The Christian Science Monitor Daily for June 10, 2022 – The Christian Science Monitor

As a streaming service, Netflix sits at the nexus of Silicon Valley and Hollywood, two industries that lean left in politics and culture. Chief executive Reed Hastings is a prominent Democratic donor in California and nationally. In 2020, about 98% of political contributions by Netflix employees went to Democrats, similar to outlays at other major tech companies. 

But Netflix’s advice to staff members who want to bring their progressive politics to work: not so fast. 

In a wide-ranging corporate culture memo last month, the company said its viewers expected to be entertained by a diverse range of TV shows and movies. “Not everyone will like – or agree with – everything on our service,” it noted, an apparent reference to comedian Dave Chapelle’s 2021 special that critics called transphobic and that prompted a Netflix employee walkout. 

The memo, which Netflix said had been under discussion for several months with employee feedback, warns that staff “may need to work on titles you perceive to be harmful. If you’d find it hard to support our content breadth, Netflix may not be the best place for you.”

In an era of polarized politics and social media outrage, American corporations face increasing pressure to take stances on hot-button social and cultural issues. That pressure is coming not just from consumers but also from younger employees, particularly in industries like tech and finance, who expect companies to reflect their progressive values and to speak out in defense of voting rights, LGBTQ equality, and abortion access in states like Texas and Georgia. 

But the attempt by Netflix to tamp down internal revolts speaks to a parallel pressure: growing unease in corporate America that what critics call “woke capitalism” upsets some customers, and is increasingly fomenting a backlash from the right. As a result, corporations now face tough choices – at an intersection of both profits and ethics – about whether to be socially activist or attempt to stay neutral on social issues and focus on making money. 

“We’re starting to see a reaction,” says Stephen Bainbridge, a law professor at University of California, Los Angeles who studies corporate governance. “Companies are having to decide whether they’re going to take sides or to market to everybody.” 

After Florida Republicans passed a bill in March limiting discussion of sexual orientation and gender identity in elementary schools, Disney, the state’s largest employer, initially sought to avoid public attention for fear of becoming a “political football,” according to CEO Bob Chapek. But that passivity rattled many employees.

Then, when Disney did speak out against the bill, Republican Gov. Ron DeSantis pounced. He lambasted Disney for its “woke” politics and signed a bill to revoke the special tax district around its theme parks. 

Looming contests from abortion to guns

Many Republicans had already been fuming at tech companies for censoring conservative voices on their platforms. Now, as the Florida governor’s action shows, GOP leaders are broadening their critique to corporations that they accuse of advancing a liberal political agenda.  

Republican Sen. Josh Hawley of Missouri singled out “woke corporations like Disney” as he proposed a federal bill designed to limit the entertainment giant’s copyright protections, adding that the age of “Republican handouts to Big Business is over.”

The next flashpoint could be abortion, if an anticipated Supreme Court decision frees states to sharply limit or outright ban the practice. Citigroup, Amazon, and other large employers have already offered to help staff and families in Texas travel for abortion services after Republicans enacted a near-total ban. That raised the hackles of Republicans, who threatened retaliation: In May, Florida Sen. Marco Rubio introduced a bill that would prevent companies from reimbursing travel expenses for such purposes.  

Gun control also pits GOP-run states against corporations that shun the gun industry. A Texas law – the first of its kind – bars state agencies from doing business with companies that discriminate against the gun industry, a barb aimed at Wall Street banks that previously vowed to cut credit to gun-makers. Texas requires banks to show compliance with its law, which predates last month’s school shooting in Uvalde in which 19 children and two teachers were killed.

On Friday, chief executives of 228 private and public companies wrote to the U.S. Senate to urge “bold urgent action” on gun violence, without specifying any policies to enact. (No Wall Street banks signed the letter.) The House of Representatives passed a Democrat-written gun control bill on Wednesday that is highly unlikely to pass the Senate in its current form. 

And the Republican backlash extends beyond culture-war issues. The finance industry’s pivot to sustainability as one of its benchmarks for investments has caused waves in GOP-run states with fossil fuel industries. Arkansas and West Virginia recently divested pension funds from asset-management giant Blackrock in protest of its adoption of ESG (environmental, social, and governance) goals that some Republicans call another sign of corporate overreach. 

West Virginia Treasurer Riley Moore, a Republican, told The Associated Press: “I don’t think we’re the party of big business anymore. We’re the party of people – more specifically, we’re the party of working people. And the problem that we have is with big banks and corporations right now trying to dictate how we’re going to live our lives.” 

Eroding middle ground in politics?

To the extent that Republicans wash their hands of left-leaning corporations, the result could be a political opportunity for Democrats.

Greater backing from business could help frustrated liberals offset what they see as structural barriers to political power, given the strong conservative influence within institutions like the Senate and Supreme Court and the near death of major legislative reform. 

That companies are being asked to play this role of Democratic ally on social issues speaks to the political deadlock in Washington and the polarization that has fueled it, says Kurt Ebenhoch, a longtime communications executive and consultant.

In the past, companies worked with politicians who wanted to appeal to a broad electorate. Today, that option has increasingly been disappearing. Most lawmakers represent safe seats, and their focus is on primary voters and building a national brand among partisans, which for Republicans means getting onto outlets like Fox News.

This is what makes Disney’s high-profile clash with Governor DeSantis so jarring, says Mr. Ebenhoch. “We didn’t see those kinds of actions 20 or 30 years ago. Leaders were more pragmatic and more concerned about the middle,” he says.  

