In recent years, U.S. public companies have faced pressure to respond to a slew of social issues, all under the scrutiny of social media influencers who can either “cancel” a brand or make it go viral (and, in either event, significantly affect the share price).
As directors attempt to navigate this minefield, they must ensure they are making decisions in their role as fiduciaries while responding to social pressure or addressing issues that could ultimately affect the company.
“I always think it makes good sense when your social and philanthropic strategy aligns with your business,” says Orlando Ashford, chief people officer of Fanatics, chair of the board of Perrigo Company, chair of the compensation committee of Array Technologies Inc. and author of the book How'd You Get That Job? “It makes the world a better place and helps to promote and enhance your business at the same time. There's nothing wrong with that.”
The Changing Social Environment for Companies
Investors and consumers are demanding greater transparency and authenticity. Researchers from the University of Pennsylvania's Wharton School reported that companies have been under more pressure to respond to social issues in the last 15 years, but especially since May 2020 when George Floyd's murder assumed center stage. The country grappled with the live footage and resulting protests. In response, companies pledged $340 billion to support racial equity.
In June 2020, Business Roundtable, an association of CEOs from America's largest companies, issued a statement calling on the president and Congress to enact significant police reform.
When Texas restricted abortion access in September 2021, Salesforce stated that it would help employees and their families relocate if they were concerned about the ability to seek reproductive care. Salesforce doubled down in 2022 in anticipation of the Supreme Court ruling that would end up striking down Roe v. Wade. By mid-summer 2022, several companies — including JPMorgan Chase & Co., Amazon, Nordstrom Inc., Disney and a slew of tech companies — aligned with Salesforce in updating their health insurance policies to offer travel benefits to U.S. employees who may need to access out-of-state reproductive care.
In October 2022, Adidas terminated its partnership with Kanye West over antisemitic comments he made. The German-based company took a loss of $540 million in the dissolution.
The ongoing Israel-Hamas war yielded a slew of corporate donations, statements supporting Israel and employee-donation matching programs. Yale University identified over 200 companies that have condemned the October 7 Hamas terrorist attacks on Israel. Many more organizations have made statements or shared social media posts, including major sports teams like the Philadelphia 76ers and the Pittsburgh Steelers.
In early October 2023, Starbucks sued its union, Workers United, for sharing pro-Hamas social media posts under the union brand, a brand that aligns with Starbucks' own logo and name. And shortly after, Elon Musk's ongoing divisive statements came to a head when he endorsed and commented on an antisemitic post. Though he claims his comments were taken out of context, in making them, he drove away dozens of blue-chip advertisers, including Disney, Apple, IBM, Fox Sports and Sony Pictures. He later suggested the outcome could “bankrupt the company.”
Making Difficult Decisions
Given the murky waters, when should companies and boards decide to weigh in, and on whose shoulders should the responsibility fall?
The Outspoken Corporation, an August 2021 report by Deloitte, found that 66% of large-cap companies, 41% of mid-cap companies and 50% of private companies had made a public statement on a political, social, environmental or public-policy matter. Racial justice was the most common topic addressed, followed by social justice and environmental issues. Of those, 31% have and use a company-specific framework.
Over one-third of respondents to Deloitte's survey say their boards or board committees have discussed whether and when any of the officers or directors should speak on the company's behalf about these issues. Over 40% of respondents say their CEO can speak out or engage publicly without the approval of the board.
The desire to comment publicly on ESG-related issues is compounded by emerging regulatory reporting requirements. There were over 40 proposed or finalized SEC rules in 2023 that included issues like climate discourses and climate fund marketing. The SEC also backed Nasdaq in its effort to bring more diversity to public company boards. In November 2023, Nasdaq won a major ruling in the New Orleans-based 5th U.S. Circuit Court of Appeals, which paved the way for Nasdaq to require companies listed on the exchange to have women and minority directors on their boards or explain why they do not.
The Litmus Test
Michael Rubin, executive chairman of Fanatics, has been very outspoken on social justice issues. Originally from Pennsylvania and a self-made billionaire, he became involved with (and is now the cochair of) REFORM Alliance, which works to transform probation and parole by changing laws, systems and culture. While running multiple successful businesses, Rubin also helped pass Pennsylvania Senate Bill 383, a significant and comprehensive probation reform, in mid-December 2023.
Fanatics has a foundation through which it manages philanthropic efforts, organized around four pillars of giving. These include community, DEI/social justice, relief and aid, and sustainability. “There are a number of organizations that we support that fit inside those pillars,” says Ashford. Their giving platform is one of the ways they govern from the board and leadership perspective.
According to Ashford, any giving starts with the pillars. Fanatics then reviews extraordinary issues as they happen in the world, approaching many from a perspective of “let's jump in and see if we can help.” Fanatics encourages people to give, and will match donations. “If it's some kind of crisis, whether a hurricane, earthquake or something that impacts our employees, like a shooting, if we have a large population of employees there, we consider it,” Ashford says.
