America’s CEOs are stuck between Trump and a hard place

In the weeks leading up to President Trump’s inauguration, chief executive officers around the country seemed to be falling over one another in their efforts to please the soon-to-be occupant of the White House.

After Trump had twitter-shamed Carrier and Boeing into making public concessions—one on jobs, the other on the price of Air Force One—automakers Ford, General Motors, Fiat Chrysler, and Hyundai, technology companies Amazon, Sprint, and Softbank, pharmaceutical multinational Bayer, and retail giant Walmart all quickly announced plans to hire or invest in the United States.

Many immediately got a tweet-on-the-back: “Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!” Trump tweeted in January. At the time, on these pages, I wondered out loud how many more companies will give Trump a honeymoon on jobs?

{mosads}It’s clear the honeymoon is over (if ever there was one). One of the most remarkable developments of this already remarkable period has been how quickly the CEOs of major U.S. companies have turned on Trump. The proximate cause was Trump’s executive order banning all refugees and immigrants from seven Muslim countries from entering the United States.

In response, Lyft donated $1 million to the ACLU, Airbnb offered free housing to refugees left in limbo, Starbucks defiantly pledged to hire 10,000 refugees, and 97 technology companies including Apple, eBay, Facebook, and Google filed an amicus brief against the executive order. Just a few weeks earlier, the CEOs of many of these same technology companies had joined then-President-elect Trump’s technology summit at Trump Tower.

What has happened—and this is the underlying cause of many CEOs’ about-face—is the realization that business is political, that it cannot go into hiding, and that companies must increasingly take sides.

In a thought-provoking article published last Friday, Andrew Sullivan writes that “[o]ne of the great achievements of free society in a stable democracy is that many people, for much of the time, need not think about politics at all.” Similarly, many American CEOs, especially the entrepreneurs powering Silicon Valley, have long felt they could choose to be apolitical, to avoid taking sides on contentious issues. “[B]ecause we live under the rule of law,” Sullivan continues, “we can afford to turn the news off at times.”

If CEOs have quickly learned that they cannot turn off the news, that not thinking about politics is not an option, then the credit largely goes to business’ two most important stakeholders: its customers and its employees. Uber’s travel ban debacle powerfully illustrates the point. For CEO Travis Kalanick and his company, it seemed to make political sense to join Trump’s business advisory council. After all, the incoming administration might get to write the rules for autonomous cars on which Uber has so much riding. It may have also made business sense for Uber to drop surge pricing and try to get market share when the New York Taxi Workers Alliance announced its drivers would stop driving to John F. Kennedy Airport in solidarity with anti-Trump protesters there. But the strategy dramatically backfired when #DeleteUber began trending on Twitter.

Nobody knows how many customers deleted the app or how much brand damage this unforced error inflicted, but we know the effects on Uber’s strategy: Kalanick resigned from Trump’s council, sought to reassure his employees that the company stood with its many immigrant drivers and progressive urban customers, and pledged financial and legal support for any Uber driver affected by the ban. And of course, Uber joined the amicus brief.

Uber’s u-turn fueled already growing efforts to mobilize customers against companies that progressives see as political or business associates of Trump and his family. Nordstrom was the next big win for the “resistance movement” when the company announced plans to drop Ivanka Trump’s fashion line from its stores and website. The company maintains that sales of the younger Trump’s products had fallen dramatically during the campaign and that it had communicated the decision to Ivanka more than a month ago.

But it is hard to explain Nordstrom’s public stance in recent days without the efforts of #grabyourwallet and similar platforms channeling progressive resistance to Trump into consumer boycotts. Even Tesla, long the darling of urban progressives, has seen customers take to Twitter to publicly announce they are canceling their orders because of Elon Musk’s membership in the same business council that Travis Kalanick was forced off of by the #DeleteUber backlash.

You don’t need a crystal ball to predict that boycotts of Trump-affiliated businesses will continue. After all, they are working. Shannon Coulter, co-founder of #grabyourwallet tweeted on Feb. 10 that more than half of the 15 companies that have so far been dropped from the boycott list (for “complying” with Trump opponents’ demands) have done so in the past 10 days. As importantly, at least some boycotts are clearly getting under Trump’s skin: his Twitter blasting of Nordstrom not only sent shock waves through government ethics watchdogs, it also let the company’s share price soar.

What does all of this mean? It means that companies have multiple stakeholders. Trump and the federal government more generally are a clear one. Indeed, for many companies, the administration is a very important stakeholder. But it is far from the only one. Equally important, and for many companies in fact more important, are their customers and employees.

As much as even Silicon Valley CEOs might want to play nice with Trump at least for the time being—lower taxes, less regulation, and more infrastructure spending is a winning formula in most boardrooms—policies such as the immigration ban that are direct attacks on the diverse workplaces many of these CEOs have carefully nurtured, and the growing resistance to all things Trump among particularly affluent urban customers, are forcing more and more companies to take sides.

As CEOs find themselves increasingly between a rock and a hard place, between Trump on the one hand side and other key stakeholders on the other, the days when business could choose not to think about politics—when turning off the news was seen as an option—are clearly over.

David Bach is senior associate dean and professor at the Yale School of Management, where his research and teaching include a focus on business-government relations and global market regulation.

The views expressed by contributors are their own and are not the views of The Hill.