How To Find A Balance Between Corporate Engagement and Customer Outrage

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Smart policies have made the American economy, in a word, exceptional. Forbes’ Mitchell Martin delves into how the U.S.’s limited reliance on international trade, policies encouraging reinvestment and government spending have made it the “cleanest dirty shirt” on the economic scene. As the world economy has shown weaknesses, the U.S. has not dropped into a recession. Markets continue to grow, despite pervasive inflation, high interest rates and geopolitical conflicts.

That exceptionalism continued to be on display last week, as Federal Reserve Chairman Jerome Powell announced Wednesday that inflation was still too high, and interest rates would not be cut. The markets, which have anxiously awaited any reduction in interest rates, didn’t decline at all on this announcement. In fact, Powell’s press conference announcing the lack of movement significantly rallied the markets, because he also said it is “unlikely” the Fed will raise interest rates further.

Markets rallied again on Friday, after the Labor Department showed job growth cooled in April. Just 175,000 jobs were added last month, far short of consensus estimates of 240,000. While fewer new jobs isn’t good economic news, it seems to show labor demand is slowing, which in turn could make inflationary pressures ease up.

Is this exceptionalism, or is it a case of optimism gone wild? Whatever it is, there are enough investors who haven’t lost faith in the economy even now, and who have their gaze fixed firmly on improvement. And, no matter how slowly things are getting better, these investors won’t be distracted from that goal.

Dealing with the current economic situation is a challenge for companies, but it’s not the only one they face. Consumer expectations for companies to be involved in social causes can be vexing as well. If a company does too much on a certain cause, they can alienate some customers and be dragged through the mud. But ignoring social causes can backfire with customers who care about them. Zeno Group surveyed C-suite executives and consumers about brand activism and discovered ways for companies to both serve consumers and their own interest. I talked to Chief Reputation Strategist and Managing Director of Global Corporate Affairs Mark Shadle about the study. A portion of our conversation is later in this newsletter.

NOTABLE NEWS

Many people may agree that Elon Musk is a visionary who has successfully brought new concepts in science, technology and business to the forefront. But many may also agree that he has been erratic, undisciplined and made moves that don’t seem to be underpinned by much logic. Forbes’ Alan Ohnsman takes a look at some of the chaotic-seeming choices the centibillionaire has made recently—and there are a lot.

After Tesla’s most recent earnings last week, during which he affirmed that the company still plans to make less expensive electric cars, he cut the entire team working on the Supercharger network for reasons that are unclear. (Forbes senior contributor Brad Templeton floats the idea that perhaps charging isn’t much of a business opportunity, though the company made the most reliable vehicle chargers and successfully convinced all electric vehicle makers to use Tesla’s chargers.) A few days later, Tesla rescinded summer internship offers.

But on the positive side, Musk traveled to China last weekend and finalized a deal with Chinese search giant Baidu on mapping and navigation, which could enable Tesla to roll out its Full Self-Driving mode there. Investors cheered the deal, which broadens the products that Tesla can bring to its largest overseas market. (Even though flaws in the Autopilot system have led to fatal crashes and the recall of nearly all Teslas in the U.S. in December.)

POLICY + REGULATIONS

Over the last decade, marijuana has been gaining acceptance as a helpful drug, as well as relatively safe to use recreationally. Currently, it’s legal for recreational use in 24 states, and for medical use in 38, though the federal government still considers it a dangerous and easily abused drug with no accepted medical use. Last week, reports indicated the Biden Administration plans to reclassify marijuana as a drug with low to moderate potential for addiction that can be used with a prescription.

This change would go far to make the marijuana business more profitable. Currently, companies that work with marijuana—even in states where it is legal—need to file their earnings with the federal government under a punitive tax measure reserved for drug traffickers that bans most deductions. Forbes’ Will Yakowicz writes that the current effective tax rate for most cannabis companies is around 80% of gross revenue. It doesn’t solve all of the business problems marijuana companies face—it will still be regulated by the DEA, meaning it will still be illegal for banks to work with these companies—but it’s a big step toward a wholesale legitimization of the industry. Andrew Freedman, executive director of the Coalition for Cannabis Policy, told Yakowicz that the decision “is really more of a signal towards the bigger policy debate than an actual policy movement.”

BIG MOVES

Two CEOs stepped down in the last week as their companies prepare for big changes. Entertainment titan Paramount Global, which is currently working toward a sale, officially said goodbye to CEO Bob Bakish last Monday. Bakish, who had been with the company since joining its predecessor Viacom in 1997, was rumored to be on the chopping block as Paramount reportedly considered a merger with Skydance Media—which Bakish was said to oppose. He’s being replaced by three executives who will run an “Office of the CEO,” which Forbes senior contributor David Bloom points out throws more unknowns into a complex potential M&A process.

Peloton CEO Barry McCarthy announced on Thursday that his ride at the company was over. The at-home exercise company, which thrived in the early days of the Covid-19 pandemic as gyms shut their doors, has since seen its business go flat. Since McCarthy was named CEO in February 2022, Peloton’s share price decreased more than 91%. McCarthy isn’t the only one leaving Peloton. The company also announced it was laying off 15% of its workforce—about 400 employees—in an effort to reduce annual spending by more than $200 million by the end of the 2025 fiscal year.

