STAY­ING PO­LIT­I­CALLY NEU­TRAL CAN BE DAN­GER­OUS FOR COM­PA­NIES

How does the way US com­pa­nies re­act to po­lit­i­cal events in­flu­ence cus­tomers’ at­ti­tudes to­ward them?

Finweek English Edition - - ON THE MONEY -

unit­edS­tates Pres­i­dent Don­ald Trump’s ex­ec­u­tive or­der tem­po­rar­ily ban­ning im­mi­gra­tion from seven Mus­lim coun­tries has put cor­po­rate ex­ec­u­tives in a bind. Al­most from the mo­ment he an­nounced the ban, ques­tions poured in about where those ex­ec­u­tives stood on the is­sue. The me­dia have high­lighted a clus­ter of com­pa­nies that have made pub­lic state­ments against the ex­ec­u­tive or­der. For ex­am­ple, Net­flix called it “un-Amer­i­can”, while Ford Mo­tor Com­pany said: “We do not sup­port this pol­icy or any other that goes against our val­ues as a com­pany.”

But over­looked are the many more com­pa­nies that tried to dis­tance them­selves from the de­bate. Chevron, Dis­ney, Ver­i­zon, GM, Wells Fargo and oth­ers have all taken a wai­t­and-see ap­proach. An il­lus­tra­tive ex­am­ple is Mor­gan Stan­ley, which ex­pressed con­cern and said it is “closely mon­i­tor­ing de­vel­op­ments”.

Such re­sponses are no doubt based on the pre­vail­ing wis­dom that com­pa­nies need to stay out of pol­i­tics. Most large cor­po­ra­tions have di­verse con­stituen­cies that draw from both sides of the po­lit­i­cal spec­trum. As a re­sult, ex­ec­u­tives fear that at­tract­ing the po­lit­i­cal spot­light by tak­ing a stand on the ex­ec­u­tive or­der will alien­ate ei­ther the millions of cus­tomers who voted for Trump or the millions who voted against him.

My re­search sug­gests their fears are mis­placed. And in fact, the op­po­site may be true: It may be more dan­ger­ous to re­main silent than to take a po­lit­i­cal stand.

Vi­o­lat­ing ex­pec­ta­tions

Con­sumers to­day form re­la­tion­ships with a com­pany based not only on the qual­ity of the prod­ucts and ser­vices it sells but also on a set of ex­pec­ta­tions of how it should com­port it­self.

When com­pa­nies vi­o­late these ex­pec­ta­tions by be­hav­ing in­con­sis­tently, con­sumers re­con­sider that re­la­tion­ship. Ob­vi­ously, this can have a ma­jor im­pact on com­pany per­for­mance if many cus­tomers ex­pe­ri­ence a vi­o­la­tion.

My col­leagues and I at Clem­son Univer­sity and Drexel Univer­sity have been test­ing this no­tion in a se­ries of con­trolled ex­per­i­ments.

In one field ex­per­i­ment, for ex­am­ple, we ex­posed study par­tic­i­pants to state­ments about a phar­macy chain mo­ments be­fore they en­tered one of its stores. Some read a state­ment in which the com­pany de­scribed it­self as guided by a set of val­ues (what we call a “val­ues ori­en­ta­tion”),

Ex­ec­u­tives fear that at­tract­ing the po­lit­i­cal spot­light by tak­ing a stand on the ex­ec­u­tive or­der will alien­ate ei­ther the millions of cus­tomers who voted for Trump or the millions who voted against him.

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