June 5, 2020

Weighing in on social unrest can get tricky – and risky – for companies seeking to support the fight against systemic racism. But such efforts are not off limits. Companies can actively contribute to needed solutions – with the right foundation of purpose.

When the Covid-19 pandemic hit, companies quickly stepped up to help. They increased wages for frontline workers, gave financial breaks to customers and made significant community and healthcare donations.

It was a sudden (and for many companies, first-ever) demonstration of true stakeholder capitalism.

The next crisis was the widespread systemic racism protest that followed the death of George Floyd at the hands of Minneapolis police. The crime was the catalyst, but hardly the sole reason for the speed and the size of the outcry.

On matters of race and violence, the silence of so much of the corporate world is deafening. It stands in stark contrast to the COVID-19 responses of virtually every public company on the planet. It’s a testament to the importance of this issue – and its urgency – that even a handful of companies have come forward to take a firm stance.

Nike, which backed the ex-NFLer Colin Kaepernick in a high-profile 2018 campaign, weighed in with a new ad. The company’s “for once don’t do it” ad asks people to not turn their back on racism, to not deny there’s a problem, and to instead be part of the change that’s needed.

Nike competitor Reebok, owned by adidas, posted on Instagram: “Without the Black community, Reebok would not exist. America would not exist. We are not asking you to buy our shoes. We are asking you to walk in someone else’s.”

Both were powerful statements, executed with aplomb by their ad agencies. In fact, news stories were quick to credit Nike’s agency, Wieden + Kennedy, which might offer an initial clue that the company’s intentions were likely more directed at PR than anything else.

In social media, where the court of public opinion is played out today, the response was mixed; many commended Nike – the social capital the company built with the Kaepernick campaign lent credibility to this message. Others, however, took Nike to task for the lack of diversity on its (all white) executive team. (It is worth noting, as Mary Emily O’Hara of Adweek did that Nike’s Board does have several Black members. Thanks to her for an overview of the corporate response to the racism conversation south of the border.)

Nike and Reebok weren’t the only companies to weigh in on racism in America. Technology companies got involved, too, and ran into much greater credibility challenges.

YouTube pledged $1 million to support Black Lives Matter but was immediately called out for allegedly allowing its platform to be used by white supremacists without intervention. Similarly, Amazon made a statement that “the inequitable and brutal treatment of Black people in our community must stop,” only to be taken to task for allegedly firing a Black employee who’d asked for safer working conditions during COVID.

We could go on and on. The point is companies that make pronouncements without backing them up can run into serious reputational risks. But that doesn’t mean they shouldn’t get involved in important and politically charged debates.

To the contrary, we believe companies have a big role to play in solving many systemic challenges. It’s baked into our philosophy as responsible investors. It needs to be baked into the purpose of companies, too. If shareholder supremacy introduces a litany of systemic problems that create risks to how effectively companies can operate, stakeholder capitalism (a business approach that seeks to create value for all stakeholders) can help mitigate those risks.

Addressing issues like fair hiring practices and employee safety, diversity and inclusion in the executive suite and among the workforce, and supporting their communities, can make companies better and more sustainable. They can also help tackle some of the underlying factors behind the racial strife we’re witnessing today.

But if a company does not have this view built into its purpose – does not have that foundation to stand on – then its words will ring hollow and its brand become discredited. This is not a reason to hide from an issue like racism. It’s a reason to make changes that can help address it.