Abortion is obviously one of our most divisive political issues. Thus, when corporate leaders make decisions related to abortion laws, such as moving out of a pro-life state (see, e.g., CEO: Duolingo will move operations should Pennsylvania ban abortion), a specter of political bias is arguably raised. One normative question that then arises is whether such a decision is sufficiently conflict-prone to warrant enhanced scrutiny, as I have argued here. There is certainly a shareholder-wealth-maximization case to be made for moving out of a pro-life state — specifically, the argument that high-value employees demand such action. But this determination should be supported by something more than trending Twitter comments or the personal biases of decision-makers. Corporate fiduciaries are required to consider all material information reasonably available, and where decision-making is sufficiently prone to conflicts of interest the accountability concerns of corporate governance should trump its protection of discretion.

As a perhaps related aside, one may compare the argument against state universities having official positions on whether the Constitution should be read as protecting abortion. As Prof. Leslie Johns noted in an e-mail she sent to the UCLA Chancellor following his related public statement asserting that Dobbs “is antithetical to the University of California’s mission and values” (via The Volokh Conspiracy here):

As a faculty member in both the political science department and the Law School, I feel compelled to remind you that Americans (and even Californians) have diverse and complicated viewpoints on the issue of abortion. The legal issues involved in the recent US Supreme Court ruling cannot be simply reduced to a statement about restrictions on “women’s reproductive rights.”

Abortion is not a simple matter of access to health care. It is a complex moral and political question that involves balancing fundamental rights to life and physical autonomy. By denying this reality, you are asserting a political position. Yet your employment as a public employee explicitly prohibits you from using your office for political purposes. It is both inappropriate and illegal for you (and for me) to use our official capacity to make claims that specific abortion policies or constitutional interpretations are “antithetical to the University of California’s mission and values.”

Given UCLA’s professed commitment to “diversity, equity, and inclusion,” I respectfully ask you to carefully consider the implications of declaring that a conservative viewpoint is “antithetical to the University of California’s mission and values.”

In February 2021, Samuel Gregg argued (here) that: “To expect the rest of the world simply to accept whatever stakeholder-corporatist insiders have decided to be the new global consensus on any given topic seems disconcertedly utopian. It also increases the possibility of more populist backlashes on an international level.”

Yesterday, George Will published an op-ed in the Washington Post that appears to capture some more of this sentiment. You should go read the whole thing (here), but here is a brief excerpt:

The New York Times recently interviewed two advocates of ESG investing. One said, in effect, that only such investing fulfills fiduciary obligations because the welfare of those whose money is being used depends on “a planet that is livable.” Meaning: Politically enlightened ESG advocates know what unenlightened investors would want if they were as intelligent and virtuous as the advocates. The other ESG enthusiast the Times interviewed said “social justice investing” is “the deep integration of four areas: racial, gender, economic and climate justice.” And the “single-issue CEO” — the kind focused on maximizing shareholders’ value — is “not the way of the future.” This is often the progressives’ argument-ending declaration: Non-progressives are on the wrong side of history, so they can be disregarded until history discards them. The Times’s interviewer observed that “defining justice seems messy these days.” These days? Actually, justice has been a contested concept since Plato wrote. For today’s ESG advocates, however, the millennia-long debate is suddenly over: Justice is 2022 American progressivism, period.

Joel Slawotsky has published The Impact of Geo-Economic Rivalry on U.S. Economic Governance: Will the United States Incorporate Aspects of China’s State-Centric Governance?, 16 Va. L. & Bus. Rev. 559 (2022). An excerpt:

China’s corporate governance model emphasizes an extensive governmental role in the construction of economic markets. The paradigm consists of an economic-political syndicate of collaborative actors creating profit but whose critical core mission is to advance state objectives as defined by the ruling authority, the CCP. Economic interests thus serve political interests pursuant to a template of state direction and partnership with the private sector encompassing share ownership; industrial policies; governmental representatives embedded in the private sector; and discipline imposed for failing to comply with syndicate rules…. [S]ome in the U.S. political establishment are in favor of more governmental control to prevent corporate abuse …. To a remarkable degree, the dissatisfaction is already being manifested by attempts to engender greater government involvement in U.S. central bank policy by expanding the Federal Reserve’s (“the Fed”) mandate to encompass a wider spectrum of goals to address social justice objectives…. Moreover, efforts to expand the Fed’s mandate to encompass social goals should also be viewed in the context of proposals to embrace a model which modifies the existing U.S. capitalist framework. For example, Elizabeth Warren’s Accountable Capitalism Act calls for employees of large firms to elect forty percent of all board members. Further corroborating this incipient trend is the fact that the CEOs of some of the largest U.S. businesses have declared their disagreement with the “shareholder-value” model, opining that a corporation’s purpose is far more extensive and embraces many stakeholders. Such a view is diametrically opposite to long-standing U.S. economic governance. Another indication of a more state-centric economic model is the popularity of environmental, social, and governance (ESG).

