Corporate Activism

A case study of GE’s stand on bathroom bills and lessons learned.

A political stand on LGBTQ rights by GE five years ago met with acclaim in many quarters but also led to criticism from some legislators and to a contentious proposal at an the company’s annual meeting claiming strategic hypocrisy. But the harshest criticism came from employees who disagreed with the company’s position and lamented that “political correctness” had run amok at GE.

It’s the backstory to the challenges GE’s leadership faced after taking on the issue, and one that offers lessons for directors to consider as more and more companies ponder corporate activism. — Eve Tahmincioglu

By Alex Dimitrief

September’s unprecedented letter from 145 CEOs to Congress in support of gun control portends that a growing number of divisive political issues are about to become the business of business. In the same vein, a recent Edelman survey suggests that nearly half of consumers are more likely to make purchases from a company whose CEO has taken a stand against gun violence. 

As the Business Roundtable beats its retreat from “shareholder primacy” to “stakeholder governance” and more customers, employees, government officials and investors insist (in increasingly sophisticated social media campaigns) upon alignment on social issues that are important to them, it will become harder for CEOs to choose, as most traditionally have, to stay out of the fray.

 At the same time, corporate activism never pleases everyone. When it comes to contentious social issues, taking a stand is bound to displease (and, in many cases, anger) stakeholders on the other side of the issue. I learned this the hard way when I helped to formulate GE’s positions on LGBTQ issues in 2015 and 2016.  This experience also taught me that when it comes to environmental, social, and governance issues (ESG), companies choosing to pursue the “S” must pick their spots, ensure that the interests of all stakeholders are considered and communicate the company’s position appropriately.

The Context: A sea change in LGBTQ rights

I became general counsel of GE in October 2015 in the midst of a sea change in America on LGBTQ rights. Beginning in 2012, federal district courts issued a series of rulings in favor of same-sex marriages that culminated in the Supreme Court’s ruling in June 2015, in Obergefell v. Hodges, that the Constitution guarantees same-sex couples the fundamental right to marry.  Many credit these cases for turning public opinion in favor of LGBTQ rights more quickly than most proponents believed would be possible.

But the Supreme Court’s landmark decision was also met with pockets of resistance in states with conservative legislatures. Arkansas and Indiana had enacted religious freedom laws that allowed services to be denied to LGBTQ people when providing those services conflicted with a provider’s religious beliefs; similar legislation was awaiting the signatures of governors in Georgia and Mississippi and pending in nearly 20 other states. In North Carolina, the state legislature overrode an ordinance adopted by Charlotte to allow transgender people to access bathrooms according to gender identity and required that public bathrooms be separated by biological sex; similar “bathroom bills” had been proposed in at least a dozen more states.

At GE, our code of conduct had long prohibited discrimination based on a person’s sexual orientation or gender identification. But, in parallel to broader developments in America, the concept of genuinely equal rights for LGBTQ people was taking on new and expanding meanings within GE, for straight as well as LGBTQ employees. I remain grateful to GE’s Gay, Lesbian, Bisexual, Transgender and Ally Alliance (GLBTA) for providing heterosexuals like me with what Bruce Bawer has aptly termed “an education of the heart and soul.” I also came to realize that GE could not be the best company in the world without attracting, retaining and promoting the best LGBTQ talent in the world.

GE’s Approach

For these and many other reasons, I believed that it was important for GE to set a visible standard as the type of company where LGBTQ employees did not have to choose between successful careers and their authenticity. Our CEO had already taken issue with Indiana’s religious freedom law, but new bills seemed to be popping up all over the country.

To achieve a going-forward consensus, I proposed to form a task force comprising leaders from government affairs, law & policy, human resources, communications and the GLBTA to navigate the issues raised by the various iterations of proposed religious freedom and bathroom bills. In evaluating how to respond to a state’s proposal(s), we considered the particulars of the proposal(s) and the significance of GE’s presence in that state. Based on the analysis of this task force, GE joined expressions of opposition to bills in states where GE had a significant presence, signed onto amicus briefs in support of invalidating such laws and advised public officials that GE would view such laws as a negative when deciding where to add jobs or make investments.