Courtney Shea, chair of the audit committee of Professional Diversity Network and independent board member and audit committee member for Assured Guaranty, explains that, at Assured Guaranty, when broader, more complex social or humanitarian events occur, a corporate response and donation is discussed. The board considers recommendations from an employee-led philanthropy committee that conducts considerable due diligence on worthwhile organizations for the company and its employees to support.
“On a corporate level, we contribute to humanitarian efforts all over the world. We have donated to some of the recent natural disasters that have occurred, even though we don't have business dealings in that geographical location,” says Shea. “In addition to making these corporate donations, which we communicate to employees, we match their donations. The mission, vision and values of our organization also encompass who we are as human beings, and that means all our employees, not just our board and senior management.”
Domestically, when social issues arise that are vital to national concerns, Assured Guaranty's board and management feel it is important to respond on behalf of employees and the communities they serve, as well as to let shareholders, clients, vendors and others know where the company stands. They have donated to weather-related catastrophes and charities helping victims of disasters across the world, and issued public statements in conjunction with those donations.
Ashford believes that a company should focus on social issues that are a natural extension of the work the company does. His board at Array Technologies, a solar panel technology company, focuses on STEM, whereas the Perrigo board, which he chairs, focuses its philanthropic work on education and STEM. Perrigo also focuses on health and ailments that align with their business model.
Ashford recently completed a search for a new CEO of Perrigo. While the board sought the best fit for the role, one filter the board applied was to ensure the new CEO would be aligned with the company's mission. According to Ashford, “We just launched the O-pill (an over-the-counter contraceptive), so making sure that we brought in a CEO that has a passion around women's health was really important.” The birth control pill has been controversial given the new, more restrictive reproductive health laws in some states.
Responding to Crises
“One thing we've learned is not everybody's going to be happy. You just have to do what you believe and do it to the best of your ability, and then explain why,” Ashford says.
Shea says that when it came to approaching the Israel-Hamas war, senior management had a twofold focus. First, they made sure their employees were okay and, if they needed additional support, provided mental health resources. Second, the employee-led philanthropy committee came up with a list of humanitarian organizations employees could give to. The company matched employee contributions while also making separate donations.
Ashford explains, “When we think about how we respond, there's a difference between responding to the inputs versus the outputs.” With regard to the Israel-Hamas war, Ashford says that focusing on the inputs — the actors in the conflict — is not helpful. Instead, he guides his organizations to focus on responding to the outputs, or the negative impacts on communities and civilians that have been hurt and harmed. “We are not choosing a side or saying, ‘These are right' or ‘Those are wrong,' but, ‘I am against terrorism and I'm against the outputs that it's creating.' Therefore, we want to support people who have been harmed.” Fanatics is matching employee donations up to $1 million, concentrating on organizations focused on helping those who have been impacted by the conflict.
Reporting on Social Issues and Beyond
Shea says that Assured Guaranty's board believes in the importance of commenting publicly on the company's commitment to ESG principles. The board provides ESG-related statements and board-approved policies on DEI, climate change and their global code of ethics. Shea notes that the board demonstrates its commitment to ESG principles by dedicating time and resources through its environmental and social responsibility committee.
Ashford says that all the boards on which he has served focus on reporting on myriad elements within ESG. “We talk about the philanthropic things that we do, diversity and representation that we have on the board and representation in the executive room, the topics that we feel are important and the programming that we do from a diversity perspective.”
Shea says she's committed to investing in social change. She says, “I have always felt it's important to elevate women, both professionally and personally. In 1996, four of us — all women — started a professional organization — Women in Public Finance — to educate, mentor and network with other women in our industry. Today, we have over 20 chapters across the U.S. and over 500 people joined our last national conference.”
Ashford says, “Any success I've had corporately is a direct reflection of investments that people made in me. There are programs that I participated in in high school and college that were accelerators to my career. So, my philanthropic endeavors have been spent around creating opportunity and access for people that have historically been underrepresented.”
A Murky Area
The strategic and outward-facing approach that some companies have taken has not been consistent across the board. While some organizations address social issues head on, thousands more have remained silent. Many public company board members contacted for comment did not feel they had the authority to engage with what may be perceived as a sensitive topic. Board members are afraid to inadvertently misstep and drive away customers and advertisers and sink stock prices.
Yet, there are also instances in which boards and management have listened to stakeholders, employee resource groups and outside groups, getting their messaging, donations, matching and outreach aligned and harnessing the moment to increase company value. Nike saw a significant stock increase in 2019, attributed to the fall 2018 Colin Kaepernick campaign. Kaepernick's actions, of course, had been a lightning rod for some.
Effective boards seem to understand the importance of navigating social issues, whether they are putting a toe in the water or jumping in headfirst. The gap between those who engage and those who don't underscores the complexity for boards.