TOMORROW’S TRENDS

How To Engage On Social Issues And Stay Out Of Trouble

Some companies that dive into social issues get themselves in hot water by offending consumers, being tone-deaf with their actions, or putting themselves into issues where they don’t belong. Do consumers want to see companies do this? And how can companies engage properly? Zeno Group did a study delving into these questions, called “Responsibility Reset: Navigating Societal Issues in a New Era.” I spoke with Zeno Chief Reputation Strategist and Managing Director of Global Corporate Affairs Mark Shadle about this research.

This interview has been edited for clarity, continuity and length. The complete conversation is available here.

What is it that consumers want? They want engagement, but how far do they want corporations to go? Do they want to see things that might make them mad? Do they want to see just a bit of engagement on hot-button issues?

Shadle: Consumers have an expectation that companies will engage on social issues. Two out of three consumers felt that companies should do more, and almost identically, two-thirds of corporate executives say they feel that they’re doing the right amount. That was an interesting disconnect.

But what consumers said, quite interestingly, was that where they want companies to engage are on topics that are relevant to their business. Whether it’s a consumer packaged goods company or a B2B company, they feel that you should be engaging on something that reflects who you are as a company and what you actually have some ability to change. We refer to those as shorthand as the ABCs of engagement. The A was for authenticity. When they decide whether or not to engage, they should be saying: Is this an issue that we should engage in? Is it authentic to our business? Do we have a track record? Is it expected? Is there some basis for us doing it consistent with our values? The second is the B, and that’s for business relevance. Is it something that relates somehow to our business? If we’re a company that uses a lot of water, we definitely should have something to say about water quality, or water preservation, or water conservation—as opposed to something that has nothing to do with our business whatsoever. And the C is really important because that was all about competence. If you’re going to engage on a social issue, it should be one where you can somehow use assets that you have or resources that you have, that you can make a meaningful change toward.

That’s where the genuine nature of the engagement comes through. What consumers said is they don’t need to hear corporations getting engaged on every single issue of the day. They would rather see them focus on the things that they continue with things that are directly relevant to their business. That’s where it comes across as being genuine, as opposed to marketing hype. I think there’s a new generation of consumers out there who are very attuned to the marketing hype, and they can see right through it, and they can see when a company is not being genuine. Those are the ones that they put right in the middle of the bullseye.

We’ve heard the stories about businesses that have engaged and turned off consumers. But what is the risk if a company doesn’t engage at all?

What we heard is that while some would say your silence speaks volumes, we would say the kind of rationale speaks volumes. There’s an expectation out there today that you will show your work. That you will explain why you’ve decided to engage on a particular social issue. But consumers are saying they also want to hear why you decided not to engage in another one. The companies that have done it well are the ones who have very clearly said, ‘We recognize this as an important issue that touches a lot of people. However, there are organizations that are far more resourced and far more qualified to tackle this issue than we are, which is why we are not engaging in it. We support those organizations and their efforts, but it's not something that you’re going to hear us talking a lot about because others are more qualified.’ Those are the ones that seem to be weathering the storm better than others, even if it’s a really hot issue of the day.

Is it worth it for companies to take the risk of offending someone, or should they work to find areas where middle ground exists?

The research that we did identified the issues that mattered most to people. We gave them a ranking. We asked them: What do you think are the most important issues facing society today? That’s interesting because consumers, they have opinions. There’s the obvious concern about war in conflict, but almost almost near the top was economic instability and poverty, the things that affect their own pocketbook. Mental health was up there. Climate change. These are big issues. I don’t think companies can step aside from considering them. But here’s the thing: It’s going to be different for every company. Everyone is going to have a different business and a different risk profile.

The bottom line is, CEOs say they feel obligated because the issues are so important, and it is good business for them to be engaged on the issues that matter to their business and to their consumers. But here’s the thing: It’s also a recognition that they have a choice. If you were a consumer packaged goods company today, how many consumers are using your product? You can’t address every single issue of every single consumer. I think CEOs are starting to recognize we don’t have to be everything to everyone, but we can actually make some choices here.

We actually gave respondents a chance to take a look and say: What do you think companies should be doing to address these social issues? It was ranked and [the options were] comply, advocate, support or be an activist. The majority said companies should do something more than comply. Just complying with the law and regulations was not considered to be enough. They wanted companies to do something, but they didn’t want to see companies being an activist. What they wanted to see, more than anything, was companies who were actually working with third parties to get problems solved. CEOs need to say: Who are our allies? Who are we investing in? Who are we partnering with? Because that’s what consumers are saying they want to see. They don’t expect companies to do it on their own, but they do expect some engagement with civil society.

FACTS + COMMENTS

Apple, which had seen its stock price creep downward for much of the last six months on reports of slowing Chinese demand, surprised analysts and investors by beating expectations as it reported earnings last Thursday.

8%: Year-over-year decline in Chinese regional sales, adding up to $16.4 billion—shattering expectations of $15.3 billion

$110 billion: Size of a planned stock buyback, in order to reverse dilution and increase its share value

‘I maintain a great view of China in the long-term’: CEO Tim Cook said on the earnings call

STRATEGIES + ADVICE

Business travel is back, but so are its pitfalls. When you’re planning trips for yourself and your employees, remember how this kind of travel impacts health and well-being.

All employees don’t communicate in the same ways. Here’s a guide to help your conversations with people in different departments be more effective.

VIDEO

QUIZ

Japan’s Kansai Airport, which serves Osaka, has a standout feature. What is this airport’s claim to fame?

A. Most of its food vendors have Michelin-star chefs

B. It hasn’t lost any luggage in 30 years

C. Its passenger lounges are equipped with massage chairs

D. 99.9% of flights were on time in 2023

See if you got the answer right here.