For many boards, this shift is taking place mainly through greater consideration of ESG issues. Evansville, Indiana-based Berry, for instance, has joined about 30 other major companies, including Procter & Gamble, in forming the Alliance to End Plastic Waste, to take action against the single-use plastics whose elimination has become a cause célèbre among many American consumers.
It’s smart strategy. Since 2014, there have been nearly 300 ESG-related proxy campaigns in the United States, spanning multiple industries, driven by a record number of exempt solicitation filings encouraging shareholders to vote in favor of ESG-related proposals, according to investment-research company FactSet. From 2009 through 2013, there were only about 80.
Capitalism long has relied on robust philanthropy to even out its rough edges, but boards may need to overhaul corporate giving as well. Many younger Americans seem unimpressed by traditional charities, such as a struggling United Way.
Kesner argues that raising esteem for philanthropy overall may be a matter of refashioning it in ways that younger generations will embrace. “They must know where their money is going before they give it,” she says. “They must be able to relate to the cause it supports; they don’t see the generic benefit of philanthropy like previous generations do.”
Tackling the Elephant
Some issues are even gnarlier for corporate boards and directors. Income inequality is one of them: It helps many Americans identify what most bothers them about capitalism—and what is appealing about socialism. Thus, leftist leaders increasingly are inveighing against outsized executive compensation.
Some board members think they’ve got a point. “Differences in pay are something that a board should be concerned with,” says Seth Goldman, who now runs for Coca-Cola the Honest Tea brand that he founded and is a director of other startups that are helping upend the food and beverage business. “CEO pay needs to be not grossly out of line. There shouldn’t be an attempt to enforce what Ben & Jerry’s used to do, with 10x pay. But there shouldn’t be a 200x pay differential.”
A thorough self-examination—beyond what is expected by disclosure regulations— is probably in order. “On the fringe these days are people like Sanders and, on the other end, those who want to go back to the gold standard,” says Gary Tobin, a Fortune 500 communications veteran. “Both don’t work. But if you don’t self-regulate, you’re going to get regulated. Look at what happened to Wells Fargo.”
Indeed, argues Lillian Hardy, boards “have to focus on compliance regardless of political movements around these issues because their engagement is about oversight. They’re supposed to have an aerial view,” says the partner in the Washington, D.C.-based Hogan Lovells law firm, who specializes in corporate reputation management.
Watching Warren
At the very least, corporate board members should keep an eye—if they aren’t already—on Warren, who has codified a regulatory militancy in which she attacks “corporate cronyism” and calls for legislating huge changes in company governance, such as a new federal charter for businesses with more than $1 billion in annual revenue that would make companies answer to more than shareholders. Employees would elect 40 percent of directors, who would be obliged to consider “benefits” beyond returns to the owners, as in the German tradition; more profits would flow to workers instead of into share buybacks and dividends to investors.
Warren also wants to go after business leaders with pitchforks. Her Corporate Executive Accountability Act would explode American legal philosophy by making it a federal crime—punishable by up to a year in prison for a first-time violation—for corporate executives to “negligently permit or fail to prevent” violations of the law at their companies.
A political and social environment that even would give serious consideration to such ideas underscores the level of distrust in business right now. Fifty percent of millennials and Generation Z members surveyed by the Harris Poll earlier this year said they would prefer living in a socialist country, with huge majorities expressing support for government-provided universal health care and tuition-free college. They will make up 37 percent of the 2020 electorate.
But even die-hard progressives find it difficult to picture America actually becoming Sweden anytime soon. “Every generation when they’re 18 to 26 is more idealistic and liberal-leaning,” says Tim Hubbard, a University of Notre Dame business professor with liberal affiliations. “Is there something fundamentally different now? Maybe. But I don’t think in this election cycle or even six years out we’re going to see it. I’m not holding my breath.”
Read more: Businesses Must Save “The Other America”
