May 31, 2023

When you consider the extraordinary backlash Anheuser-Busch and its Bud Light beer brand have suffered following a marketing campaign involving a transgender influencer, imagine the dangers of a company sticking its head above the parapet to express opinions of geopolitical importance. How business leaders should engage in politics is a tricky question, especially in these hectic times.

Are you quietly trying to influence the government through your public affairs experts and lobbyists? Or do you make an impression by expressing political opinions?

Democracy and capitalism should go hand in hand. In theory, they are both about freedom to choose and to develop both our personal and mutual social interests. The rise of populism is testing this relationship.

Martin Wolf, chief economics commentator for the Financial Times, argues in his recent book “The Crisis of Democratic Capitalism” that the two work best for business when one complements and limits the other. “Democracy’s strengths are representation and legitimacy, while its weaknesses are ignorance and irresponsibility,” he writes. “Capitalism’s strengths are dynamism and flexibility, while its weaknesses are insecurity and inequality.”

Companies need eyes and ears to inform the mouth. (And advise when to open.) Lobbyists traditionally fill this role. But while the ESG movement—short for prioritizing environmental and social factors—promotes (and reflects) a more enlightened approach, acknowledging many responsibilities beyond the bottom line and shareholder returns, the politics have become coarser. How are business leaders approaching politics and government as the debate about ‘wake capitalism’ rages?

Gabriel Wildau is a New York-based specialist on political risk in China at Teneo, the consulting and communications firm. He recommends caution when it comes to policy issues, especially with China at a time of heightened tensions between Washington and Beijing. “You must do your best not to offend either party.”

This puts companies in a special position, as many have strong commercial interests in both China and the United States.

Ray Dalio, the founder of Bridgewater Associates, the hedge fund, has sailed successfully between the two countries for decades. But after two recent trips to China, he concluded: “The United States and China are on the brink of war and cannot talk.”

Anyone who watched the bipartisan whims of Shou Chew, TikTok’s CEO, through a congressional committee last month could see there was little room for nuance for anyone trying to keep a foothold in either market.

Beijing, meanwhile, has stepped up its crackdown on foreign companies entering areas it sees as a potential threat to national security, despite telling the world it is open for business. And concerns remain about China’s threat to invade Taiwan, which Beijing claims as its territory.

But while Mr. Wildau acknowledges that sentiment in Washington is anti-China, US companies have so much skin in the globalized trade game that business leaders are uncomfortable drawing attention to political issues. “I could scare customers – and attract more business – with gloomy forecasts for Taiwan,” he says. “Not me.”

The consequences to China’s reputation if you get it wrong can be extremely embarrassing. For example, the country is Volkswagen’s largest market and has 100,000 employees. In 2019, when Herbert Dies, the then CEO of Volkswagen, told a BBC reporter that he knew nothing about re-education camps where millions of Uighurs are interned in Xinjiang, the video clip went viral. At the company’s annual meeting on Wednesday, activists and some shareholders continued to lash out at Volkswagen’s continued presence in the region and called for an independent audit of operations there.

“My advice would be: be prepared,” says Mr Wildau. “Have thoroughly read the codes of conduct and principles. No company should be overwhelmed by events.”

Britain has experienced serious conflicts that have arguably been bad for international business, including a referendum on Scottish independence in 2014 and Brexit two years later. It’s a useful case study of the tightrope executives try to walk.

“Business is all too fed up with politics,” says Toby Pellew, head of public affairs at Headland, a London-based consultancy. “But when you operate in a highly regulated environment, there are many necessary touchpoints. And I can’t think of a time when it has been more important for business to have visibility and insight into government policies. ”

Howard Davies is the chairman of NatWest, one of the UK’s largest banks, and was previously a director at Morgan Stanley and deputy governor of the Bank of England. He advises business leaders to exercise caution and ensure that government intervention closely aligns with their company’s commercial interests. “My advice is: be very careful,” he warns. “Choose and publish your fights only if they are strictly relevant to your business interest. It may seem attractive to be a policy leader while your name is being celebrated, but politicians are more likely to be cynical than rational and will use you if you get a small chance. Likewise, it’s a bad place to be held hostage by a pressure group.

The temptation to flunk in can be great, especially for business leaders who feel they know how to run things. The Edelman Trust Barometer suggests that business is held in higher esteem than politicians.

Ian Cheshire is the former boss of Kingfisher, a multinational retailer, and a member of the board of directors who oversees the Cabinet Office, a government department that supports the British Prime Minister.

When David Cameron, the former Prime Minister, called on businessmen to publicly oppose Scottish independence, Cheshire agreed. He also spoke out against Brexit.

“There’s no point getting into a debate where you don’t have real insight,” said Mr. Cheshire. “But business can lead and has the ability to act faster than governments sometimes can. You have to be practical and know how good looks.”

Mr Cheshire spoke out against Brexit as it directly threatened the interests of his company, whose largest operations were in Britain and France.

“On Brexit, I felt strongly that it was bad for my business and my country,” he said. “This was a heavy enough subject and my opinion was completely authentic in its concern.”

“But if you’re expressing political opinions, don’t expect to be popular,” he added. “You get beat up.”

Anheuser-Busch is pretty beat up. Even before the influencer incident, Bud Light sales in the US were down 6.4 percent in the year to March 24, according to Nielsen data. One of the marketing executives who was sent on leave after the backlash said earlier this year that her mandate was to “change the tone, it means having a campaign that’s really inclusive”.

The episode shows how troublesome – and potentially commercially destructive – well-intentioned efforts can be. Brendan Whitworth, the company’s North American CEO, eventually made an effort to keep both parties happy. In a statement entitled “Our Responsibility to America,” he said: “It was never our intention to be part of a discussion that divides people. Our job is to bring people together over a beer.”

From now on, Mr. Whitworth can choose to only share his opinion with close friends at the bar.

Matthew Gwyther is a London-based business journalist and former editor of Management Today magazine.