Column: What happens to businesses when their CEOs become extremists?
Mike Lindell is discovering the downside of becoming known as a right-wing crank.
Or so the My Pillow chief executive claims. He says that in recent days, Bed Bath & Beyond, Kohl’s and Wayfair have dropped his product.
Lindell is convinced their decisions are related to his continued support for Donald Trump’s claims of a rigged election, telling Yahoo Finance that the retailers were pressured by “left-wing groups that attack with bots and trolls.”
As more and more business leaders choose to speak out on contentious political and social matters, CEOs will increasingly be called on to help shape the debate about such issues.
Aaron K. Chatterji and Michael W. Toffel, Harvard Business Review
Bed Bath & Beyond said it’s dropping My Pillow because it isn’t selling well; the retailer called it one of a “number of underperforming items and brands” being excised from inventory, though it’s possible that reflects consumer distaste for Lindell’s position.
Kohl’s, citing “decreased customer demand,” said it would sell off remaining inventory and not order any more. Wayfair hasn’t commented publicly.
Assuming Lindell is correct that he’s losing distributors because of his political stance, he has become the latest in a long line of business leaders whose business fortunes have been rattled after they became identified with extreme, or even just unpopular, positions.
The traditional rule for CEOs has been that it’s best to let your products speak for themselves and keep your big mouth shut about anything other than narrow business principles. In recent years, the rule has become more often honored in the breach. That’s because social conditions have led to a broadening of the principle of corporate social responsibility.
The redefinition has been driven by major institutional investors such as BlackRock, whose CEO, Larry Fink, has called on companies “to wade into sensitive social and political issues” in part because governments have ceased to address them.
Major corporations and their CEOs still take care when wading into political waters. They have been more willing to take a stand on questions with an economic coloration, such as the minimum wage and climate change, than polarizing topics such as LGBTQ rights, gun control and abortion, according to a 2018 study by Aaron K. Chatterji of Duke University and Michael W. Toffel of Harvard University.
Social conditions sometimes can change a precarious topic into one seen as appropriate, even mandatory, for corporations to take a stand on — the Black Lives Matter movement and the George Floyd killing, for instance, have placed support for racial justice squarely on corporate agendas.
But occasionally CEOs take it upon themselves to speak out. That can be a bad choice. Same-store sales at the pizza chain Papa John’s cratered after its founder and chairman, John Schnatter, blamed the take-a-knee protests by NFL players for a decline in the league’s TV ratings and consequently his company’s sales.
Schnatter ceded his post as CEO and, following a later report that he had used the N-word on a conference call, left the company’s board and sold all his stock.
Sometimes a top executive’s comments don’t have a direct impact on sales but damage a company’s reputation nonetheless. That happened to the family-owned fast-food chain Chik-fil-A in 2012, when its president, Dan Cathy, spoke out against gay marriage in interviews with a Baptist publication and a devotional radio program. The company was also found to have contributed to organizations opposing LGBTQ rights.
Boycotts ensued, along with expressions of support by evangelist politicians such as Mike Huckabee. The company reported a 12% gain in sales for 2012. But the controversy plainly hurt. Chik-fil-A stopped contributing to anti-LGBTQ organizations and announced it would henceforth “leave the policy debate over same-sex marriage to the government and political arena.”
By 2014, Cathy was expressing regret for “making the company a symbol in the marriage debate.” He told the Atlanta Journal-Constitution that aligning the company with “anti-gay groups” resulted in its “alienating market segments.”
“Consumers want to do business with brands that they can interface with, that they can relate with,” Cathy said. “And it’s probably very wise from our standpoint to make sure that we present our brand in a compelling way that the consumer can relate to.”
The most notorious example of a prominent business leader parading himself as a full-blown extremist crank is Henry Ford. From 1919 to 1922, Ford promoted virulent antisemitism.
Ford tied his views directly to his car company by publishing them in the Dearborn Independent, a weekly he owned, and demanding that the Independent be distributed to customers of Ford dealerships across the country. He published “The Protocols of the Elders of Zion,” a despicable Tsarist forgery asserting the existence of a worldwide Jewish conspiracy.
