The recent reversal of Roe v. Wade, acting like a starter’s pistol at a track meet, has initiated a new round of corporate social activism and virtue-signaling. American companies are racing from the starting blocks to demonstrate their support for aborting would-be future employees and customers. Many businesses pledged to cover or reimburse U.S. employees who need to travel to gain an abortion if access is limited because of specific state laws.
Dick’s Sporting Goods’ CEO Lauren Hobart, for example, announced the company will reimburse employees up to $4,000 for expenses related to out of state travel for abortions. Dick’s is not alone. They are part of a crowded field of organizations, including American Express, Apple, Bank of America, Disney, Starbucks, and many others who have announced similar plans. Clothing retailer Patagonia, in an attempt to outdistance competitors in the race to the woke finish line, pledged that it would not only provide financial compensation for abortion-related travel but also “training and bail for those who peacefully protest for reproductive justice.” To demonstrate their bona fides on political and social issues, many corporations are trying to run both a business marathon and a woke sprint. The long-term consequences of such an approach spell disaster.
It has long been an accepted free-market principle that the role of business is to provide goods or services that meet the needs of its customers at a profit, all the while returning value to those who invest in the business. Many corporations have shifted from this core purpose into advocacy for social or political causes having little, if nothing, to do with the manufacture, distribution, or sale of goods and services. But this is not a revelation. It is surprising, however, that many businesses are ignoring the long-term consequences of such actions. The reaction by many corporations to the Roe reversal serves as an illustration.
For a business to be successful in the long-term, it must source, cultivate, and retain customers. Without customers, the source of business growth evaporates. Businesses go to great lengths to understand the wants and needs of their customers through market research, new product development, and promotional activities. Instead of trying to focus on providing great products and outstanding customer service—the things that every customer wants—companies like Dick’s or Disney are focused on signaling their support of abortion, alienating a segment of their customer base. Organizations who take this step realize it will only appeal to a specific segment of their customers and are betting that those who oppose the company’s stance will not care enough to shop elsewhere and thus contribute to subsidizing the termination of a human life.
Like the alienation of customers, corporate social activism will negatively impact employee recruitment and retention. In the case of The Walt Disney Company, employees who disagreed with the company’s radical gender equity position penned an open letter charging that conservative and religious employees have been forced to “watch quietly as our beliefs come under attack from our own employer.” They further added that Disney has “fostered an environment of fear that any employee who does not toe the line will be exposed and dismissed.”
Any employee who feels marginalized or alienated is not doing their best work and will not choose to stay with the organization for the long-term. In addition to current employees, corporate social activism will also alienate potential future employees, depriving organizations of key talent because of a mismatch of viewpoints. Job applicants will be judged, consciously or not, on their views or support of particular issues. Hiring then turns into a process of ensuring employees’ wokeness instead of their ability to perform on the job, creating a homogenous echo chamber of views. The young, progressive tech industry workforce is a prime example.
Third, companies that take even one small step toward corporate social activism will never turn back. They will forever be obligated to take a position on all social issues; pursued by the press, called out on social media, and targeted by activist groups or their own employees. Companies may believe that issuing a press release expressing sympathy with a certain cause or solidarity with a certain identity group will placate the mob. If the last year has taught corporate leaders anything, it is that once recognized, the mob never, ever goes away. It only comes back for more. This means that once a company heads down the road of corporate activism, those in the boardroom or C-suite offices are forced to keep one eye on the competitive business landscape and the other on what is trending on Twitter.
Lastly, publicly traded companies who engage in corporate social activism will risk pushback from shareholders. Activist shareholder actions have historically been one-sided. In the time since the leaked draft opinion of Dobbs v. Jackson, companies such as Home Depot, Walmart, and TJX have fielded shareholder proposals that would require them to publish reports detailing the risks and costs of restrictive state policies on abortion. These proposals failed. Now, shareholders who oppose corporate social activism are taking a page from the other side’s playbook. Corporate officers who chose to focus company resources and attention on activism will need to explain to shareholders why those decisions are in the best interest of the firm. By acting to the detriment of the company’s brand or reputation (as Disney has), company officers neglect their fiduciary duty to investors, thus opening the company to shareholder derivative lawsuits.
Success in business is more a marathon than a sprint. Yet the reversal of Roe v. Wade has provided another occasion for companies to sprint to demonstrate their wokeness. Like any distance runner knows, however, the race is not won by hurried fits to reach the front of the pack but by an even, steady pace. The consequences for a runner constantly trying to be the pacesetter are dire; there is nothing left in the tank for the finishing kick. Corporations who are trying to run a business marathon and a woke sprint cannot do both. Eventually, when customers, employees, and shareholders have been alienated, there is nothing left to do but exit the race.