comments outraged and offended a wide swathe of the American public, and that his gradual decline in the polls shows few signs of abating. In some industries Trump’s broad-based unpopularity leaves companies that are seen as supporting him vulnerable to boycotts.

Beyond the immediate question of whether or not to serve on a council advising Trump, the demographics of opposition to the president put unique pressure on business leaders. He is astoundingly unpopular with the young. In August, among adults under 35, Trump had a disapproval rating of 62 percent with only 22 percent approval. Advertisers target younger consumers for a reason–people tend to form brand preferences when they’re young. Young consumers who are alienated by a perception of corporate support for Trump might be lost for a lifetime, not just an administration.

“A company that is seen as supporting Trump is likely to face difficulties recruiting young highly-skilled workers”

Just as problematic are Trump’s numbers with educated voters. Even solely among whites, 60 percent of white voters with a college degree disapprove of Trump’s performance as president, and 54 percent of white voters disapprove of it strongly. These numbers are certainly vastly worse for college-educated minority voters. Putting those two findings together, it is clear that young college-educated Americans don’t just disapprove of Trump, they do so strongly and overwhelmingly.

Given the intensity of feelings aroused by this administration and the slim likelihood that they will ebb any time soon, a company that is seen as supporting Trump is likely to face difficulties recruiting young highly-skilled workers. Any CEO facing that problem is likely to ask his or herself if the short-term benefits that might be garnered from allying with this administration are likely to make up for the costs imposed by being unable to get exactly the sort of employees critical to success in today’s economy.

The obligations faced by corporate leaders

CEOs have responsibilities to their companies, their employees, their communities, and their shareholders. That is a truism that provides little guidance.

Executives may be tempted to take refuge in the idea that they have fiduciary obligations to maximize shareholder returns, but this is simply a myth—corporate leaders have many responsibilities, but there is no requirement in American law that they maximize shareholder returns. Leaders of publicly held companies are required to exercise their best judgment in pursuit of the interests of the business, and this gives them enormous flexibility to make whatever choice they see fit.

This a test that  cannot be deferred to financial markets. The question of what position to take on the Trump administration is a test of judgment and of ethics, and every prominent American business leader will be forced to make it, if they have not already.

To lead an organization is to have power, and power reveals character. Having power means that the actions you take are your responsibility, not the fault of situation or circumstance. CEOs have obligations to many stakeholders. In this situation, though, those obligations are not determinative. Business leaders can construct arguments as to why supporting, opposing, or attempting to remain neutral on the Trump administration or any particular action it takes is right for their business. Constructing those arguments, however, is precisely what they would be doing. Human beings are profoundly subject to confirmation bias. They look for reasons to affirm their own beliefs, not change them.

The tendency is so powerful and pervasive that I often remind my students that “the most powerful force in the universe is the desire to believe what you want to believe.” Some business leaders may be in situations where the situational pressures are so strong that they determine their actions. Most are not. Their choices will be driven by their underlying preferences and desires. They will know what they want to do, and will build business rationales for why that is the right thing to do.

My own assessment is that the overwhelming majority of American business leaders either already have or soon will decide that being seen as actively supporting the Trump administration is unsustainable and that for many even neutrality will seem difficult or impossible. But that’s just my assessment, which is as likely to be a product of confirmation bias as anyone else’s.

So the central question of what business leaders should do in the wake of Charlottesville—and more generally with regards to the Trump Administration—is actually the simplest one. Leaders have many obligations to others. They also have obligations to themselves, to their own ethics and beliefs. If you’re a leader, people will be judging your choices. That is one of the principal burdens of leadership.

Every leader needs to interrogate his or her values to make this choice. How offended were you by the president’s statements? If they didn’t bother you at all, then your choice is an easy one. If you found them so unacceptable that you couldn’t live with yourself if you didn’t speak out, then your choice is a little harder, but you still know what to do. If you’re not sure, then now is the time to decide what your values really are. Whatever you decide, people will be watching.

Related Reading:

Courageous Leader Triggers a Moral Revolt of CEOs Against Trump

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