ARNC Arconic Corporation

By Mark Peters and Rachel Emma Silverman 

Companies used to avoid hot-button social issues, fearing that any strong stance could alienate customers and staff. Now, executives say it is far more risky to stay silent on issues such as gay rights.

As legislative battles brew in North Carolina, Tennessee, Mississippi and Georgia over gay and transgender rights, companies such as Dow Chemical Co., Alcoa Inc. and Northrop Grumman Corp. have waded into the fray, lobbying elected officials and publicly condemning measures seen as discriminatory. While such issues seem to have little connection to the companies' core products, their executives say that unwelcoming state laws can harm local economies and hamper the companies' ability to recruit and retain bright young workers.

The debate over state laws illustrates a new reality of business, in which corporate activism isn't just encouraged but expected. A recent survey by public-affairs agency Global Strategy Group of more than 800 adults with varying political beliefs found that Americans are overwhelmingly supportive of corporate political engagement, with 78% agreeing that companies should take action to address important issues facing society.

"It is becoming an expectation that our companies stand for something," said Melissa Dodd, an assistant professor at the University of Central Florida who studies corporate activism.

In Missouri, agribusiness giant Monsanto Co. is leading a fight against a bill that could eventually allow businesses to deny certain services to same-sex couples as a matter of religious freedom. The company, based in St. Louis, employs 5,300 people in the state.

After similar legislation touched off a firestorm in Indiana, Monsanto leaders decided that they would mount a strong opposition if such a bill were to gain traction in Missouri. Such laws run counter to Monsanto's human-rights policy, said Duane Simpson, the company's state and local government-affairs lead. Mr. Simpson recently testified against the bill in Jefferson City, the state capital.

For a company that draws young workers from elite universities and Silicon Valley, recruiting was a top concern. Mr. Simpson said it is hard enough to attract employees accustomed to the ocean and mountains elsewhere in the country, without having to add concerns over discrimination.

The issue has driven a wedge between business leaders and Republican legislators. At a recent meeting of Civic Progress, a St. Louis business group whose members include many of Missouri's largest employers such as Boeing Co. and Express Scripts Holding Co., executives expressed frustration with elected officials, complaining that lawmakers didn't understand their companies' need to recruit graduates of elite schools such as Northwestern and Princeton universities, said Thomas Irwin, the group's executive director. Members agreed that their companies couldn't afford to stay silent.

"The concern was about not taking a strong stand," he said. "They asked in the meeting for numbers" to call lawmakers.

"The more and more you see this kind of legislation, the more you wonder about your ability to operate in those states long term if they take this kind of stance," said Jim Fitterling, Dow's president and chief operating officer. "It's important to us from a recruiting standpoint. When employees don't have to hide who they are they are more productive, more innovative."

Dow executives quickly decided to oppose the Missouri legislation and similar measures in other states. "If anything, we pushed on our public-affairs team to promote the issue in a higher-level way," said Howard Ungerleider, Dow's vice chairman and chief financial officer.

Republican State Senator Bob Onder, who introduced the legislation, said the pushback comes from "corporate elites" out of step with most Missourians. Mr. Onder said he has heard from numerous small businesses that support his legislation. "I really don't understand where Monsanto finds the need to get involved in an issue like this," he said, adding that Monsanto might alienate the conservative farmers who buy the company's seeds.

Dow, which largely sells to other businesses, was prepared for possible negative customer or employee feedback, but so far "the positive vastly outweighs the negative," Mr. Fitterling said.

Missouri is only the latest battleground in recent weeks between big business and state lawmakers over bills seen as discriminatory to lesbian, gay, bisexual and transgender people. Georgia Gov. Nathan Deal vetoed legislation after Walt Disney Co. said it would exit the state -- where the company produces films -- as part of a larger corporate backlash. In North Carolina, a new law signed by Gov. Pat McCrory over the objection of large corporations prompted Deutsche Bank AG to freeze plans to add positions in the state and PayPal Holdings Inc. to shelve an expansion there.

Consumers and workers, especially younger ones, want to feel that companies share their beliefs, said Dr. Dodd, the University of Central Florida assistant professor. U.S. consumers are 8.1% more likely to buy from a company that shares their opinions and 8.4% less likely to buy from a company that doesn't, according to research she co-wrote.

Chief executives seem to be "having more impact now" partly thanks to social-media outlets such as Twitter, which allow companies to communicate directly with consumers, said Aaron Chatterji, an associate professor at Duke University who studies CEO activism.

In a recent study, Dr. Chatterji and Michael Toffel of Harvard Business School found that people were more likely to oppose Indiana's religious-freedom law passed last year once they found that Apple Inc. CEO Tim Cook opposed it. Apple's advocacy seemed to boost business, too: Consumers were more inclined to buy Apple products once they learned of Mr. Cook's position on the issue, the researchers found.

For now, the growing business opposition appears to have slowed the legislation in Missouri. A House committee held a hearing on the legislation last week, but hasn't yet moved it to a vote. The bill could end up before the full House in coming weeks and eventually on a statewide ballot later this year.

(END) Dow Jones Newswires

April 17, 2016 19:51 ET (23:51 GMT)

Arconic (NYSE:ARNC)
Historical Stock Chart
From Mar 2024 to Apr 2024

Arconic (NYSE:ARNC)
Historical Stock Chart
From Apr 2023 to Apr 2024