The Business Nightmare of Dealing with Government

If one considers the extraordinary backlash that has hit Anheuser-Busch and its Bud Light beer brand over a marketing campaign with a transgender influencer, imagine the perils if a corporation puts its head above the parapet to express opinions of geopolitical importance. How business leaders should engage with politics is a vexed question, especially in these febrile times.

Do you quietly try to influence the government via your public affairs experts and lobbyists? Or do you make a splash by going public with political opinions?

Democracy and capitalism are supposed to go hand in hand. In theory, they are both about freedom to choose and develop both our personal and mutual societal interests. The rise of populism is testing this relationship.

Martin Wolf, the chief economics commentator of the Financial Times, argues in his recent book “The Crisis of Democratic Capitalism” that the two work best for business when each complements and constrains the other. “The strengths of democracy are representation and legitimacy, while its weaknesses are ignorance and irresponsibility,” he writes. “The strengths of capitalism are dynamism and flexibility, while its weaknesses are insecurity and inequality.”

Businesses require eyes and ears to inform the mouth. (And advise it when to open.) Lobbyists traditionally perform this role. But while the E.S.G. movement — shorthand for prioritizing environmental and social factors — is stimulating (and reflecting) a more enlightened approach, acknowledging many responsibilities besides the bottom line and shareholder return, politics has grown coarser. As the argument over “woke capitalism” rages, how do business leaders approach politics and government?

Gabriel Wildau is a New York-based specialist on political risk in China at Teneo, the advisory and communications firm. He advises caution when it comes to policy issues, especially with China at a time of heightened tensions between Washington and Beijing. “You have to do your best not to offend either side.”

That leaves companies in a particular bind because many have strong commercial interests in both China and the United States.

Ray Dalio, the founder of Bridgewater Associates, the hedge fund, has spent decades successfully navigating between the two countries. But after two recent trips to China, he concluded: “The United States and China are on the brink of war and are beyond the ability to talk.”

Anyone who watched the bipartisan grilling of Shou Chew, the chief executive of TikTok, by a congressional committee last month, could see that there was little space for nuance for anyone trying to keep a foot in both markets.

Beijing, meanwhile, has intensified a crackdown on foreign firms that veer into areas it deems a potential threat to national security despite telling the world that it is open for business. And worries persist about China’s threat to invade Taiwan, which Beijing claims as its territory.

But while Mr. Wildau acknowledges that the sentiment in Washington is anti-China, U.S. business has so much skin in the globalized trade game that business leaders are uneasy about drawing attention to political issues. “I could scare the heck out of clients — and attract more business — with dire predictions about Taiwan,” he says. “I don’t.”

The reputational consequences of getting it wrong on China can be hugely embarrassing. For example, the country is Volkswagen’s largest market and it has 100,000 employees there. In 2019, when Herbert Diess, the chief executive of Volkswagen at the time, told a BBC reporter that he did not know about re-education camps where millions of Uyghurs have been interned in Xinjiang, the video clip went viral. At the company’s annual meeting on Wednesday, activists and some shareholders were still lashing out at Volkswagen’s continued presence in the region and called for an independent audit of its operations there.

“My advice would be: Be prepared,” Mr. Wildau says. “Have properly worked through codes of conduct and principles. No corporate should be caught out by events.”

Britain has experienced severe ructions that were demonstrably bad for global businesses, including a referendum over Scottish independence in 2014 and Brexit two years later. It is a useful case study of the tightrope executives are trying to walk.

“It’s easy for business to be fed up with politics,” said Toby Pellew, the head of public affairs at Headland, a London-based consultancy. “But if you’re operating in a highly regulated environment, there are many necessary touch points. And I cannot think of a time when it’s been of more importance for business to have visibility and insight into government policy. ”

Howard Davies is the chairman at NatWest, one of Britain’s biggest banks, and was formerly a director at Morgan Stanley and a deputy governor of the Bank of England. He advises that business leaders be cautious and make sure that any public intervention is closely aligned with their company’s commercial interests. “My advice is be very careful,” he warns. “Choose and publicize your battles only if they are strictly relevant to your business interest. It can appear attractive to be a policy trailblazer with your name up in lights but politicians are more often cynical than rational and will use you given half a chance. Likewise, becoming hostage to a pressure group is a bad place to be.”

The temptation to wade in can be strong, particularly for business leaders who feel they know how to run things. The Edelman Trust Barometer suggests that business is held in higher regard than politicians.

Ian Cheshire is the former boss of Kingfisher, a multinational retailer, and a member of the board overseeing the Cabinet Office, a government department that supports the British prime minister.

When David Cameron, the former prime minister, called on businesspeople to publicly come out against Scottish independence Mr. Cheshire obliged. He also spoke out against Brexit.

“It’s pointless to chip into a debate where you have no genuine insight,” Mr. Cheshire said. “But business can lead and it has the ability to move faster than governments are sometimes able. You have to be practical and have to know what good looks like.”

Mr. Cheshire spoke out against Brexit because it directly threatened the interests of his company, whose biggest operations were in Britain and France.

“On Brexit, I felt strongly that it was bad for my business and my country,” he said. “This was a sufficiently weighty topic and my opinion was entirely authentic in its concern.”

“But if you do express political opinions, don’t expect to be popular,” he added. “You will be clobbered.”

Anheuser-Busch has been well and truly clobbered. Even before the influencer incident, Bud Light’s U.S. volume sales had fallen 6.4 percent in the year to March 24, according to Nielsen data. One of the marketing executives who was put on a leave of absence after the backlash said earlier this year that her mandate meant “shifting the tone, it means having a campaign that’s truly inclusive.”

The episode shows just how tricky — and potentially commercially destructive — well-meaning efforts can be. Brendan Whitworth, the company’s North American chief executive, eventually made an attempt to keep both sides happy. In a statement under the heading “Our Responsibility to America,” he said, “We never intended to be part of a discussion that divides people. We are in the business of bringing people together over a beer.”

Henceforth, Mr. Whitworth may choose to share his opinions only among close friends at the bar.

Matthew Gwyther is a business journalist and a former editor of the magazine Management Today.

Add a Comment

Your email address will not be published. Required fields are marked *