Companies are taking on politically sensitive issues – why?

Bank of America recently became the latest U.S. mega-bank to pull back on doing business with the private-prison industry amid concerns about the treatment of immigrants detained under the Trump administration. The move followed similar moves by Wells Fargo which said in January that it planned to significantly decrease its credit exposure to private prison companies. JPMorgan announced it would no longer fund private-prison companies in Marc. In a statement Bank of America vice chair Anne Finucane said:

The private sector is attempting to respond to public policy and government needs and demands in the absence of long-standing and widely recognized reforms needed in criminal justice and immigration policies.

The day before the Bank of America announcement, 500 workers at Wayfair, the large online furniture supply company, walked off their jobs in Boston to protest the company’s sale of $200,000 worth of beds to a contractor who supplied immigrant detention camps on the southern border.

Right now, the U.S. is now caught up in a tsunami of corporate activism that transcends traditional labor-management issues like salary, working conditions, and, pensions to take on matters of “values.” It seems that the U.S has never had so many employees feeling so emboldened to publicly criticize their employers, organize protests and pursue change at the top on formerly taboo issues such as immigration, diversity, gun sales, even abortion rights.

After several American states, including Alabama, Missouri, and Georgia, passed new laws in early June that placed extreme restrictions on abortion, more than 180 businesses signed a letter opposing the laws. Among other things, the letter, featured in a full-page ad in The New York Times, said:

…restricting access to comprehensive reproductive care, including abortion, threatens the health, independence and economic stability of our employees and customers.

At the same time, the large media companies Netflix, WarnerMedia, Walt Disney Co, and NBCUniversal threatened to stop productions in Georgia should the state’s new abortion law take effect. Several companies have even jettisoned important customers in order to take principled stands.

Salesforce, the tech giant consumers rarely hear about (it has more than 150,000 clients and a market cap of $118 billion) changed its policy to forbid customers who use its software from selling semi-automatic weapons, 3D-printed guns, and a range of accessories, including large-capacity magazines and devices that make semi-automatic guns fully automatic.

Dick’s Sporting Goods, the huge outdoor retailer, had pulled all assault-style weapons from its stores and banned high-capacity magazines and “bump stocks” that could effectively convert semiautomatic weapons into machine guns after the Parkland, Fla. school shooting. Amazon and eBay have both banned the sale of firearms on their platforms.

What’s going on here?

There are many theories about what is driving the surge in corporate activism among large enterprises. The decision to go public on a controversial issue is not easy and especially tough when the public debate divides along party lines and across society. As recently as five years ago, most businesses tended to support worthy community or nationally-vetted charities and avoid the politically charged issues as if they were a dose of Ebola. From what we see, the most likely reasons include:

1. Shifting workforce demographics

Today’s workforce is far more diverse and younger than ever. Millennials are the most likely generation to speak up about an employers’ actions or a controversial issue affecting society, according to a survey by public relations firm Weber Shandwick. The poll of 1,000 U.S. adults found 48% of millennials are employee activists, compared with 33% of Gen Xers and 27% of baby boomers.

Millennials also tend to have different leadership styles than their company man predecessors. Stanford Professor Deborah Meyerson calls them ‘ Tempered Radicals,'” and describes them as:

…people who want to succeed in their organizations yet want to live by their values or identities, even if they are somehow at odds with the dominant culture of their organizations. … Tempered radicals are likely to think ‘out of the box’ because they are not fully in the box. As ‘outsiders within,’ they have both a critical and creative edge. They speak new ‘truths.’

Meyerson also views them as “everyday leaders” who are:

… quiet catalysts who push back against prevailing norms, create learning, and lay the groundwork for slow but ongoing organizational and social change.

2. The war for talent

Ironically, as automation and artificial intelligence play an increasing role in enterprises, the ability to attract and retain the best possible talent and the next generation of innovators becomes even more crucial to success. What better way to keep workers happy than to create a sense of shared values? Some firms are doing this and again, Salesforce is one of the stand-out examples.

3. Loss of faith in government

It sounds strange to say but at a time of rock bottom trust in institutions and leaders, corporations are among the few remaining bastions of public confidence left standing. Frustrated by gridlock in Washington and a polarized electorate, many younger people I talk to have given up on government as a source of change. For them, having a voice means being able to choose what products they buy or what company they work for. And in a turn that reflects this, we see firms like Wayfair having to take public positions as part of their strategy to ensure sustainable growth.

My take

Bank of America’s statement on its reasons for getting out of the private-prison lending echoes the loss of trust in government argument. Corporations are stepping in where they –and their employees — feel governments have failed.

This is a remarkable commentary on the sorry state of political paralysis that is now gripping Washington and other capitals around the world and a sea change in management orthodoxy. For those of us who began our careers in the “I’m the boss and you’re not” era, the current state is nothing short of revolutionary.

But let’s be clear. While it is easy to say that private companies should keep out of politically sensitive topics, the economic tensions that exist among firms that want to grow their business, expanding workforce choice and a heightened awareness of numerous problems that impact lives across all demographics mean that it is good business to be good corporate citizens.

It is citizen empowered, internet enable democracy in action.