An early priority was Georgia, where GE’s power businesses were headquartered. In late March 2016, after the governor vetoed the state’s proposed religious freedom bill, I posted a note entitled “Georgia on My Mind” on my GE leadership blog:

GE was among the companies that opposed the bill, and we applaud Governor Deal for his leadership in one of GE’s home states.

At GE, we believe that a wide variety of cultural and individual experiences helps us innovate and deliver the best results for customers. We foster an inclusive workplace where all of our employees have the opportunity to fulfill their potential and contribute to the progress of the industries and communities we support. We urge leaders at all levels of government in the United States to ensure their laws do not permit discrimination of any kind, including discrimination based on sexual orientation or gender identity. GE will consider the actions taken by states and municipalities on GLBT rights when we make business decisions, including where to add jobs and where to open new facilities or invest in modernizing existing facilities.

GE is developing the technologies of tomorrow, and diverse thinking from employees with varied backgrounds, styles and experiences result in more effective ideas. We oppose discrimination of any kind and we will continue to speak up on behalf of an inclusive workplace and inclusive communities for our employees across the United States.

The Reaction and GE’s Response

The reaction was mostly positive, but not entirely so. Several legislators criticized us for disrespecting their prerogatives to decide these issues for the citizens of their states. Other legislators and a few commentators suggested that GE stick to manufacturing.  But the harshest criticism surfaced on GE’s website from employees who supported the religious liberty and bathroom bills, and protested that GE was unnecessarily (and, to some of the more aggrieved employees, offensively) involving their company in extraneous political controversies in ways that contravened their religious and other heartfelt beliefs.

Our task force had considered these positions but concluded that GE’s commitment to equality nevertheless required that we oppose the legislation. In hindsight, however, I realized that my initial blog post should have acknowledged and addressed these opposing viewpoints. I posted another note entitled “Georgia is Still on My Mind … And Yours Too.”

I appreciate all of the candid comments … about the Georgia, North Carolina and Mississippi bills and the broader issues they raise. … It’s a sign of a company’s strength when employees are confident that they are at liberty to share their views and disagree with each other (and senior officers like me) . …

Religious beliefs are by definition an intensely personal issue of the sort that ordinarily do not (and ought not) implicate GE or what we do as a company. So are sexual orientation and gender identification. … But the intersection between religious beliefs and sexual orientation has given rise to a flurry of proposed laws in the United States that, in GE’s view, necessarily and unavoidably implicate our commitment as a company to oppose discrimination based on sexual orientation or gender identity.

In our experience, legislation allowing rights and services to be denied to groups of people based on characteristics such as sexual orientation is not conducive to success for companies like GE. In the specific context raised by the proposals at issue in Georgia, North Carolina and Mississippi, GE cannot be the best company in the world without attracting, retaining and promoting the best talent in the world, including the best GLBT talent. Nor can GE realize its full potential unless our company and the communities in which we operate are safe havens where GLBT employees and their families do not have have to make a painful choice between successful and satisfying careers and their authenticity.

GE’s position on these bills is not about social engineering, political correctness or politics, which we’ll leave to others. It’s about taking a stand against discrimination that would adversely affect GE, consistent with the recent rulings by the U.S. Supreme Court affirming that the U.S. Constitution confers equal rights to GLBT people.

Neither I nor anyone else involved in formulating GE’s position questions anyone else’s rights to their religious beliefs (I have my own, which are personal and important to me and which I take seriously) or their frustrations about positions that may run contrary to those beliefs. Nor does allowing transgender people to use the public restroom that is consistent with their gender identity change anything about the criminal prohibitions in our country against inappropriate behavior by any person in any public restroom in schools or anywhere else. (As a father of three and “Uncle Buck” to seven nieces and nephews, that’s important to me too.)

I conclude all of my posts by writing that I’d like to hear what you think, and I really mean it. We need to be open as a company if we are to operate with the speed, transparency and credibility required for success in today’s increasingly challenging world. It’s also OK if we continue to disagree constructively on these and other issues on which GE is required to take a stand in the collective best interest of our employees, our customers, our shareholders and our other important stakeholders. But even if you disagree with me about the position that we have taken on the bills in Georgia, North Carolina and Mississippi, please know that, when it comes to doing my job as your General Counsel, my “political party” is GE.