Today, factions within both parties exhibit strong antipathy toward big business. Consider the left’s ambitions to tax more corporate profits to pay for social programs, as well as to break up industry cartels, cap drug prices, and enact other regulatory reforms. 

That views of big business have also soured on the right, for different reasons, should concern company boardrooms, says Professor Bainbridge. 

“There’s a resurgence of right-wing populism that has very little in common with left-wing populism other than a deep distrust of big business. That’s the political dynamic of the moment. For the first time in a long time, you have strong populist wings in both parties that are skeptical of big business,” he says.

“The professional class is the real driver”

In February, more than 150 corporations signed a letter to oppose Florida’s education bill, dubbed by critics as “Don’t Say Gay.” Disney was a notable exception. Pressure began to build on Mr. Chapek to join this opposition, which he eventually did on March 9. He also signed the letter and promised that Disney would produce more LBGTQ content, but that failed to assuage staff who organized walkouts at Disney theme parks and studios.

Among the demands of these employees was that Disney stop all investments in Florida until the education law is repealed. American capitalists historically used comparable get-tough strategies, such as factory lockouts and closures, to defeat local workplace organizers, says Darel Paul, a politics professor at Williams College in Massachusetts. Now the workers, not the shareholders, are urging action against a state and its elected officials.

That shift in power dynamics, and Mr. Chapek’s fitful efforts to find a compromise, are a microcosm of how “woke capitalism” operates, says Professor Paul, author of “Tolerance to Equality: How Elites Brought America to Same-Sex Marriage.” Companies like Disney must compete to hire and retain young professionals. In turn, those professionals bring progressive values, often from elite colleges, and demand that management steps up on social issues.

“The professional class is the real driver here. Their values begin to spread to the wider managerial class,” he says.

In Disney’s case, empowered workers forced Mr. Chapek to go toe-to-toe with Governor DeSantis. Disney now faces the dissolution of Reedy Creek Improvement District, a semi-autonomous area it has run in Florida since 1967. And far from Disney’s image being burnished, the row and the company’s response led to a sharp drop in its consumer reputation in an annual survey of America’s 100 top brands.

“They’re realizing that letting their employees dictate their position is not a free lunch,” says Professor Paul of Disney’s management.

Staying out of the culture wars

To be sure, many companies don’t feel compelled to join culture wars. Most CEOs who speak publicly on such issues are concentrated in industries like tech, media, finance, and entertainment; not coincidentally, the majority are based in blue states like New York and California.

The views of these companies shouldn’t carry more weight than others, says Vivek Ramaswamy, an entrepreneur and author of “Woke, Inc.: Inside Corporate America’s Social Justice Scam.” He reckons firms should focus on making profits and providing “excellence,” not using corporate power “to advance political or social agendas that ought to be settled through free speech in the public square where every citizen’s voice counts equally.”

Mr. Ramaswamy recently founded an asset management company, backed by billionaire tech investor and Republican donor Peter Thiel, that eschews ESG goals. To Mr. Ramaswamy, CEOs who genuflect at employee demands to take social stances are only listening to an activist minority. “There is no such thing as ‘The Employees.’ They’re a diverse base of people with a diverse range of views, just like the citizens of this country,” he says.

Netflix isn’t the first tech company to ask workers to check their politics at the door. In 2020, Coinbase, a cryptocurrency exchange in San Francisco, said it would become an apolitical workplace and offered severance pay to anyone who wanted to leave; at least 60 reportedly took the offer.

But that policy is an exception. Most companies recognize that younger employees expect to bring their values to work and want companies to stand for something more than making profits for shareholders, says Michal Barzuza, a professor of law at the University of Virginia who studies ESG investing. “Millennials’ reputation is that they bring their values to their economic activities,” she says.

Research she co-authored found that the investment industry has adopted ESG goals in response to actual and perceived millennial behaviors, including a propensity to bring politics to the workplace and to shun companies and investments that breach their values. That these values lean left, and are shaping how CEOs respond publicly to social issues, reflects an asymmetry. “The right is less inclined to bring these values to the market,” she says.

Will companies move to new states?

That doesn’t mean CEOs need to opine on every controversy, says Paul Argenti, a professor of management and corporate communications at Dartmouth and author of a widely cited 2020 Harvard Business Review article, “When Should Your Company Speak Up About a Social Issue?” The article offers a playbook for corporate choices on both words and actions, and how to prepare for when controversies hit.  

“The main thing is to have a way of justifying your actions before things happen,” he says. But in today’s polarized marketplace, “there are some things where you just can’t win.”

Professor Argenti predicts that multinationals based in red states will eventually relocate if legislators continue to attack the values these companies want to be seen championing, such as voting rights in states like Georgia. “Delta doesn’t just operate in Georgia, and the same goes for Coca-Cola. These are global companies that are trying to appeal to a wide variety of people, not just in that state,” he says.

Still, any rupture with Republicans is likely to be temporary since companies need allies on both sides of the aisle, says Abhinav Gupta, a business professor at the University of Washington who studies how political donations and ideology influence corporate social responsibility. He’s skeptical that liberal-leaning corporations will swing hard to Democrats, despite their alignment on social and cultural issues, given the left’s regulatory economic agenda. But that also creates an opening for companies to shape those policy choices.

In the end, political influence is far from the only yardstick of results after companies engage publicly, says Mr. Ebenhoch, the communications consultant. “They sent an important message to an audience to show that they’re taking a stand … and spending some political capital.”

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