Should shareholder funds be spent on divisive social issues?
by Tony Jaques, Director of Issue Outcomes Pty Ltd, for people who work in issue and crisis management
Companies have struggled for years whether to speak out on controversial social and political issues.
This debate was reignited very publicly by high-profile companies taking a stance on the failed Referendum to create an indigenous Voice to the Australian Parliament.
While a conga-line of instant experts offered their opinions about the effectiveness or otherwise of the communication strategies of either side in the referendum, the more fundamental question is whether companies should take sides on such a highly divisive public issue.
Immediately after Australia voted No to the proposed amendment to the Constitution, there was a flood of comments about the appropriateness of some of the biggest listed companies donating as much as $2 million to support the unsuccessful Yes campaign.
For example, Hugh Morgan, former President of the Business Council of Australia, said the resounding public rejection of the referendum should force big company CEOs and boards to “reconsider intervening in social political issues and spending shareholder money on causes not widely supported.”
“Given the mood of the community,” he said, “maybe this is a moment for the corporate sector to reflect and rethink.”
Similarly, Kennards Self Storage CEO Sam Kennard said: “Directors of companies should not put shareholder money into pet political positions and it could be a breach of a fiduciary duty because how is that in the best interests of shareholders?”
However a majority of ASX Top 20 companies publicly advocated for the Voice, and many made substantial donations. Australian Council of Superannuation Investors CEO Louise Davidson said they supported the Voice in the belief its success would lead to better dialogue between First Nations peoples and the business community, and would ultimately have supported long-term value creation in the companies.
By contrast, The Australian Shareholders’ Association, which represents smaller retail investors, took a neutral stance. CEO Rachel Waterhouse said companies could choose to take a stance on social issues “if it was consistent with their overall purpose and strategy.”
And that’s the essential test. Is corporate support for any high-profile issue – be it indigenous recognition or war in Palestine – just a bandwagon effect to be politically correct, or does it represent true corporate values, purpose, and strategy?
Although research consistently shows consumers want CEOs, companies, and brands to be more active on social issues, taking a stance on a polarising topic has increasingly become a reputational and commercial risk. Look no further than Bud Light aligning itself with a transgender activist, then losing its place as America’s top-selling beer brand, and throwing the two executives who approved the promotion under the bus.
As a Wall Street Journal headline concluded in June: “Companies That Embraced Social Issues Have Second Thoughts: Executives are rethinking if and when to weigh in on potentially divisive issues, fearing backlash from all sides, and are developing crisis plans in case things go wrong.”
Yet taking a values-driven stand in the face of controversy can be a powerful corporate statement.
At the AGM of Telstra, soon after the referendum loss, shareholders questioned why the telecom giant spent $1 million on advertising to support the Yes campaign. While criticism made for easy headlines, Chair John Mullen said support for the Voice was “in the best interests of the company, and therefore the best interests of our shareholders.”
He added the decision was made after consultation with the Indigenous community. Indeed, Telstra has a comprehensive Reconciliation Action Plan, which includes a First Nations Expert Advisory Committee and a First Nations Employee Representative Group.
Many other organizations also have effective on-the-ground support and genuine financial commitment to indigenous advancement and employment. But for some, it seems that support for Yes was little more than opportunistic virtue signaling.
A Parting Thought
Being politically correct means always having to say you’re sorry.