Mixing Business With Politics, Lemonade From Regulation, and Doctoring the System
Here’s What You Need To Know
With the announcement that it will no longer serve meat or reimburse its 6,000 employees who order meals with meat out of concern for the environment and animal welfare, WeWork became simply the latest company to mix business with politics. The increasing political polarization in all aspects of daily life has been a growing trend over the past few years, and areas once insulated from the rough and tumble of the political arena are now at the mercy of the 24-hour news cycle. This new operating environment poses additional political and reputational risks for companies and the executives, employees, customers, and investors who depend on them. Here’s what you need to know about mixing business with politics:
- What Is Going On? Frustration directed at Washington politicians and the broken governing process has resulted in a vacuum in today’s public policy landscape where policy conversations are now foisted onto companies. In Silicon Valley, workers in the tech industry have “moved from apathy to activism in the last few years,” using tactics to organize on social media, rally against company (read: employer) policies they disagree with, and “fundamentally remake” the power structure inside the companies and the dynamic between the companies and the communities in which they are located. On Wall Street, reforms intended to give vested shareholders a seat at the table regarding corporate governance have been hijacked by social activists and interest groups looking to “promote their political objectives at the expense of shareholders.” This activity is not confined to the coasts, or any particular industry, but is now the new normal.
- What Are The Consequences? Political and reputational risks bring intense scrutiny that can result in public affairs challenges causing businesses to close, which was the case when a restaurant had to close temporarily after it refused to serve White House Press Secretary Sarah Sanders late last month and was targeted for withering online trolling. However, most importantly, reputational damage can translate into hard costs that impact a company’s bottom line. That is why it was recently reported that Starbucks executives and investors are worried that a partisan run for The White House by founder Howard Schultz could be divisive and “bad for business.” But what about the potential to attract new, like-minded customers? Despite Patagonia’s sales rising 7% after engaging the Administration over national monuments in Utah, alienating current or potential customers over political stances is ultimately a game of subtraction, when making pragmatic business decisions to increase a business’s bottom line in most cases requires addition. Indeed, a new study has provided evidence that activist investors pushing political agendas unrelated to a company’s core business does not increase shareholder value, and may in fact negatively impact it.
- How Can Your Company Survive? Rather than wade into the political swamp on purpose or in response to pressure campaigns, companies can proactively determine how to engage on the issues of the day, paying extra attention to ensure their stance in the public arena is consistent with their values and within their control. Having a strategy in place that understands vulnerabilities will also help avoid negative blowback, and understanding today’s fast-moving environment – for example, that while millennials may appreciate a company’s political stand, it does not influence their spending habits – goes a long way towards avoiding unforced reputational damage.
When companies make business about politics, they lose the ability to decide when that politicization ends. In the case of WeWork, it is possible to imagine powerful agriculture influence groups lobbying government to force the company to again offer meat options as a way to support American farmers, just as politicians in downtown Mountain View are requiring tech companies to stop offering free meals in their cafeterias due to the harm to local small businesses – because bringing politics into the boardroom means bringing in government, too.
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DOCTORING THE SYSTEM
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It’s a bird, it’s a plane, it’s doctorpreneur. Motivated to help solve India’s poverty and “abysmal” healthcare system, doctors are at once physicians, entrepreneurs, and philanthropists who are taking advantage of the largely unregulated and “wide open” space to experiment with methods that expand quality healthcare to the greatest number of people possible.
Despite the challenges of India’s public health system, the value-based competition stemming from consumers paying for what they consume and seeking value from providers, offers a lesson to other countries debating how to contain rising healthcare costs, especially given the fee-for-service model prevalent in the U.S.
LEMONADE FROM REGULATION
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When life gives you lemons, let your kids sell lemonade. Lemonade stands are getting shut down across the country with cities fining small children for selling without permits, claiming to be looking out for consumer safety. This overextension of government has led to public outcry, with lemonade brand Country Time even creating Legal-Ade to pay these fines or reimburse parents for buying the expensive permits cities are requiring.
While cities that clamp down on lemonade stands may deprive younger generations of their first experiences of having a job and running a business, the newsiness of targeting this summertime rite of passage may aid in raising broader awareness of the excessive burden of regulation from state and local governments, such as through occupational licensing, which deprives opportunity to people of all ages.
GREAT MINDS THINK SATELLITE
President Trump’s space force won’t be up and running anytime soon, but a different space agency is making some moves. NASA is inviting commercial users to start using their satellite data with its launch of an online toolkit that brings together data and analytic tools previously scattered across 50 agencies.
This trove of information was previously difficult to navigate, with general users facing a “high barrier to entry” to navigate the maze of resources at the level of scientists and researchers. NASA hopes this toolkit “leads to new companies forming, new services being offered to consumers, and an overall improvement of quality of life as the rich data from space is used to make our lives safer, more interesting and more convenient.” As the analysts here at Delve love to dive into open source, publicly-available information to derive breakthrough insights for our clients, we could not agree with that sentiment more.
COLLISION COURSE?
Cities that are battle-hardened from regulatory jousting with rideshare and lodging startups are now focusing their public concern on dockless, shared electric scooters that have raced onto the public policy scene. Twenty-five cities now have operating electric scooter companies, with one popular scooter startup achieving a $1 billion valuation. However, it is not only pedestrians who need to be careful to avoid a collision, but also policymakers.
Electric scooters are already illegal in New York, and other municipalities are implementing policies to regulate the burgeoning industry. It remains to be seen whether electric scooters have the staying power that other industry disruptors had before them, although we may speculate that if they do, it will be because they recognize the importance of engaging – rather than shunning – the policymakers and stakeholders on the issues impacting their interests.