CEOs Need to Shut Up About Politics

by Lawrence Meyers | March 28, 2013 6:00 am

NewLetters[1]“There are three things I have learned never to discuss with people: religion, politics and the Great Pumpkin.”

This is wisdom from Linus Van Pelt, he of the security blanket and crabby sister, and his words are particularly appropriate to senior management of public corporations. It’s not just that nobody wants to hear what a CEO’s opinion is on a certain issue — it’s that nothing a CEO says on these fronts can possibly be good for the company or the stock.

The thesis is simple: Every issue has two sides. No matter what a CEO says, there will be a group of people who don’t like what he has said. If the issue is important enough, grand enough or sweeping enough, that group of people might be put off at the company enough to never buy its product again. There is no scenario where 100% of customers will love the position the CEO takes.

The most recent example comes from Starbucks (NASDAQ:SBUX[2]) CEO Howard Schultz.

In January, the company supported a bill in Washington state that would legalize gay marriage. Nike (NYSE:NKE[3]) and Microsoft (NASDAQ:MSFT[4]) had done the same thing. A company statement said, “This important legislation is aligned with Starbucks’ business practices and upholds our belief in the equal treatment of partners.”

Apparently, some people decided to boycott Starbucks over this support. Whether that boycott made any verifiable impact in the company’s earnings is difficult to ascertain. However, at the recent annual shareholder meeting, Schultz reportedly said[5] — in answer to a shareholder who did not like that Starbucks had embraced the bill — “It is not an economic decision. The lens in which we are making that decision is through the lens of our people. We employ over 200,000 people in this company, and we want to embrace diversity.”

I’ve got news for you, Mr. Schultz: It is an economic decision. Even worse, it’s an egotistical one.

Some idiot in corporate communications probably agreed with Mr. Schultz to publicly endorse the bill in the first place. This isn’t necessary. It’s an attempt to show the world what a fine, upstanding corporate citizen Starbucks is. It’s a move aimed directly at the politically correct. However, by doing so, it immediately alienates those who are opposed to the bill and to gay marriage.

Furthermore, Mr. Schultz’ statement at the annual meeting doubled down on that statement, when he said to the same shareholder, “If you feel, respectfully, that you can get a higher return than the 38% you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company.”

The media has now spun this as, “If you don’t like that we support gay marriage, you can sell your shares.”

Great. So were I a shareholder of Starbucks, I not only have to deal with Starbucks being overly concerned about its “diversity,” but now I have to deal with a CEO who tells people who oppose his position to sell shares.

The Chick-fil-A dust-up from last year had a bit more subtlety to it[6] and was blown out of proportion, but the central concept is the same.

In this case, the company is private, so what management does isn’t going to matter to shareholders, who likely share the company’s vision. Also, Chick-fil-A’s corporate communications dissipated the problem by issuing a statement that directly addressed the criticism it received. However, while the issue has gone away, several thousand gay marriage advocates might have permanently abandoned the stores.

On the other side, several thousand gay marriage opponents might have permanently embraced The Coffee Bean & Tea Leaf.

Look, shareholders care about one thing: making money.

Every major company engages in good citizenship by offering grants, scholarships, sponsorships, and doing all kind of philanthropic work. None of this is subject to negative media or public scrutiny. However, the moment some idiot spouts off about a political position on an issue, he’s guaranteed to alienate as many as half his customers.

I don’t want to have to even worry about whether or not a boycott will be effective. It’s creating a fire where one isn’t wanted. I bet if Starbucks had kept mum about the bill, nobody would’ve said a thing. The whole exercise is a distraction from the business.

And I’m sure the gay employees of Starbucks did not need to have the company publicly prove how they feel about diversity any more than Chick-fil-A’s employees needed to hear about what traditional marriage means to management.

So CEOs, do us shareholders a favor, and listen to Linus.

As of this writing, Lawrence Meyers[7] did not hold a position in any of the aforementioned securities. He is president of PDL Capital, Inc.[8], which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books[9] and blogs about public policy, journalistic integrity, popular culture, and world affairs[10]. Contact him at[11] and follow his tweets @ichabodscranium.

The opinions contained in this column are solely those of the writer.

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