Corporations Paying for Employee Protest: Does the Tail Wag the Dog?

There’s nothing unusual about a corporation offering employees paid leave for vacations, illness or personal emergencies. That’s a fact of the modern workplace. But lately employers have begun to provide a far less justifiable benefit: paid leave for social justice activism. Very often, employees themselves, backed by social media mobs, demand that management take stands on gun control, global warming, immigration and other major issues. And these shakedowns can result in the termination of less than compliant executives. It’s another example of why business should not be a vehicle for political advocacy.

The Left always has been resourceful in building cadres. And the workplace has become the new frontier. Not that many companies aren’t already on board with this. At Luxe, a San Francisco-based valet parking smart phone app, founder and CEO Curtis Lee, angered over President Trump’s January 2017 executive order temporarily barring entry into the U.S. from seven terrorist-sponsoring or terrorist-occupied nations, provided paid leave to employees who participated in protests against this “Muslim ban.” At another San Francisco firm, Traction, employees are allowed two Days of Action a year. Meanwhile, Ventura, Calif.-based outdoor gear and apparel retailer Patagonia has vowed to pay for bail and court appearances for employees arrested at environmental rallies (see photo).

Such companies are practitioners of Corporate Social Responsibility (CSR), a doctrine holding that business must answer to “stakeholders” affected by company decisions. An enterprise, in this view, should promote the general welfare and not just create value. Leading businessmen such as BlackRock Inc. CEO and chairman Laurence Fink not only are championing this doctrine but are pressuring other companies into adopting it.

But “encouragement” also comes from the streets. Ridesharing industry leader Uber found out the hard way. When the company showed insufficient enthusiasm in opposing President Trump’s “Muslim ban” – and worse, undercut cabbie fares at New York City’s JFK Airport – political activists across the country deleted their Uber app. In response, Uber CEO Travis Kalanick spoke out against President Trump and vowed to sway him toward an open-borders immigration policy. But it was too late. Uber’s main competitor, Lyft, by contrast, vitriolically had denounced Trump from the start and pledged $1 million to the ACLU. The episode was a contributing factor in Kalanick’s departure last June.

As corporate political activism is becoming de rigeur, a new classification has come about for smart progressive consumers everywhere: the B Corporation. This certification, issued by B Lab, a global nonprofit organization, requires that a company achieve a minimum score for “social and environmental performance” and integrate stakeholder concerns into governing documents. At present, there are more than 2,000 such companies worldwide. To acquire such status, companies can rely on Conscious Company, a self-described “magazine for business leaders, entrepreneurs, and the next generation of professionals looking for meaning and mission in their work,” that relies upon a “community of forward-thinking, influential changemakers to help us co-create the content.”

Many employees are demanding that employers cater to their beliefs. An online workforce survey released last spring by St. Louis-based management consulting firm Povaddo reveals how deeply this trend has taken root. Among people working for major American companies, fully 57 percent believed that employers should be more active in addressing social problems. Thirty-eight percent said they would be less likely to make a long-term commitment to a company if management failed to become more active politically. By Povaddo’s definition, 15 percent of employees fit the definition of an “activist,” with millennials three times more likely than baby boomers to fit that category.

Activist employees, like everyone else, buy things. And corporations, reluctantly or not, realize that exhibiting a social conscience helps to keep customers. Recent research by the marketing firm Sprout Social indicates that two-thirds of U.S. consumers believe it is important for companies to take public stands on social and political issues; 58 percent said social media should drive such advocacy. Sprout Social unctuously concluded: “Brands have an invitation from their audiences to get involved and the space to do it via social (media), but lack an understanding of how to take strategic stands that avoid backlash…(B)rands that take a stand in the right way can turn potential risks into business opportunities.” Ah, the right way.

All this amounts to a dangerous trend. By becoming warriors for social justice, corporations risk violating their fiduciary duties to investors. A company’s primary legal and moral obligations are to the people formally connected with it. Best practices should not be driven by prevailing political winds. As for CEOs, they should send out the word: Employee activism is a personal right, but not on company time.