The reaction to this follow-up note was again mostly positive. This time around, some of the disaffected employees, while saying that they still disagreed with our position, thanked us for acknowledging their views and explaining our reasoning. But, from what I could tell, many of the skeptics remained dissatisfied as well as unpersuaded.

A Challenge From the Right

GE also drew fire from the National Center for Public Policy Research, a conservative think tank. At the April 2016 annual shareholders meeting, the center submitted a proposal to require GE to prepare a report on GE’s criteria for conducting business in high-risk countries. The center suggested that GE undertake

… a congruency analysis between its stated corporate values and company operations in certain regions, which raises an issue of misalignment with those corporate values. … For example our CEO expressed deep concern that state-level religious freedom laws might lead to anti-homosexual bigotry saying, “the impact of laws like the Religious Freedom Restoration in Indiana and proposed laws in other states could have a very negative impact.” Yet, the company maintains operations in high-risk regions where homosexual acts are criminalized.

In theory, the center had a point. It was seemingly inconsistent for GE to oppose religious liberty laws and bathroom bills in the United States but not to voice similar concerns in foreign countries whose laws still persecuted LGBTQ people. To this day, however, I believe the right path to achieving “congruency” on LGBTQ issues is not the one that the center truly sought — i.e., for American companies doing business in such foreign countries to go silent in the United States. In my view, organizations stay true to their values by adhering to them everywhere, speaking up in support of those values where that’s permitted and modeling them where speech is not yet as free.

Our country has a proud tradition of civil disobedience that empowers its citizens and companies to challenge the actions and policies of our governments. Suffice it to say that this tradition does not hold sway in Russia, Saudi Arabia, Nigeria or other countries whose laws still criminalize same-sex sexual activity. Indeed, I once asked a career U.S. diplomat stationed in one of these countries to describe his approach toward advocating for LGBTQ rights. His answer: Do no harm to the people we are trying to help by speaking too loudly or too self-righteously.

My professional and personal interactions in 180+ countries over the course of my career have left me thoroughly convinced that American companies can best advance LGBTQ and other human rights in countries without a tradition of free speech or civil disobedience through constructive engagement.

As GE explained at the time, “instead of divesting in areas such as Saudi Arabia, Qatar, Nigeria and the United Arab Emirates due to concerns about human rights records as they related to women’s rights, GE has instead worked to empower women in these countries” through mentoring programs, partnerships with universities, internship programs and employment opportunities that might otherwise not be available in these countries. More fundamentally, “while we must comply with all local laws in countries where we operate, we use our presence and influence to try incrementally to effect changes in laws that do not reflect universal human rights values. We feel these incremental efforts to bring about change through our continued presence are more likely to address human rights deprivations than would withdrawing our presence.”

To this very point, some of my more memorable moments at GE were meetings with LGBTQ and straight employees in Africa, China, India, Russia and Southeast Asia who said that they had decided to work for GE because of our commitment to equal rights and our vocal advocacy for those rights in North America, South America, Australia, Western Europe and New Zealand.

Guidelines for Pursuing the “S” in ESG

These employees, and the tens of thousands of other stakeholders throughout the world who have been drawn to GE and other companies as beacons of hope for equal rights, are the main reason why I unequivocally stand by the approach that we took on the religious freedom and bathroom bills. My experience on the LGBTQ task force also prompts me to proffer a few guiding principles for corporate activism:

1. A company should pick its spots. Taking stands on social issues is never a cost-free proposition. For every X stakeholders who may be inspired, Y stakeholders will be disaffected. In today’s political environment, the ensuing fallout can be acerbic, and its ramifications amplified via social media. Witness the recurring controversies generated by contentious exchanges on diversity and other social and political issues on Google’s internal employee message boards.

Nor is corporate activism inexpensive. Doing things well requires a significant investment of time and resources and consumes bandwidth that could otherwise be devoted to a company’s business activities. Serving on GE’s LGTBQ task force required significant chunks of time from busy vice presidents and senior vice presidents. And there were plenty of weeks when addressing religious freedom and bathroom bills in state capitals around the country became almost a full-time job for members of the government affairs team.

