Worth Magazine Op Ed: CEOs Need Stronger Political IQs

By Arick Wierson, Bradley Honan | October 6, 2022 | Original Article

At September’s Clinton Global Initiative in New York City—arguably the biggest annual conglomeration of policymakers, business leaders, and cultural influencers outside of the annual World Economic Forum in Davos, there was one resounding subject that crept into nearly every keynote, panel discussion, and informal coffee klatch: how, in the post-COVID era, otherwise back-burner political pressures have boiled over onto the business landscape and are scalding corporate leaders unprepared to adroitly navigate them. 

The arrival of the cultural wars in American and global politics is now unmistakable, and they are knocking on the front door of every corporation across all major industries. As evidenced in the business sector’s clumsy reaction to the killing of George Floyd or the unease with which many corporate leaders are tiptoeing around women’s reproductive rights in the wake of the overturning of Roe v. Wade, there is now a seemingly endless stream of social, cultural, and political issues that are drawing in—almost always against their will—large multinational corporations into the national conversation. Perhaps best crystalized in the recent imbroglio over Disney’s squaring off with Florida Governor Ron DeSantis’s so-called “Don’t Say Gay” law, multinationals are largely ill-prepared to deal with a new business landscape that puts them at the forefront of hot-button issues; and no matter what path they choose to take—even if that path is one of inaction—they are bound to draw the ire of some subset of Americ

Even on issues such as climate change, which is unequivocally proved by science, Corporate America has found itself swept up in a debate they would rather not find themselves in. Despite broad consensus among the scientific community that global warming poses an existential threat to not only the companies that operate around the globe but also to the long-term survival of humanity itself, corporate executives are contending with something that might be best described as an ‘ESG clapback.’ This is a brazen effort by right-wing activists and  institutional investors that are urging CEOs to back off of so-called ‘woke climate initiatives.’ This counterpunch comes just as some conservative elected officials—namely comptrollers who manage state pension investments—have begun to exert pressure on institutional asset managers to keep fossil fuel stocks in their portfolios or risk losing multi-billion dollar asset management mandates. 

Amid these growing pressures, it’s notable that Blackrock, the largest asset manager in the world with over $10 trillion in assets under management, has become both something of a firewall against more broad-based climate-denying investor activism and a staunch proponent of a company’s right to stake out forward-looking positions on salient political issues. Blackrock’s outspoken CEO, Larry Fink, pointed out in no uncertain terms in his 2022 annual letter to shareholders that stakeholder capitalism is no longer merely a toothless term that adorns the glossy pages of company annual reports; it’s a movement that deserves the full attention of business executives and their boards, and one that should force many to rethink the fundamentals of their business models, namely who they sell to, where they source from, and how they impact the communities in which they operate. “Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper,” wrote Fink. “This is the power of capitalism.” 

In an effort to echo Fink’s sentiment, other elected officials such as New York State Comptroller Thomas P. DiNapoli, who manages New York State’s $279 billion dollar pension fund, are now purposely leaning into ESG and showing a preference for companies that take issues such as climate change seriously. Speaking with DiNapoli, he told Worth that “Corporate America must understand that shareholders are concerned about the long-term sustainability of their investments. That means that analysis of environmental, social and governance issues are critically important to investors.” Even former New York City Mayor Mike Bloomberg, who is worth north of $77 billion and is widely regarded as the visionary who brought financial markets into the digital age, recently weighed into the issue in a Bloomberg opinion piece, writing that “Critics call [ESG] ‘woke capitalism.’ There’s just one problem: They don’t seem to understand capitalism.”

Big Business as a Vector of Social Change

One of the most appealing aspects of being invited to attend the Clinton Global Initiative is the opportunity to speak with senior corporate, political, and philanthropic leaders informally, many of whom let down their guard when surrounded by their peers. One conversation we had with a Fortune 100 Chief Executive was particularly revealing as he summed up the new state of play: “Big Business has become a new vector in American and global politics—whether they like it or not. And CEOs who continue to put their head in the sand, wishing it wasn’t so, are a soon-to-be endangered species.”

But it’s not just at the Clinton confab that CEOs, heads of state, and global key opinion leaders are openly bemoaning Big Business’s general reluctance to embrace and accept the new dynamic that companies are now high-profile participants in some of today’s most contentious and divisive social and political issues. Many privately point to the C-Suite’s generally low political IQ while others simply see their inaction as a lack of courage. Edward Bergmark, the founder and former CEO of Optum, the healthcare services wing of United Healthcare, the largest health insurance company in North America, sees both factors at play. “For years, corporate leaders quietly kept their heads down and stayed clear of politics or, when pressed, at least attempted to play both sides—why else would you see major corporations and their offices donating handsome sums to both major political parties,” mused Bergmark in an email exchange with Worth. “Now, many of them are being pressured—oftentimes by their own employees as well as their customers—to take a stand and weigh in on issues such as the overturning of Roe v. Wade.”

And CEOs aren’t getting much advice from their top lieutenants or corporate boards (mostly comprised of former CEOs themselves). Many of these individuals are oftentimes cut from the same cloth as the CEO, where MBAs and corporate culture have spent decades preaching to young aspiring leaders that businesses should stay clear of politics at all costs.

The Cost of Avoidance 

But avoiding socially and politically divisive issues is itself a decision—and one that comes with a hefty price tag. Although it’s hard to measure in dollars and cents, the price of inaction is surely erosive to a company’s reputation among young and habit-informing consumers. Remaining silent on issues that seek to drive inclusion and foster diversity may levy a heavy toll on a corporation’s recruiting advantage. And finally, by staying on the sidelines as some of society’s most contentious and salient issues are being debated, some companies may be effectively ceding valuable ground to aggressive challengers that are more vocal about their value set that more closely aligns to a rapidly changing business landscape.