Ford’s weekly campaign against the “International Jew” didn’t seem to have cut into business at the company, which was selling a million Model T cars every year. He was finally forced to apologize as the result of a libel lawsuit, but to this day his successors and descendants still grapple uneasily with the legacy.
The Henry Ford Museum in Dearborn, Mich., devotes an entire webpage to Ford’s antisemitism, but describes it as “a complex story.”
Regarding the articles Ford published in his weekly, the museum states, “Seen within the context of the times, they demonstrate the sharp realities and tensions that emerge in societies undergoing profound cultural, economic and political change.”
Ford’s views, the museum adds, “were also influenced by current populist political sensibilities that advocated a distrust of financiers, bankers and institutions of economic power.”
This comes very close to a whitewash. “Because The Dearborn Independent was published by Ford, it meant that other newspapers would pick up on what he said,” Hasia Diner, an expert in American Jewish history, observed in 2012.
Therefore, “it got much greater currency than if it had just been a small-town newspaper in some equivalent sized town in Wisconsin or Montana.... What Henry Ford says, people stop and listen.”
These cases taken together show that it can be difficult to predict how a CEO’s outspokenness will play in public. But they point to a few general rules of thumb.
One is that businesses with stronger products have more latitude to take stands on public issues than those without. Retailers aren’t very likely to evict Apple products from their stores no matter how Apple interprets its corporate social responsibility.
My Pillow, however, may be an easier target. As a private company, My Pillow hasn’t disclosed its financial results, but its sales don’t measure up to Ford’s, whether in the 1920s or today. And its products aren’t always universally heralded: Consumer Reports, for example, questions whether it meets its “bold claims” to foster deeper, more comfortable sleep.
Two: Companies should know their audience. This isn’t always a simple matter. Not only does the customer base for Patagonia support the environmental activism of its founder, Yvon Chouinard — they expect it: “We’re in business to save our home planet,” the company’s website declares.
“From supporting youth fighting against oil drilling to suing the president, we take action on the most pressing environmental issues facing our world,” the website says, next to a button allowing consumers to connect directly with activist organizations.
The spectacle of insurrectionists inside the U.S. Capitol has provoked many supporters of President Trump suddenly to deem themselves ex-supporters. But it’s not only Republican politicians — it’s Big Business.
Three: Not all outspoken CEOs are equal. In a conventional environment, the hijinks of Elon Musk might have done real damage to the public image of Tesla, his electric-car company. Musk has promoted the useless COVID treatment chloroquine and defied government orders aimed at keeping workers in his California factory safe from infection. He has smoked marijuana in public and drawn a government sanction for misleading investors.
Yet these shenanigans only seem to reinforce Tesla’s allure for stock investors and EV customers. It’s fair to conjecture that enthusiasm for Tesla’s shares and products would fall if not for its identification with Musk.
It can be hard to distinguish whether extremist CEOs have a negative impact on their companies because of their views or their distraction by noncorporate matters. After building Overstock.com into an innovative online retailer, Patrick M. Byrne veered into a conspiracy-infected fever. He announced that he had been serving as an informant against the Russian foreign agent Maria Butina, and plunged into the cryptocurrency world.
Overstock’s profit and market capitalization plunged. In mid-2019, Byrne announced he had sold all his stock, blaming his decision on attacks on him by “organs of the Deep State,” including the SEC. Under a new CEO and with a tail wind provided by a pandemic-related surge in online commerce, Overstock.com’s revenues and stock price have recovered.
The old mandate to keep corporate executives out of the political limelight has obviously faded.
“As more and more business leaders choose to speak out on contentious political and social matters, CEOs will increasingly be called on to help shape the debate about such issues,” Chatterji and Toffel observed. “Many will decide to stay out of the fray, but they should still expect to be peppered with questions from employees, the media, and other stakeholders about the hot-button topics of day.”
They counsel executives to “select issues carefully, reflect on the best times and approaches to get involved, consider the potential for backlash, and measure results.”
For all that, some business executives will find it hard to stay out of the limelight, to their own disadvantage. The best example may be a prominent businessman who has lately been losing corporate sponsorships and public credibility because of his extreme public positions while reportedly facing growing deficits and mounting debt at his businesses. His fortunes may end up defining the limits of CEO cults of personality. His name is Donald Trump.
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