Corporate activism is now very much a part of doing business.
I wrote a piece last year for Fortune about the business community’s role in speaking out against House Bill 2 in North Carolina, what some have termed the “bathroom bill,” requiring people to use the restroom matching the gender identity on their birth certificates. PayPal PYPL , the NBA, and the NCAA were among the businesses that cancelled plans or events in the state in protest of a law they viewed as discriminatory toward the LGBTQ community.
When I initially wrote about the corporate activism I was witnessing in my home state, I didn’t imagine that almost a year later, businesses would be weighing into political issues so publicly and frequently at both the state and federal level. Business and politics are now tied in ways that were unprecedented in the past. I suspect the Trump administration’s reversal of the Obama administration’s guidance to allow public school students to use whatever bathroom they choose will ignite another round of debates in the states about this issue. In fact, Apple, IBM IBM , Microsoft MSFT , and Williams-Sonoma WSM are among the companies that just signed onto a brief submitted to the U.S. Supreme Court supporting a Virginia student seeking to use the restroom that matches his gender identity.
Corporate activism is now a very real part of doing business. Increasingly, CEOs must decide when to speak out about politics and when to remain silent. Consider all of the recent headlines about how companies and leaders reacted in various ways to the immigration travel ban. We heard a lot about Howard Schultz’s vow to hire refugees at Starbucks SBUX and the boycott that followed. Uber CEO Travis Kalanick decided to leave President Trump’s advisory council after much public and employee pressure. This growing trend is a drastic shift from the days when businesses relied primarily on lobbyists to communicate their interests and advocate for change.
As a business school dean charged with preparing future leaders in an increasingly complex world, I’ve been talking to many CEOs—from Walmart’s WMT Doug McMillon to the NBA’s Adam Silver to Apple’s AAPL Tim Cook—about how they decide when to weigh in on political issues. Based on what I’ve gathered from these conversations, there are typically three reasons as to why CEOs speak out about controversial issues:
1. CEOs speak out when the policy or legislation directly impacts the business model.
Target TGT CEO Brian Cornell has publicly expressed concerns about a proposed border adjustment tax, which aims to discourage companies from producing or buying goods from outside of the U.S. Target has said the tax would hurt consumers and “will raise prices for American families on everyday essentials.”
Walmart also warned that taxing imports could raise prices. Walmart—along with Target—is part of a coalition with other retailers called Americans for Affordable Products. They’ve joined forces to speak out because the tax would directly impact their business strategies and operations. The American Apparel and Footwear Association estimates that about 97% of clothes sold in the U.S. were imported in 2015.
2. Leaders speak out when the policy or legislation has implications for employee morale and recruitment.
Employees may believe their company doesn’t have their backs if they feel marginalized and the leader remains silent. Companies don’t want their employees to feel unwelcome or unappreciated.
When policies narrow the potential talent pool by limiting who can be hired, recruitment suffers. This is one reason the tech sector has been so active in speaking out about immigration issues. Many companies know that the lynchpin of innovation is diversity of backgrounds and perspectives, and they don’t want to limit their ability to hire and recruit the best talent or hamper entrepreneurship.
Around 100 technology companies signed an amicus brief challenging January’s immigration order, and pointed out that more than 200 companies on the Fortune 500 list were founded by immigrants or their children. Apple’s Tim Cook has said publicly, “Apple would not exist without immigration. This is a huge issue for us … we stand up, we don’t sit in silence.”
3. CEOs speak out when the policy or legislation violates their company’s core values.
NBA Commissioner Adam Silver told our students last year that his decision to move the All-Star Game from Charlotte over HB2 was largely based on his feeling that HB2 was inconsistent with the values of diversity and inclusion in his organization. Walmart’s Doug McMillon cited a similar reason for speaking out about a religious freedom bill in Arkansas in 2015. Simply put, if you tout diversity and inclusion as paramount in your company, many employees expect you will uphold those values related to external issues, as well.
I should point out that these decisions to speak out are complex and can carry significant risk for a company on a variety of issues, ranging from angering employees and customers who disagree with the CEO’s point of view to making the company itself a target for political action.
Research from one of our professors at Duke shows that activism can make a consumer feel more warmly toward a company, but usually only when the consumer shares the same political view. A recent poll by the public relations firm Weber Shandwick showed that many Americans believe the primary reason CEOs speak out is to get media attention and feel less favorable toward CEO activism when the issue doesn’t directly relate to a company’s core business.
Perhaps it’s appropriate for businesses to be leading some of these conversations. After all, business is a vehicle for job creation and innovations that improve lives. Moreover, the business community uniquely understands how to bring people together who have very different views to work toward a common vision. It happens every day in our nation’s great companies where people who vehemently disagree on political issues stand side by side producing their best together for their employer. Business leadership uniquely understands the power that lies in diversity: Differing perspectives are essential to true innovation. Unique ideas and solutions are rarely conceived in groups where everyone brings the same views to the table. Business leadership doesn’t want to leave any talent on the sidelines and certainly doesn’t want that talent to feel excluded or unwelcome.
My hope is that the business community will continue to express itself at the state and federal level when it sees opportunities to make communities more inclusive and to use the power of business to advance the common good. Business leaders can be part of a transformation in our political discourse to advance conversations about how we harness the power of diversity to work toward a shared goal or vision. Maybe business can help us remember the common purpose that binds us: We are all in this together, regardless of our differences.
Bill Boulding is dean of Duke University’s Fuqua School of Business.