“The evidence is building so quickly that people want to buy products from companies and brands that operate to high standards of sustainable behavior and ethical conduct,” remarked Unilever CEO Alan Jope in a panel with former President Bill Clinton at the Clinton Global Initiative. “Unilever is now the employer of choice in 50 countries around the world in our sector because it’s a magnet for young talent. People want to come and join companies where they can make a positive impact.”

“And our commitment to sustainable business and proper conduct is very strongly driven by serving our shareholders as a consequence of serving our people, our customers, our societies, and the communities that we do business in,” added Jope. 

“Some CEOs might feel that they’re ‘damned if they do, damned if they don’t—but right is right,” added Bergmark. “You don’t need a fancy degree to see which way the arc of history is turning and that your company’s long-term interests depend on being on the right side of that arc.”

Privately held companies, of course, offer their owners and executives far more leeway to maneuver around political hot-button issues. For example, owner-operated Michael Stars, a Los Angeles-based fashion and apparel brand that has been outspoken on a range of social and political issues over the company’s twenty-year existence, has recently stepped up its official communications in light of what Suzanne Lerner, the company’s co founder and CEO, sees as a “steady and incremental encroachment on basic human rights.” Lerner, the company’s co founder and CEO told Worth that she personally took to the company’s Instagram and Facebook accounts to show solidarity with women’s reproductive rights and quickly moved to pay for employees’ travel expenses for those living in states where changes in public policy were affecting their ability to get the healthcare they needed

Why Companies Still Choose Inaction Over Action

Despite growing recognition that younger Millennial and Gen Z consumers are far more socially conscious and politically progressive than older generations when it comes to the stakeholder approach to business, corporate leadership is still reluctant to lean into divisive social issues, even when the evidence is clear that taking decisive action serves its long-term strategic interests. 

Part of this anemic posturing stems from a structural gap within the C-Suite. Sitting one rung below the CEO in many large corporations is a Chief Sustainability Office, a Chief Human Resources Officer, a Chief Marketing Officer, a Chief Communications Officer, a head of investor relations, and occasionally a Head of “External Affairs” or a Public Affairs executive, among the many other operational leaders. Although each of these roles might become adjacent to some of these rocky quagmires that corporations increasingly find themselves in, not one of them, due to the siloed nature of their respective roles and responsibilities, is empowered to take a holistic, company-wide approach to solve them. Moreover, whether they have the requisite skill sets that combine media savvy, political chops, policy expertise, and strategic analysis—is also a very much open question.

As an example, issues surrounding abortion, women’s reproductive rights, and access to healthcare are very much centered around the HR function, but public affairs and communications professionals might only see short-term peril. Sales leaders might be reluctant to back dicey issues that may lead to uncomfortable conversations with key accounts—particularly if they are located in more conservative parts of the country where state and local governments are taking the opposite approach.

All of these suggest that this gap in the C-Suite must be filled by a new set of accretive yet highly complementary core competencies.

The Rise of C3PO

What is lacking in most C-Suites is a role that might be best described as the Chief Public Policy and Political Officer, or perhaps more memorably, C3PO—an individual who leads a multidisciplinary team comprised of political and policy experts, savvy communications and public relations professionals, and other core competencies who supports the CEO, the executive team, and the Board of Directors. Although many companies will likely opt for a title not from a galaxy far, far away, the position’s mandate is clear: synthesize what is happening not only within the company and its ecosystem—namely among its employees, customers, competitors, regulators, and suppliers—and layer on top of those internal dynamics expert analysis of global, national, and local political issues, media and news cycle coverage, and what’s happening on Wall Street and the investment community. 

The C3PO would be charged with culling, analyzing, and curating all of these sundry inputs and distilling them into a cogent stream of recommendations and actions for the CEO and the Board. In some cases the C3PO will be empowering company leadership to react swiftly in real time to cultural zeitgeists—the murder of George Floyd, for example, was a moment that swept up the nation within a 24-hour period and caught many corporations completely flat-footed. In other cases, the C3PO adroitly identifies areas of opportunity, where the company has a chance to lead a national conversation about a back-burner social issue, and in doing so, elevates the brand, delivers eminence and prestige, and sews new and valuable connections with key stakeholders.

No Shortage of Issues

America and many industrialized countries are at crossroads. Immigration flows, rapid technology transformation, and growing climate insecurity—and the inevitable backlash to these brusque changes—are part of the current national and global milieu. Broadly speaking, these issues fall into two types of categories:

1. National Identity Challenges

In the U.S. as well as in many countries across the globe, shifting ethnic and racial demographics spurred on by immigration patterns, a greying of so-called ‘traditional’ populations, and the economic repercussions of these shifts are bringing an array of social-political issues to the front door of the business sector. These types of challenges get to the central question of what types of people society wants to embrace and how much freedom or autonomy different groups should be granted. The results of this internal struggle can manifest themselves in issues ranging from immigration policy to issues of religious freedom, language, and even acceptable social mores. In the U.S. this category of challenges has recently come to a boil around border policies, women’s reproductive rights, social justice, diversity and inclusion (including LGBTQ+ rights), book banning, and even voting rights and ballot access. 

2. Systemic Fault Lines

This category of challenges confronting companies are ones in which the solution requires the mobilization of actors across the whole of civil society, or even across borders, as in the case of climate change and global warming. Other types of issues that have made their way from the news cycle to the board room include gun rights and freedom of expression versus misinformation and disinformation.

All these are issues that are not going away, nor will the pressures they exert on corporations.

Corporate America will be forced to weigh in on them again and again.