The culture wars are heating up for U.S. businesses. Many will duck. But those who want to stand their ground should look to Citigroup, the company that messed with Texas and lived to tell the tale.
In March 2018, after a gunman killed 17 people at Marjory Stoneman Douglas High School in Parkland, Fla., then Citigroup CEO Michael Corbat announced a new firearms policy for the bank. The policy, with some caveats, prohibits retailers that are customers of the bank from offering bump stocks or selling guns to people who haven’t passed a background check or are younger than 21.
As reported by Bloomberg News, the national gun lobby went into overdrive, accused Citi of being “woke” and lobbied for a law passed last year by Texas Republicans that forbid the state from working with any companies that “discriminate” against the firearms industry.
At stake for Citi and other banks that adopted similar policies was $58 billion in debt underwriting fueled by population growth and infrastructure needs. Citi’s ranking as the largest Texas munis manager plummeted while the bank hashed out a recognition from the state attorney general that the policy did not discriminate.
In December, Citi, without making any change to its gun policy, finally resumed business with the state of Texas. It is now leading underwriting for a $1.2 billion bond sale for the Dallas Fort Worth International Airport.
Citi quickly found itself fighting on another front in Texas. Corbat’s successor, CEO Jane Fraser, in response to a Texas law banning abortions after six weeks of pregnancy, announced that Citi would pay travel expenses for employees needing to travel out of state to have access to adequate medical resources. “What we did here was follow our past practices. We respect everyone’s view on this subject,” Fraser said.
Texas state Rep. Briscoe Cain warned Citi that employees who travel outside Texas for an abortion could face criminal charges. He said he would introduce legislation to bar Citigroup from underwriting municipal bonds—again.
Citi has not issued any comments in response. But by standing up to Texas on guns Citi has set a precedent for ignoring the grandstanding and carrying on business as usual. For all the companies that want to demonstrate social purpose and care for employees’ needs, but worry about alienating government stakeholders, breaking through the political noise to stand up for values isn’t too hard.
In 2019, 181 CEOs of America’s biggest companies signed on to a commitment by the Business Roundtable redefining the purpose of the corporation to serve all stakeholders, including workers, as well as shareholders.
The commitment covered rewarding hard work and helping workers adjust to the rapid pace of change in the economy. “We foster diversity and inclusion, dignity and respect,” the statement says.
The statement was a reversal of economist Milton Friedman’s popular view that shareholders are the only ones who count. It invited debate as to whether companies really should think about their stock price less and pay more attention to their employees. Perhaps without realizing it, the statement also placed them squarely in the middle of the so-called culture wars.
Advocates have pointed out that many of the signatories to the statement have fallen short in their pledges to uphold the interests of all stakeholders. Companies have faced pressure to engage on voting rights, Black Lives Matter, abortion, LGTBQ issues, climate, and #MeToo. Covid-19 vaccination requirements also entered the debate.
This has set companies up to enter politics in a way they studiously avoided before, and not just in Texas. Republican governors in Florida and Georgia are now policing business, as the columnist Heather Cox Richardson puts it.
Disney’s confrontation with Gov. Ron DeSantis over education legislation his opponents have labeled the “Don’t Say Gay” law put CEO Bob Chapek to the test. He signed the Roundtable commitment. But he first tried to avoid getting involved, saying he didn’t want the controversy to become a political football.
His workforce revolted and forced him to apologize to them and stand up to Gov. DeSantis.
Now Chapek is fighting Florida to retain tax breaks and governance of the special district created for Disney, the state’s largest employer, since its inception.
The abortion fight has raised the stakes even higher.
The draft under consideration by the Supreme Court to overturn Roe v. Wade has turned the social purpose debate upside down. The landmark ruling in 1973 gave women the freedom to decide if they wanted an abortion. If the ruling takes away that right on a federal level, states like Texas, Georgia, Alabama, Arkansas and Florida have strong anti-abortion laws that will kick in. Other states that would also have the power to decide may follow.
For companies that offer healthcare plans that cover abortion and follow federal guidelines of offering equal healthcare to all their employees, this is a practical problem, as much as a moral one. Many operate in states were abortion would become illegal. Companies such as AT&T, which signed the Business Roundtable statement, may not believe it obligates them to take a stance on abortion. The company has stayed with a policy of public silence on the topic.
But nearly 200 CEOs have recognized that the right of women to make their own decision about abortion rights is good for business. It’s an important part of Americans deserving a life of “meaning and dignity,” as the Business Roundtable statement put it. Like Citi, Amazon, Starbucks and Tesla have all announced they would help their Texas employees travel for out-of-state abortion services.
For companies that don’t live up to their social-purpose commitments, there’s a good chance their employees will hold them accountable. Ducking is no longer an option. Citi’s experience shows they can put their money where their mouth is and live another day.
Barron’s
By Laurie Hays
May 20, 2022