Erik Nesler: Using the private sector for good

Wednesday, March 14, 2018 - 5:41pm

In the wake of the tragic mass shooting in Parkland, Fla., a few weeks ago, several major companies have decided to publicly take a stance on the contentious gun control debate. Two major gun sellers, Walmart Inc. and Dick’s Sporting Goods Inc., recently raised the minimum age for gun buyers at their stores to 21. Because of their power as a major distribution channel for gun manufacturers, the two companies were notable additions to the list of companies taking action after the tragedy in Parkland.  

Another intriguing development in the fight for stricter gun control in the U.S. was the recent New York Times story by Andrew Ross Sorkin in which he called for institutional investors to use their stakes in the gun industry to encourage internal reform. BlackRock, the largest investor in the world and an investor in several gun manufacturers, has recently committed itself to holding companies accountable to “not only deliver financial performance, but also show it makes a positive contribution to society.” As a major shareholder in several gun manufacturers, BlackRock could force the manufacturers to reform themselves voluntarily.

BlackRock would have to make a compelling, financial case as to why the companies would need to reform themselves, but it is nonetheless possible. Imagine if the private sector could push social change on its own — without the help (or coercion) of the government.

The recent stances companies have taken regarding the gun control debate piqued my interest in whether or not it was the private sector’s place to take political stances at all. It turns out companies have been taking loud and highly controversial political stances for years. In fact, corporations were supportive of the burgeoning LGBTQ movement before many liberal politicians were. Many companies began offering gay employees health care benefits for their significant others long before politicians began endorsing the practice.

With more and more companies taking political stances, companies that remain silent in an effort to appear impartial may be worse off. In a marketing class I took last semester, I learned how companies are now forming relationships with their most valuable customers. Social media has made this marketing objective much easier as we can all interact with our favorite companies through our phones. With this relationship, customers have come to expect their favorite brands to act and behave in a certain way — which may involve taking a controversial political stance. Companies that choose not to take a political stance miss out on forming these relationships with customers, which represents lost revenue potential.

There are disadvantages to taking a political stance, however. Companies have extremely diverse customers, so it is likely that they draw from both sides of the political spectrum. Taking a controversial political stance can result in outrage and lost sales from a potentially significant subset of a company’s customer base. When the founder of Chick-fil-A publicly opposed gay marriage, supporters of his decision decided to have a “Support Chick-fil-A Day” where the firm saw increased store traffic on that day. The enthusiasm from his supporters quickly waned while the boycotts from the adversaries continued for a much longer period of time. In addition, Ian Chipman wrote for Stanford’s Graduate School of Business that companies need to be sure to not make customers feel “queasy” about the brand, as such a feeling remains “permanently etched” in their brain. Companies may need to pick and choose topics on which they want to take a stand.

Despite the potential drawbacks, I like the idea of companies standing up for what they believe. The private sector has the salience and scale to push social change much faster than the government. Though numerous companies have been committing themselves to particular social issues like gun control, climate change and women’s rights, the private sector could be doing more.

I urge readers of this publication to purchase products from companies that share your social and political viewpoints. This past year saw the #DeleteUber movement as consumers were outraged by CEO Travis Kalanick’s ties to the Trump administration as well as his muted response to the Muslim travel ban. Because of the movement, over 200,000 people deleted their Uber app. Consumers really do have the power to assist in changing the status quo. Vote with your dollar and put it toward something you care about.

Erik Nesler can be reached at egnesler@umich.edu.