Id. at 559, 578-79.

Recently, the New York Times reported that Howard Schultz wants to rescind the open bathroom policy that Starbucks adopted in 2018.   The backstory, as some may remember, is that two black men in Philadelphia were waiting to meet someone in a Starbucks and they sought to use the bathroom without buying anything.  A store employee ended up calling the cops; they were arrested; protests ensued; and the company announced that anyone would be permitted to use Starbucks bathrooms going forward.

Now, however, Schultz is reconsidering that policy.  Here’s what he said about it:

We serve 100 million people at Starbucks, and there is an issue of just safety in our stores in terms of people coming in who use our stores as a public bathroom, and we have to provide a safe environment for our people and our customers. And the mental health crisis in the country is severe, acute and getting worse.

Today, we went to a Starbucks community store in Anacostia, five miles from here, which is a community that unfortunately is emblematic of communities all across the country that are disenfranchised, left behind. And here’s Starbucks building a store for the community. Now, we had a round-table discussion with the manager and other people, and we were told that from 12 to 6 p.m. today — every day — there’s no one on the street. Why? Because people are afraid that their children are going to get shot — five miles from the White House.

I think we’ve got to provide better training for our people. We have to harden our stores and provide safety for our people. I don’t know if we can keep our bathrooms open.

Starbucks is trying to solve a problem and face a problem that is the government’s responsibility.

Let’s remember why the open-bathroom policy was adopted in the first place.  I, for one, used Starbucks bathrooms for years without buying anything, well before 2018.  That’s because a customer-only bathroom policy doesn’t actually mean that only customers can use the bathroom; it is, in practical effect, a policy of employee discretion, via selective enforcement.  Some people who are not customers can use the bathroom, and some cannot.  In general, we can surmise it will be black non-customers who are asked to leave; white non-customers will be permitted to go.  Perhaps some degree of employee training may mitigate the racial impact of a closed-bathroom policy, but it’s unlikely to eliminate it entirely.  So, Starbucks opened up its bathrooms.

Still, let’s assume Schultz is right, and the open-bathroom policy does, in fact, attract some people who are actual threats to Starbucks employees. 

That means Starbucks has to balance stakeholder interests.  Does it favor the employees and their safety?  Or does it recognize the disparate racial impact of a closed-bathroom policy, and favor the public interest of keeping them available?  

Right now, Starbucks is fighting off a union campaign; very likely, the profit-maximizing strategy is to favor the employees.  This article, for example, reports safety as a key issue surrounding union organization. 

This illustrates a couple of things.  First, despite occasional rhetoric to the contrary, it may very well be profit-maximizing to bow to employee demands; it doesn’t mean the CEO is pursuing a personal political agenda, it simply means that restive employees make a company difficult to run.  Second, as is often mentioned when stakeholder-governance is discussed, not all stakeholders have the same interests, and favoring some groups may wind up disfavoring others (which is one of the reasons shareholder primacists argue stakeholder governance is impractical; absent that profit-maximization decision rule, there’s no obvious way to choose among stakeholders).

But now, let’s complicate the narrative.

Is employee safety really Schultz’s motivation here?  Starbucks does not have a janitorial staff; part of the job of being a barista is cleaning, including cleaning the bathrooms.  I assume an open-bathroom policy means there is simply more work, and more unpleasant work, for the baristas.  It wouldn’t at all surprise me if the union organizing campaign does not just include safety discussions, but also the question whether baristas should receive more pay, or more benefits, or whether stores should simply hire more staff, to deal with that extra work.  Schultz, by closing the bathrooms, placates the employees on this point but also avoids additional expenditures by the company.

If that’s the real story here – and I don’t know that it is, I’m speculating – then what essentially is going on is that Starbucks’s original policy had a disparate racial impact, and remedying that problem is expensive.  Schultz would rather just leave the racism in place; it’s cheaper.

That’s definitely a shareholder primacist approach, but it’s one where the company profits by externalizing the costs of doing business on to the public.  And in particular, black members of the public.