Bauer Business Focus

Why Corporations Are No Longer Reluctant To Take A Stance On Social Issues

A Rice University researcher says companies can no longer hide from public debates.

Scott Sonenshein, management professor at Rice University, studied corporate social activism.

Corporations used to stay away from political issues, but in recent years that has changed. Whether it’s immigration, gun violence, marriage equality, transgender rights, religious liberty or racial injustice, many companies have weighed in one way or another.

Most recently, the intersection of business and politics was in the news with the fallout from a tweet by Houston Rockets General Manager Daryl Morey.

Morey had shared a tweet in support of the Hong Kong protests against China, which led to China boycotting the NBA and league leadership attempting to make good with one of their biggest markets. It also triggered a nationwide debate about free speech on social and political issues in sports and business.

“Increasingly what we’ve seen is that individuals working for organizations, especially organizations with big platforms, whether they be sports teams are probably the most prominent example, (…) are increasingly willing to speak their minds,” Scott Sonenshein, management professor at Rice University’s Jones Graduate School of Business, told News 88.7.

He wrote about his research in a recent article in Rice Business Wisdom.

That trend extends to the organizations itself, Sonenshein said, for several reasons.

One reason is that more and more positions are filled by millennials, who are more socially conscious than some of the previous generations, he said, and they take those values to the outside world via social media.

“So I think businesses are being faced with an issue where they have one set of stated values and the question is, what are they doing to actually enact those values in a bigger public square,” Sonenshein said. “And social media has created this bigger public square where it’s much harder to hide.”

As a result, businesses have to make a decision that may not be based on maximizing profits, but on corporate values.

“Almost by definition you’re going to alienate a good portion of your customer base by taking a stand on a controversial issue,” Sonenshein said.

But results are mixed. Nike, which bet on former NFL player Colin Kaepernick, who controversially kneeled during the national anthem to protest police brutality, faced backlash but had increased sales.

Chick-Fil-A similarly saw better business, despite a boycott, after it became public that the owner of the chicken sandwich chain opposes gay marriage and the company donated to anti-gay organizations.

Target, on the other hand, didn’t appear to see any benefits from weighing in on the transgender bathroom debate by offering gender-neutral restrooms and may have lost money from a boycott.

“There’s been over 100 studies trying to link broadly corporate social responsibility with financial performance for businesses, whether you measure them in terms of profit or you measure them in terms of other metrics like stock price, and it’s very mixed,” Sonenshein said. “Some studies show a positive effect, some studies show a negative effect and some studies show that this makes absolutely no difference.”

Another question is what it means for society that corporations are at the forefront of social and political issues.

“Political pressure and social pressure for addressing some of these issues is increasingly coming from business organizations as government is disengaging from some of these issues,” Sonenshein said. “Is that what we really want the role of business to be?”

Click on the audio above to listen to the interview with Sonenshein.

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Florian Martin

Florian Martin

Business Reporter

Florian Martin is currently the News 88.7 business reporter. Florian’s stories can frequently be heard on other public radio stations throughout Texas and on NPR nationwide. Some of them have earned him awards from Texas AP Broadcasters, the Houston Press Club, National Association of Real Estate Editors, and Public Radio...

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