The stronger the nexus between an issue and a company’s mission (its products and services) or the way a company goes about fulfilling that mission (its culture and HR practices), the stronger the case for engagement. In some cases, the nexus may be so strong as to confer a responsibility to step up. Conversely, the weaker the nexus, the stronger the case for leaving the issue to others or to other arenas. In some cases, the nexus may be so weak that diving into the mix would be unwise or counterproductive. As always, the more difficult decisions lie between these two extremes.

2. Utilize robust processes, including boards. The talent, diversity, seniority and commitment of the LGTBQ task force gave me confidence in the course that we were charting. Striking the right balance in our positions and follow-up communications was challenging, but we were able to bring years of collective experience to the exercise. We also made it a point to include Republicans as well as Democrats and conservatives as well as liberals.

As a result of this bipartisan seniority, we were comfortable exchanging our views candidly and pushing back as necessary. The diversity of our task force and our advisers (in terms of gender, sexual orientation, race, age, politics, backgrounds and specialties) also helped to ensure that the views of all our stakeholders were anticipated and appropriately considered.

In this respect, boards can play an important role. In our case, to make sure that we were headed down the right path, we presented our analysis to the independent directors who served on the governance & public affairs committee, and their feedback (both positive and negative) was very helpful. Directors can provide sober perspectives and ensure that executives wrestling with social issues are not making difficult and potentially contentious decisions in an echo chamber, and that they have thought through all of the potential repercussions.

3. Develop a thick skin. Corporate activism is a contact sport. Rather than being afforded the benefit of the doubt by critics, companies venturing into debates about social issues should prepare to be hit with adjectives that make “meddlesome” seem tame. Any company performing sub-optimally should be especially careful to pick its spots and expect to be told to mind its own business, literally and figuratively.

By way of example, here’s how the National Center for Public Policy Research, which holds itself out as a “think tank,” chose to characterize GE’s advocacy on the center’s website: “General Electric Criticized for Religious Liberty Hypocrisy at Shareholder Meeting,” Center exposes GE’s “hypocrisy” in “falsely claiming America religious freedom laws discriminate against homosexuals,” GE has “perpetuated falsehoods about [religious freedom] laws that are then repeated in the liberal press,” the Center “set the record straight and called the company’s CEO Jeffrey Immelt to task for the company’s duplicity on this issue,” and GE was part of a “mob effort to quash religious liberty.” The tenor of this criticism served to reinforce my personal conviction that GE needed to stand with the LGBTQ community.

More recently, nearly a dozen leading American companies (including GE) have drawn sharp criticism from LGBTQ activists for making campaign contributions to politicians who scored zeros on the Human Rights Campaign’s “Congressional Scorecard” for LGBTQ-related issues. If I were at one of these companies, I would probably be trying to get to the bottom of the legitimate questions being asked about HRC’s methodology, examining the overall records of the candidates in question to determine whether they still deserved the company’s support based on the entirety of their records, and drafting a blog post or other type of communication to explain why a company generally needs to support candidates across the political spectrum vis-à-vis the broad variety of issues that can significantly affect its businesses. But the immediate points for now are that criticism of corporate activism will be voiced by progressives and moderates as well as conservatives and that, when a company ventures into social and political issues, it’s an uphill battle to please all stakeholders all of the time.

The continuing developments regarding LGTBQ rights since 2016 underscore the potential significance of steady and measured leadership by the business community on volatile social issues, particularly in light of how abruptly the federal government has reversed its positions on LGBTQ rights in military service, Title VII discrimination litigation, and regulations and lawsuits about transgender people’s access to public restrooms and locker rooms that conform with their gender identities.

It can be powerful and meaningful when a leading company steps up on issues that are important to the company’s culture and stakeholders. In today’s body politic, however, even the most well-intentioned corporate activism on social and political issues will never be easy or for the faint of heart.

Alex Dimitrief is a Lecturer on Law at Harvard Law School, where he is co-teaching a class on “The Corporation as a Citizen.” He was the President & CEO of General Electric’s Global Growth Organization in 2018 and previously served as GE’s General Counsel. The views in this piece are strictly his own.

 


Issue: 
2019 Fourth Quarter

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