For businesses, distancing themselves from Donald Trump was the easy part

In the hours after the storming of the U.S. Capitol by pro-Trump extremists, a significant number of large U.S. and multinational corporations pulled their financial support from certain members of Congress. Other companies and organizations, such as Canada’s Shopify Inc. SHOP-T -1.90%decrease
and the PGA Tour, cut their commercial ties with pro-Trump organizations and businesses. Although Canadian businesses are not allowed to contribute to political parties or candidates, this movement away from Donald Trump still holds important lessons for all companies and organizations, wherever their head office resides.

The anti-Trump business tide resembles, in its rapidity and breadth, the movement in favour of Black Lives Matter in the wake of George Floyd’s killing last May. The latter was an attempt by corporations to move “in” – to be seen to be supportive of a cause – and the former is an attempt to move “out.” This raises many questions that are relevant for all businesses and organizations that are thinking of, or that are required to, take a stand on political or social issues:

Those companies distancing themselves from Donald Trump are trying to protect their brand. But are they acting purely out of business interest, or are they also expressing their convictions?

Are there more risks in taking a stand, or in remaining silent?

Actions speak louder than words. Most companies have announced a suspension of their donations to pro-Trump members of Congress. What will they do in the longer term? Will they revert to donating to the same elected officials? Will they stop political contributions altogether?

As was the case for some of the pro-Black Lives Matter stands, these latest business initiatives, warranted or not, have appeared rushed. The fact that donations have been suspended – not cancelled outright – is an indication that the corporations involved do not really know what they will do in the future. One reason may be that not only were they caught off guard by the assault on the Capitol, but also that they had not revised their donation strategy in light of the increasingly pressing demands by the public that businesses act in a purposeful manner.

We live in a different world. As a survey conducted by the Canadian Centre for the Purpose of the Corporation (CCPC) and Navigator demonstrates, Canadians expect corporations to act in the interests not only of their shareholders, but of all their stakeholders (employees, consumers, suppliers, communities, the environment, etc.). They are deeply concerned with the inequalities and environmental damage that capitalism has produced in Canada and in the world. Canadians demand that businesses, along with government and NGOs, tackle these challenges.

What are corporations to do? First, if they have not already done so, they need to define their purpose. This is not the same as drafting a vision or a mission. A company’s purpose is its reason for existence. A corporation does not exist only to make profits; it exists to solve a problem, to offer a product or a service that is helpful and useful to its customers.

Defining (or, more accurately, rediscovering) its purpose is only the first stage. As Alex Edmans writes in his book Grow the Pie, “Purpose is far more than a statement. An enterprise must live its purpose … A purpose statement should be focused and selective.” In other words, something like “Solving the World’s Problems” is not a helpful purpose, because it is not focused enough, and therefore it would be impossible to hold the firm accountable for its purpose.

Once the firm’s purpose has been (re)found, all its activities should be aligned with it, including its public positions. In the CCPC’s view, an organization should take stands that are in sync with its purpose. For instance, a financial institution might not need to commit to carbon net zero, because of how small its GHG emissions are already. However, the company may have a significant impact on income and wealth inequalities. This should be reflected in its purpose statement, in its operations and in its political positions.

If businesses are to benefit, or limit damage to their brand, from becoming an actor in the field of policy, they need to walk the talk. This is another reason for a focused, purpose-based approach. In today’s political environment, statements will not suffice. Citizens will demand that organizations deliver on their purpose and on their political statements.

“Rebuilding trust in our economy requires taking meaningful action,” former Bain Capital managers Michael O’Leary and Warren Valdmanis wrote in Accountable: The Rise of Citizen Capitalism. “People won’t be fooled time and again. Empty talk will be revealed for what it is, and it will breed even more cynicism when it’s not backed up with action.”

The effects of the positive press that U.S. corporations have gotten after their distancing from Donald Trump will soon dissipate, and the wind could turn if the lofty assertions are not followed by new, principled policies regarding political donations. The best way to design such policies is to let the companies’ purpose serve as a guide. But to achieve that, of course, you need to know what your purpose is.