CEOs found their moral compass and steered away from Trump

By Steven Mufson, The Washington Post

Courage is not a currency companies trade in very often.

But there wasn’t much needed this week. President Donald Trump’s tepid condemnation of white supremacists who demonstrated in Charlottesville, Virginia, gave chief executives — usually ready to answer any president’s call to public service — all they needed to take a stand. After a series of Wednesday morning conference calls, they abandoned his economic advisory groups, leaving with an unprecedented volley of disparaging comments about the nation’s first businessman president.

“Their job is not to be political, but Tuesday was just so deeply disconcerting,” said one participant in a conference call between nearly 20 members of the Strategic and Policy Forum. “Since Saturday this has just gone beyond the bounds, and I think we were reacting to what had happened not only as corporate leaders but as citizens and as people. And we could not continue in this role” on the advisory forum.

There is a certain irony in expecting moral compass from Corporate America. Back in 2010, Stephen Schwarzman, head of the Blackstone private-equity group and of the Trump advisory forum, told a nonprofit organization that President Barack Obama’s efforts to increase taxes on private-equity firms were “like when Hitler invaded Poland in 1939.” He quickly apologized after a report in Newsweek.

And in 2000, Merck disregarded its own studies showing substantial risk of heart attacks from the painkiller Vioxx and continued to market the drug for another four years. (That was before the tenure of the company’s current, well-respected chief executive.)

In earlier generations, businesses have been slow to join in defending rights, from segregated lunch counters in the United States in the 1950s to multinationals such as General Motors, Mobil, IBM and others that kept doing business in apartheid South Africa through the mid- to late-1980s, a quarter-century after the main black political force, the African National Congress, was banned. At least in that case, GM created, with the help of the Rev. Leon Sullivan, a code of conduct to nudge South Africa forward.

So the businessman-in-chief has managed a rare achievement by rattling the members of America’s business elite who have been hoping Trump would bring tax cuts and regulatory relief and who now see a president who is morally and politically bankrupt.

One by one, led by Merck’s chief executive, Kenneth Frazier, they found their own moral backbone, criticized the president and headed for the doors. Among the many impassioned notes to employees and the public was that of Apple chief executive Tim Cook, who wrote, “Hate is a cancer, and left unchecked it destroys everything in its path.”

For the general public, looking to American business executives to take a principled stand shows what a dire crisis we find ourselves in. A Gallup poll in early June found that only 21 percent of Americans have confidence in big business and only 32 percent have confidence in banks (while Congress gets 12 percent, newspapers 27 percent and the military 72 percent). Yet the institutions of government are quaking, and traditional checks and balances are providing few checks and little balance. Americans are turning anywhere — retired military officers in civilian posts, or the once-mistrusted intelligence agencies — for someone who might help save American democracy from itself.

U.S. business leaders have played many roles during the history of the country, but savior is not one of them. In the Revolutionary era, business leaders were merchants, landed gentry and Benjamin Franklin-style entrepreneurs and inventors. Later tycoons advised presidents; financier Bernard Baruch, for example, provided counsel for presidents Woodrow Wilson and Franklin D. Roosevelt.

Members of the business elite still fancy themselves as pragmatic and experienced in the ways of the real world, but they are now more likely to be risk-averse managers of large organizations. More Jack Welch than Averell Harriman or even George H.W. Bush.

Moreover, American business leaders have retreated from the center of the political spectrum and moved further to the conservative end. From World War II through the 1960s, big business negotiated with organized labor without questioning its legitimacy, supported tax increases when needed, and accepted a degree of increased regulation. But in recent years, the business community has turned on unions and fought back against environmental and workplace regulations, while paying executives ever more lucrative salaries.

Now when they come to Washington to dabble in politics, corporate executives often come with their velvet hats in hand, seeking a favorable cut in taxes or rollback of regulations. Companies, as part of our civil society, are entitled to a voice in policymaking as long as they don’t seek an unfair advantage and as long as corporate money doesn’t inappropriately tip the scales in their favor. But this isn’t the stuff of courage or principle.

John Flannery, the incoming chief executive of General Electric, on Wednesday tried to make sense of the Trump phenomenon and GE’s role.

“I am a believer that GE is a company that needs to be — and will continue to be — constructively engaged in dialogues regarding any matter that could impact our employees, our customers and our investors,” Flannery said, using the phrase “constructive engagement” that President Ronald Reagan’s assistant secretary of state for African affairs, Chester Crocker, once used to justify continued American involvement in apartheid-era South Africa.

“GE operates in 180 countries, and these countries have different challenges and viewpoints, some of which do not always align with our core values as a company,” Flannery added. “Sometimes it is necessary to take a stand in public. Often, we advocate around the world privately.”

When is it necessary for a corporation to take a stand in public?

The participant in the Wednesday conference call said that the members of the Strategy and Policy Forum had heard from family members, employees and customers who believed that remaining even a distant adviser to Trump could not be countenanced any longer.

The customers are a key element in that coalition. Companies can be immoral or amoral or very moral. But it’s the bottom line that usually speaks loudest.

“A lot of CEOs are afraid to stand out. Their boards of directors don’t encourage them. And there are no rewards for this corporate citizenship,” said Jeffrey Sonnenfeld, a senior associate dean at Yale’s School of Organization and Management.

Plus, he said, being out of step with Trump carries the risk of “being humiliated with Twitter storms,” or caught “in the middle of a mud fight” like Rosie O’Donnell, the television personality. “The CEOs don’t want to be next Rosie O’Donnell,” Sonnenfeld said.

Yet in just a few months since Trump took office, the executives’ largely empty gesture of giving the president advice while seated awkwardly around a giant conference table had taken on the character of a financially risky activity with potentially heavy reputational damage to companies’ brands. And in the Internet era, customers can organize quickly, as some did through the online petition #QuittheCouncil.

Quitting the councils was made easy because they had rarely gathered. The Strategic and Policy Forum, which was supposed to tackle education, job creation and investment, hadn’t met since April. The participant in the call said that the Charlottesville uproar was “destructive” to that agenda.

In the end, no one on that call even broached the idea of sticking with the advisory councils. As the participant put it, “there was no mast to hold onto in this storm.”