Florida’s largest employer, The Walt Disney Company, and Governor Ron DeSantis are currently embroiled in a never-ending, no-win dispute. With DeSantis preparing to announce his campaign for president of the United States, it is easy to take sides for political reasons, but dangerous to jump to conclusions without fully understanding the roots of the controversy.
Here are five lessons companies must learn from this dispute:
There are no state subsidies without implicit quid pro quos
In July 2021, Disney’s new CEO Bob Chapek announced the company would move its theme park headquarters and 2,000 employees from Burbank, California to Lake Nona Florida, investing $864 million in its new office complex.
In exchange, DeSantis agreed that Disney would receive $578 million in tax breaks from the state of Florida. No doubt DeSantis felt betrayed the following March when Chapek publicly attacked his Parental Rights in Education Act. What implicit understanding did Chapek have with DeSantis?
In today’s world, CEOs are expected to speak out on behalf of their employees, their company’s mission, and their values.
Disney has long been known for its active support of its LGBTQ+ employees and its inclusion of LGBTQ+ characters in its movies. Yet when Chapek became CEO of Disney in February 2020, he pledged not to discuss controversial issues publicly–in sharp contrast with his predecessor Bob Iger, who deftly handled these issues.
When you are CEO of one of the world’s most visible and best-loved companies, you have no choice but to take public stands on behalf of your company’s beliefs and your employees–when these stances are core to your brand. No doubt you risk offending some of your customers, but that is the price you pay for having clear principles.
While Chapek may have been an experienced operator capable of generating profits, he was wholly unprepared to become CEO of one of the world’s most public companies. This is not unusual. As we’ve learned in our New CEO Workshop at Harvard Business School, dealing with complex public issues is the area where new CEOs feel least prepared.
You can’t change positions in midstream
As the controversy over the Florida legislation erupted, Disney employees publicly protested, even staging walkouts at Pixar. At that point, Chapek felt compelled to reverse his code of silence and issued strong statements of apology. “Speaking to you, reading your messages, and meeting with you have helped me better understand how painful our silence was,” he said. “It is clear that this is not just an issue about a bill in Florida, but instead yet another challenge to basic human rights. You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry.”
As sincere as Chapek was, Governor DeSantis smelled blood in the water and went on the attack against Disney to further his conservative credentials in his quest for the White House. He took away Disney’s privileged status in the Reedy Creek Improvement District, taking control by replacing the board with his appointees.
Your predecessor should not engage publicly in these disputes
Chapek’s predecessor Bob Iger was an extremely successful CEO for 16 years, but after turning over the reins to Chapek in 2020, he should never have commented publicly on Chapek’s actions, no matter how strongly he disagreed.
Instead, Iger tweeted his open support in February 2022 for President Biden’s strong opposition to the Florida legislation, writing, “I’m with the President on this! If passed, this bill will put vulnerable, young LGBTQ people in jeopardy”–thus putting himself in direct opposition to Chapek. He later reinforced his position on CNN, saying, “It’s about right and wrong.”
Ever the astute politician, DeSantis saw this split as an opportunity to engage in ever more aggressive attacks on Disney as being “woke.”
Politicians should not attack their largest and most beloved employer
Disney already has 75,000 employees in Florida and is planning to add 13,000 more as it plans to invest an additional $17 billion in the state. Every governor in the country, Republican or Democrat, would be thrilled to have Disney make these investments in their state–except Ron DeSantis.
Now Iger and Disney are counterattacking with a lawsuit and accusing DeSantis of orchestrating a “campaign of government retaliation” against the company that violates its first amendment rights. At Disney’s annual shareholders’ meeting, Iger accused DeSantis of being “anti-business” and “anti-Florida.” Sensing the political winds are shifting against DeSantis in this battle, House Speaker Kevin McCarthy is urging DeSantis to “sit down and negotiate” with Disney instead of waging a legal battle against them. Instead, the DeSantis-appointed tourism board countersued Disney.
In contrast, when Georgia Governor Brian Kemp and the Georgia legislature pushed through new voting laws in 2021, it had to overcome strong vocal opposition from two of its largest employers, The Coca-Cola Company and Delta Air Lines, yet Kemp never publicly attacked the companies.
CEOs and politicians alike should recognize the importance of resolving issues privately because, in a public dispute like this one, no one wins. Yet many CEOs are drawing the wrong lessons, thinking they can ignore these public issues. They cannot. In today’s world, CEOs are expected to have clear public positions on issues vital to their companies. If they don’t, they may face the same fate that befell Disney’s Bob Chapek.
Bill George is the author of True North: Emerging Leader Edition, an executive fellow at Harvard Business School, and a former chair and CEO of Medtronic.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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