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Conventional wisdom says companies should probably stay away from political hot button issues, if for no other reason than to avoid antagonizing customers. Apparently, no one told Target.
In the backlash to North Carolina’s passage of a so-called bathroom law aimed at the transgender community, the discount retailer has voiced its opposition to the law in a big way. “We welcome transgender team members and guests to use the restroom or fitting room facility that corresponds with their gender identity,” the company declared.
Target was by no means the first corporation to speak out — Paypal, American Airlines, Apple, Alphabet, Facebook, and other Fortune 500 companies have all expressed their opposition to the North Carolina law. Yet Target is now being targeted by conservative consumers in the backlash to the backlash.
The American Family Association says it has gathered more than 1 million signatures calling for a boycott of the popular discount retailer.
So was this a strategic mistake on Target’s part?
Maybe not. Recent surveys and studies show that there can be a sound business reason for companies to wade into such a controversial issues.
In recent years, Americans seem to have embraced the notion that the private sector has a role in shaping the political debate, according surveys by the public relations firm Global Strategy Group. In the most recent survey — the results of which were published in January — 78% of Americans said that “corporations should take action to address important issues facing society.” That’s up from 72% in 2013.
To be sure, Americans tend to think it’s more “appropriate” for companies to take stands on economic issues such as the minimum wage, pay equality, and parental leave. Still, a majority also think it is suitable for companies to weigh in on social and political issues ranging from LGBT equality to Obamacare to race relations.
How effective can CEO’s be at changing the electorate’s mind? That’s not entirely clear.
But changing minds may not be the only reason the C-Suite is speaking out.
“CEO activism might not be about moving the needle on how people think, but might be rallying supporters to their side who actually get excited about buying the products,” says Aaron Chatterji, an associate professor at Duke University’s Fuqua School of Business.
In other words, this could be an opportunity to show potential customers that the brand is aligned with their world view.
Of course, partisanship cuts both ways — in other words, companies like Target could also end up alienating customers who don’t share its views. But in a recent paper entitled “Do CEO Activists Make a Difference?” Prof. Chatterji and Michael Toffel of Harvard Business School found that “under some conditions the benefits can outweigh the costs.”
The professors conducted a field experiment that sought to isolate Apple CEO’s Tim Cook ability to weigh in on another controversial law — Indiana’s Religious Freedom Restoration Act (RFRA), which passed last year. Critics said the law would discriminate against LGBT consumers, while proponents believed the law simply protected religious rights.
Cook voiced his opposition to the measure, as did the CEOs from Salesforce.com and Angie’s List. Shortly thereafter the Indiana state government changed the law “to clarify that this new judicial standard would not create a license to discriminate or to deny services to any individual as its critics have alleged,” according Gov. Mike Pence.
But how much of this reversal was due to Cook?
To determine that, the authors started by asking survey respondents whether they supported the law. They then prefaced the question with a statement from Cook and other notable figures that said the law was discriminatory. They also included a preface without attribution — for example: “some believe the law may allow discrimination against gays and lesbians in that state.”
It turned out that adding a clause that said some people found the law discriminatory made the law less popular. “The result is that the framing matters a lot,” says Chatterji. “Once discrimination is mentioned, support the law goes down.”
Does that mean Cook’s activism actually made a difference? Not quite. “Who mentions the discrimination does not seem to matter,” says Chatterji.
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Cook was, however, able to communicate something else. By speaking out against the law, he was able to signal to same-sex marriage proponents that Apple supported their cause, thus engendering goodwill.
What about same-sex marriage opponents? “In our study, we see the benefits from consumers who agree with him outweighing the costs of those who disagree,” says Chatterji.
But he adds that it is “not clear at all that this applies in all cases.”