Jun 6, 2019

When companies act like governments

Illustration of a circle of columns with the center column replaced by a skyscraper

Illustration: Aïda Amer/Axios

In a flurry of big decisions, major companies are refusing to work with gun sellers, states that restrict abortion rights, and places that propose anti-LGBTQ bills — throwing their weight around to shift public policy.

Driving the news: Throughout the history of capitalism, wealthy and powerful companies have effectively acted like governments. But now, as these corporate giants get bigger and richer than ever, they are fundamentally changing the calculus of power in the U.S.

As Axios has reported, companies are taking ever more daring positions on social and political issues because of intense pressure from the public and their own employees. At a time of rock bottom trust in institutions and leaders, corporations are among the very few remaining bastions of public confidence, says Edelman, the public relations firm.

The latest example is Salesforce, which has recently barred certain gun sellers from using its e-commerce software, per the Washington Post. It follows a trend of companies targeting guns:

  • Amazon and eBay have both banned the sale of firearms on their platforms.
  • Shopify has stopped providing its software to merchants who sell semi-automatic firearms and silencers, among other weapons.
  • Walmart, the country’s biggest gun seller, has stopped selling the weapons to customers under 21. And Dick’s Sporting Goods has pulled all assault-style guns from its shelves.

Firms have waded into other debates, too: In an outcry over abortion rights, Hollywood studios are threatening to stop filming in Georgia. And two years ago, a backlash by PayPal, the NCAA, Bank of America and others forced North Carolina to repeal a "bathroom bill" that discriminated against transgender individuals.

"We are concerned by the rise of boardroom legislation by unelected corporate leaders," says Lawrence Keane, SVP of public affairs for the National Shooting Sports Foundation. "It’s particularly troubling when the companies making the decisions have tons of market power."

The big picture: While firms are well within their rights to take a stand, their actions take on new significance when unelected businesses have the same sort of power as government officials, says Luigi Zingales of the University of Chicago.

  • In early 2018, Facebook and Google banned ads for cryptocurrency exchanges. That meant 60% of all online ads were off limits to cryptocurrency companies.
  • The combined actions of Amazon, eBay, Shopify and, now, Salesforce, have effectively banned the online sale of certain guns.

The bottom line: Look for continued corporate activism, as socially minded employees and consumers show no sign of wavering in their insistence on their companies taking such positions.

  • "It has a lot to do with the war for talent," says Louis Hyman, a historian at Cornell. "In an age where the corporate talent is socially liberal, companies that do not take these positions are risking their key assets."
  • "It's not really companies who are making this difference. It's the consumers who support these companies," says Heather Cox Richardson, a professor at Boston College.

A new vehicle for grassroots politics

Those consumers are finding that at a time when national politics is at an impasse, refusing to buy something on Amazon until it takes sides in a debate could be a more effective way to assert their political will than calling their representatives in Congress.

Turning to companies instead of lawmakers has already shown results.

  • On Wednesday, YouTube rolled out new, stricter hate speech policies that prohibit, for example, videos that promote Nazi ideology. Public criticism was a factor driving the changes, writes Axios' Ina Fried.
  • In 2015, under pressure from shoppers, Walmart came out swinging against an anti-LBGTQ bill in Arkansas, home of its headquarters. The behemoth prompted the governor to demand that the state legislature change the bill.

Why it matters: While companies are beginning to act like governments, some experts say it is not their power that has boomed, but that of consumers.

  • 58% of millennials, 55% of Gen Xers and 51% of baby boomers think it’s important that brands they support invest in causes they care about, according to a 2018 report from market research firm InMoment.
  • When companies don't speak up, consumers are often organizing widespread boycotts to spur action.
  • But, but, but: It takes a lot of force to change the course of an enormous company. Take, for example, two recent failed shareholder votes meant to get Amazon to act on climate change and facial recognition.

"This doesn't look like some new corporate power to me," says Brink Lindsey, co-author of "The Captured Economy." "It looks like new power by public pressure groups to change corporate behavior."

Be smart: Using companies to change policies "is a really effective way to include people on the ground floor in American politics," Boston College's Richardson says.

  • "People feel frustrated with politics and feel like they don't have a voice, but buying stuff is something you do every day and you could send a message in your own way," says Rob Atkinson, founder of the Information Technology and Innovation Foundation.
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