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 paid leave for something far less justifiable: social justice activism. Employees themselves, backed by social media mobs, increasingly are demanding that management take stands on gun control, global warming, immigration and other major issues and that they should be compensated for taking part in protests. And these shakedowns in the future might cost noncomplying executives their jobs. 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 a new political 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 for shareholders. Leading businessmen such as BlackRock Inc. CEO and chairman Laurence Fink not only are championing this doctrine, but are using their leverage to pressure other companies into adopting it.

But “encouragement” also comes from the streets and not just from within. Ridesharing industry leader Uber found out the hard way. When New York City cab drivers, a great many of them Muslim, went on strike at JFK Airport to protest President Trump’s “Muslim ban,” Uber continued to provide service at the airport, earning a reputation as a scab company. In response, political activists across the country deleted their Uber app. Even when Uber CEO Travis Kalanick spoke out against President Trump and canceled its surge pricing at JFK, it did not buy the company any good will with their Leftist critics, many of whom had shifted their loyalty to competitor Lyft. 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 companies and consumers everywhere: the B Corporation. This certification, issued by B Lab, a Berwyn, Pa.-based 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 1,500 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.