Hundreds of large corporations and top executives signed a two-page ad in Wednesday’s editions of The New York Times and The Washington Post, declaring their opposition to any legislation that restricts voting in America. It’s the latest political statement by U.S. corporations, following the passage of an electoral law in Georgia—previously condemned by the Atlanta-based Delta Airlines and Coca-Cola—containing provisions that make it more difficult for many citizens to vote. Many prominent Republican politicians have since criticized these companies as “woke capitalism,” with top Republicans, including Donald Trump, calling for boycotts of Delta and Coca-Cola. That would seem to threaten these corporations with potentially major losses of revenue from Republican customers. So why are corporations taking progressive positions on controversial political issues?

For Neil Malhotra—the director of the Center for Social Innovation at Stanford University, who has researched the relationship between consumers’ values and their buying choices—corporations are making a calculated business decision with the social and political stands many of them are now taking. They’re coming under pressure from many large shareholders and employees, groups largely made up of professionals who hold liberal or progressive social views; and they know, meanwhile, that their customers traditionally don’t choose products or services based on a company’s social or political statements.

Michael Bluhm: Given that more than 74 million people voted for Donald Trump, and some 40 percent of Americans support Republicans, it seems strange that corporations would risk alienating almost half their potential customers. Why are corporations so publicly aligning themselves with the Democratic Party on issues such as voting access and Black Lives Matter?

Neil Malhotra: One way to answer that is to go back in history to think about how corporations see their role in society. Business leaders and corporations were once very civically involved, [but] a turning point came in the 1970s. There’s a very famous Milton Friedman article in The New York Times that said the social responsibility of business is to maximize profits. If you’re a manager of a corporation, you have one job, which is to do what the owners of the corporation want, which is the shareholders. And if you do anything else, you’re using the shareholders’ money for your own interests, which is immoral—and, in Friedman’s view, should be illegal. So in the 1980s, you get this mantra of shareholder value as the singular focus of what a corporation should be doing.

Now we have a pushback. People have the view that corporations should be looking out for what they call stakeholders, not just shareholders. Stakeholders include not only the owners of the company, which are the shareholders, but also customers, employees, and the communities in which corporations operate.

People have the view that corporations should be looking out for what they call stakeholders, not just shareholders. Stakeholders include not only the owners of the company, which are the shareholders, but also customers, employees, and the communities in which corporations operate.

So you get these kinds of big statements—the BlackRock memo, the Business Roundtable statement—which basically disavow shareholder value and shareholder capitalism in favor of stakeholder capitalism, which is that corporations are embedded in society at large, and they have to look out for interests beyond just the owners of their corporations, if they want to sustain capitalism as an institution.

Will this cause problems with the company’s profitability? Will Republicans stop buying their products? There’s limited academic evidence that customers are very influenced by these ethical concerns of companies. If you look at the two companies that get a lot of attention in the news recently—Delta and Coca-Cola—there’s pretty good evidence that non-frequent fliers pretty much select all airline tickets by price. That’s why you see this is not a very customer-focused industry.

Similarly, Coca-Cola has a very strong brand reputation, which has very high switching costs. If there’s a product that has very low switching costs—something like gasoline—it’s very easy for a customer to switch. But if the switching costs are very high, customers are really not going to switch or boycott.

A nice example of that is you saw Donald Trump with his Coke hidden under his phone on his desk in that picture—he’s not going to switch from drinking the product he’s drank for the last multiple decades.

Who might have lower switching costs? Investors have very easy switching costs; they can buy and sell securities very easily. So you see potential pressure from public-sector pensions that are getting very involved as stakeholders and shareholders to try to move companies in a more ethical direction.

Sergio Rota

Even though it’s very costly to switch a job, employees can cause a lot of trouble. So if you have a very high-end, professional class that works for you, you want to stay in their good graces. Research shows, for example, that the professional class got angry with companies when they supported anti-environmental interests. Google employees got very mad when they found out that their PAC was donating to [Republican Senator] James Inhofe. Google employees had the walkout over sexual harassment.

If you’re a corporation, you see that customers don’t really decide much on these [issues], especially if there’s a lot of stickiness in their choices. Whereas you have other stakeholder groups like investors, very professional employees, which could cause a lot of trouble. So it could be in both the short-term and long-term profitability interest of corporations like Delta and Coke to take a stand on these issues.

Bluhm: Large corporations tend to be located in or near densely populated urban centers, populated disproportionately by Democratic voters. A lot of the corporate workforce draws from these urban, high-density populations. There’s an argument that some of these corporate positions are somewhat driven by the companies’ own employees.

Malhotra: When I talk to CEOs about these issues, they mention this a lot. They agree with everything that you’ve said. The general trend is that the professional class has been moving more into the Democratic Party over the years.

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