The Florida legislature’s decision to take what some believe are retaliatory actions against Disney because its CEO publicly opposed the so-called “Don’t Say Gay Bill,” adds to the potential ESG risks every company must consider. As a result, corporate board members should determine what type of policies and procedures their company needs to put in place to effectively deal with political issues.
Florida’s Parental Rights in Education Bill (which is the actual name of the legislation) has ignited a public debate over who should have the responsibility of determining the type of material that is taught to children in public schools at a particular age. It is estimated that as many as 19 other states have introduced similar legislation dealing with teaching or discussing LGBTQ information in classrooms. This shows how political issues like this one can quickly become something that could impact the company’s business nationally and internationally. If multiple states take retaliatory actions against a company based on a political position, it could have material impact on the company’s bottom line. Unfortunately, this is a new possibility boards must consider and an indication that corporate boards may need to reevaluate what “corporate responsibility” means – now and in the future.
When Social Turns Political
When the “Social” portion of ESG turns political, in many cases corporate boards are put in what turns out to be a “no-win” position. Shareholders, employees, and customers can each exert pressure on a company to “take a stand” or “speak out” about issues that – on the face of it – have very little to do with the company’s products or services but hold some significance to its stakeholders. However, taking a position or trying to remain neutral on political issues can wind up alienating portions of these important stakeholder groups, and that can hold major consequences for the company.
Last month, Harvard Business School Working Knowledge published a post asking readers what they thought Disney board chair Susan Arnold should suggest CEO Bob Chapek do to get the company through what has become a challenging situation. Since Chapek voiced opposition to the Florida parental rights bill (but not forcefully enough for some employees) Disney has been stripped of a special status that will cost the company millions and has alienated some shareholders, employees and customers.
One reader commented with what seems like sound advice:
The management team should stress the following in its meetings and to its stakeholders
1. The basic Disney values of inclusion, etc
2. Disney’s obligations to all of its customers, even those who may support unpopular political views
3. Employees have every right to disagree with political actions and participate in the political process
4. Disney supports an internal dialogue, but employees have to respect different views. Employees who are unable to accept that will unfortunately have to leave
5. Disney will make its voice heard but ultimately will follow the political result
While boards cannot eliminate stakeholder pressure to voice opinions on controversial matters, establishing some very well communicated internal parameters for when a company comments publicly can mitigate some of the potential risks. Creating a process for identifying potential political issues that could place the company at risk and creating an executive team to develop responses to each of those issues should be on the board’s agenda.
Also, making sure that the company regularly articulates its core values – internally and to the communities it serves – is critically important. Consistently demonstrating actions that live up to the company’s core values can enhance its reputation and help defend its positions on some political issues. In general, customers will support a company that stays true to its core values, particularly if those values are in line with its customer base.
Lastly, the board should be careful to create a system of identifying political decisions that could affect the company’s operations, now and in the future. Vaccine mandates during the pandemic changed the way many businesses had to operate to stay profitable – including changing company policies regarding working from home and workplace safety. While certain situations may begin as political, once laws are passed or market trends take over, a company must be willing to adapt quickly to protect its bottom line. Determining what is in the best long-term interest of the company will guide what most companies should do when faced with political concerns.