CHIEF EXECUTIVES have long had to be contortionists, balancing the needs of employees, suppliers and above all shareholders while staying within the limits set by governments. But the twisting and stretching is now more fiendish than ever. The world is becoming dangerous and disorderly as governments try to manipulate corporate behaviour. Global companies and their bosses find themselves being pulled in all directions.
Few multinationals are unscathed. As tensions between China and America ratchet up, chipmakers from Micron to Nvidia have been the target of sanctions. TikTok, a Chinese-owned short-video app, is in the sights of American lawmakers. The Biden administration’s plans to curb outbound investment will encompass private-equity giants and venture capitalists. Once-staid carmakers now find their investments in the spotlight, as countries vie to host the next electric-vehicle factory. China’s tech behemoths have been tamed by Xi Jinping. Everyone from bankers to brewers has been ensnared in America’s toxic culture wars.
All this rips up the unspoken agreement between government and business that held sway in America and much of the West after the 1970s. Businesses aimed for shareholder value, by maximising wealth for their owners, promising efficiency, prosperity and jobs. Governments set taxes and wrote rules but broadly left business alone. Although the gains of the system were not evenly spread across society, trade flourished and consumers benefited from greater choice and cheaper goods.
The rules have changed. Governments are becoming more dirigiste, spurred by fragile supply chains in the pandemic, a more menacing China and the dangers of climate change. Company ceos need a new approach for a new age.
Businesses’ re-entry into politics began in the run-up to the Trump era. By taking a stand on social issues bosses saw a way to signal their distaste for populism—and surely also a way to signal their virtue to their employees and customers. It was around this time that Larry Fink, the boss of BlackRock, America’s largest asset manager, became a proponent of investing using environmental, social and governance principles, or esg.
Yet instead of solving social problems, that seemed only to deepen divisions. As we set out in an extended profile, Mr Fink has been demonised by the right for going too far and the left for not going far enough. He is not alone. Disney’s former boss, Bob Chapek, waged a battle over gay rights with Florida’s Republican governor, Ron DeSantis, one reason he lost his job. In Britain Dame Alison Rose, head of NatWest, has resigned over the bank’s cancellation of the Brexiteer Nigel Farage, partly over his political views. Such encounters bruise egos but do little for the long-term bottom line.
The real front is broader and the stakes are higher. Governments seem to be everywhere all at once. They want to correct the problems of globalisation by winning back manufacturing jobs. They want to enhance national security by protecting vital technologies. And they want to fight climate change by speeding up decarbonisation.
Each aim is worthy in its own terms. But the means to bring it about are flawed, or involve trade-offs. Manufacturing jobs are not the high-earning prize they are cracked up to be. Roughly $1trn of green subsidies in America will reduce efficiency and raise costs for firms and consumers. America says national security requires “a small yard and high fence”, but unless policymakers are clear about the risks from subsidies, export controls and investment curbs, the yard is likely to get bigger and the fence grow taller. These convulsions affect big firms far more than arguments over who should use which bathroom. Yet, out of joint after the wokelash, few bosses are prepared to say so.
Some companies are wrapping themselves in the flag, so as to become national champions. That has long been the norm in places like China and India, but it is heading West. After Intel broke ground on two chipmaking fabs in America last year, Pat Gelsinger, its head, said that he “could feel the national pride welling up”. Similar jingoism is on display over generative AI. Grandees of venture capital such as Marc Andreessen express horror at the risks of Chinese ai conquering the world.
Others hope that by keeping under the radar, they will avoid political flak. Taking their cue from Jack Ma, the once-outspoken boss of Alibaba who was mercilessly brought to heel by the Chinese government, ceos have ducked out of public view. Pony Ma, the founder of Tencent, surfaced recently only to pay lip service to new guidelines set by the Chinese Communist Party. In America Shein, a fast-fashion giant that is a favourite with Gen Z shoppers, does its best to hide its Chinese roots. So does TikTok, which says it is a “myth” that Bytedance, its owner, is Chinese. Among Western CEOs even a loudmouth like Elon Musk is learning the value of silence in China. His recent visit to Tesla’s factory in Shanghai provided no media access. He did not even tweet.
Yet both of these strategies could easily go wrong. Patriotic cheerleading is a problem when you do business elsewhere in the world. Intel is building fabs not just in America but in Germany, too. The average American multinational has eight foreign subsidiaries; a giant like General Motors has a hundred. And what the boss may see as a stealthy below-the-radar strategy can look to others like sticking your head in the sand. Just ask an American lawmaker where they think TikTok is from.
What to do? In a fractious world, businesses cannot hide from politics and geopolitics. But the lesson of the wokelash is that outspokenness can backfire. When deciding whether to speak up, bosses of global firms should use long-term shareholder value as their lodestar. The more directly what they say affects their business, the more credibility they have and the less risk of appearing a fraud or a hypocrite.
This approach may include reminding politicians of the benefits that efficiency and openness once brought to economies around the world. When governments seem to contain a dearth of champions for either, that would be no bad thing. ■
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