CEOs and Politics Are a Bad Mix: Why C-Suite Execs Should Keep Quiet on Issues That Don’t Affect the Bottom Line

Not everything Wall Street and Corporate America does wrong is corrupt.

Often it’s just dumb – even when they’re trying to do the right thing.

And today, I’m telling you all about the current #1 example of dumb do-goodism – and what you can do to avoid it yourself.

The growing trend of investing based on environmental, social, and governance (ESG) issues has created a dangerous problem.

That trend has started a new movement of CEOs advancing their personal positions on ESG issues, supposedly on shareholders’ behalves.

Yes, that’s right – social-justice activism has entered the boardroom.

Many investors now vote with their consciences by buying shares of companies that “do no evil” – that produce goods and services they believe meet ESG standards. On the flipside, they have the power to sell shares of companies whose management, products, or profitability they don’t agree with.

To meet the increasing demand for company leaders to make their politics public, more and more CEOs are coming out in “support of” or “condemning” issues they have no real stake in.

That might not be corrupt, but it’s not smart.

Moreover, CEOs advocating personal ESG opinions or advancing their political agendas on company time (especially while employing company assets in the process) is inappropriate and unwarranted.

Even worse, corporate executives using company platforms to advance their opinions and politics is dividing shareholders (and the public at large) on political, social, and environmental issues.

This quickly advancing “CEO-statesmen” trend is taking the country down a twisted path that will lead us off a dangerous cliff.

Here’s why.

The Key to Smart Business

That said, doing “good” isn’t always a bad move.

It is smart business when companies like General Mills Inc. (NYSE:GIS), Nestlé SA (OTC:NSRGY), and PepsiCo Inc. (NasdaqGS:PEP) reformulate their products to suit changing consumer preferences.

They didn’t lead a crusade to take sugar, sodium, or cornstarch out of their food offerings.

They weren’t at the forefront of changing consumer preferences, pushing healthier food.

But they followed consumers and made the changes they estimated would serve them well.

When Walmart Inc. (NYSE:WMT) – with a history of low prices, low wages, and labor issues – increased wages and improved workplace conditions, it wasn’t an ESG issue. It was smart business improving working conditions to foster better customer engagement, greater customer satisfaction, and more profits.

The market shows what consumers want. Either the companies meet those demands, or they lose business.

Shareholders voted their displeasure with those companies when consumers stopped buying products that didn’t meet new demands. Shareholders, likewise, could have dumped shares if they didn’t like how much monosodium glutamate or nitrates were in company products.

That’s how the market works.

As Adam Seessel, founder and CEO of New York-based Gravity Capital Management said, “Long-term managers of both capital and corporations understand that if a company routinely pollutes the environment, deviates from social norms, or flouts good governance practices, it will be disciplined by the marketplace, the government, or both.

“This is the essence of the marketplace,” Seessel says.

The other side of the marketplace – of business – is personal.

Preaching From the Corporate Pulpit

FBI agents’ political preferences have no place in the field.

Teachers’ politics have no place in the classroom.

And personal politics have no place in the C-suite.

Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. (NYSE:JPM) and leader of the Business Roundtable recently told his employees that U.S. immigration policies are “tearing apart our body politic and damaging our economy.”

Mr. Dimon is a smart guy – but that was not a smart move.

That’s simply his opinion and an expression of his politics.

It’s got nothing to do with running a megabank, its customers, its profitability, or its shareholders.

Mr. Dimon isn’t alone here.

Far from it.

Apple Inc. (NasdaqGS:AAPL)’s Tim Cook, Facebook Inc. (NasdaqGS:FB)’s Mark Zuckerberg, Twitter Inc. (NYSE:TWTR)’s Jack Dorsey, and Uber Technologies’ Dara Khorsowshahi are among the dozens of execs I’ve seen weighing in on political issues as if they’re speaking for their employees, customers, and shareholders.

That’s got to stop.

Employees, customers, and shareholders may have similar opinions and political views as CEOs, but to assume and speak for them is flagrantly inappropriate.

What’s scary is nothing is preventing politically motivated CEOs from usurping company assets on behalf of their personal agendas.

Ben Walsh, in a Barron’s article titled “Border Outrage Shows Limits of CEO-Statesmen,”tells us that “Uber’s Dara Khosrowshahi said he was working to deploy his company’s lawyers on a pro-bono basis to help separated families.”

If he’s doing that on his own time and doesn’t apply corporate capital or personnel toward his passion, that’s fine.

But CEOs aren’t expressing their viewpoints just through the charities they support, through their churches or synagogues, or by saying something like, “This is my personal opinion, and I’m not speaking for the company, its employees, our customers, or our shareholders.”

They’re using their corporate pulpits to push their personal opinions and politics.

Shareholders and boards need to rein in executives preaching from corporate platforms.

The country is divided enough without exorbitantly paid CEOs using company time and assets, and their own global reach, to divide us further.

Stick to your knitting, people.

Sincerely,


Shah