Trump-era shift: CEOs find a voice for moral outrage

Not since the 1930s, when prominent business heads publicly broke with Franklin Roosevelt, has a US president seen such a revolt by leading business executives.

Only this time, like Alice down the rabbit hole, everything is topsy-turvy.

Then, the heads of General Motors, General Mills, and others organized to try to defeat a liberal president because of his policies.

Today, a string of business leaders are upbraiding a conservative president because of his character, specifically his fumbled attempts at denouncing neo-Nazis and white supremacists holding a rally turned violent in Charlottesville, Va., over the weekend.

In 1936, Roosevelt seized the moral high ground, saying he was battling “the forces of selfishness” and went on to a landslide election victory.

Now, it appears it’s the CEOs who have the high ground. While President Trump waited two days before specifically denouncing the ideologies of white supremacists, the KKK, and others, then seemed to undercut that denunciation in a subsequent press conference, executives made clear their opposition to hate groups and quit two White House advisory boards in droves –a rare and stinging rebuke from the business community to a sitting president.

Politically, the move further isolates Mr. Trump at a time when he has few legislative victories and an increasingly restive Congress. The situation also pushes CEOs into an unfamiliar – and, for many, an uncomfortable – position of taking high-profile stands on hot-button issues.

Such a public rebuke of a sitting president “is quite rare,” says David Farber, a history professor at the University of Kansas and author of “The Rise and Fall of Modern American Conservatism.” “Even during the Vietnam war, during the times of Nixon and the controversies of the 1960s and early ’70s, leading business people did their best to pretty much stay out of politics.”

Instead of a new trend of CEO outspokenness, it’s likely that this episode represents a unique moment when CEOs felt compelled to speak out.

A usually cautious lot

Typically, companies don’t take stances on political issues because they don’t want to alienate customers. They will lobby when their business is affected and occasionally criticize a president over a specific issue: Think insurance companies taking on Presidents Bill Clinton and later Barack Obama over health care. But CEOs tread carefully because a president wields enormous power and they don’t want a disagreement in one area to shut off possibilities of White House collaboration on other issues.

One thing that’s different in this case: Corporate leaders may feel they risk alienating customers if they don’t speak out.

The last time there was such a public break came in 1934, in the depths of the Great Depression, when General Motors’ Alfred Sloan and other corporate leaders broke with FDR’s then-radical programs for massive government intervention in the economy.

That corporate opposition was far more serious than today’s, professor Farber says, involving a well-funded effort to defeat Roosevelt in the 1936 elections. By contrast, corporate America today supports key parts of Trump’s agenda, especially tax reform and the push to reduce government regulation.

Early clashes with Trump

It was other White House policies, supported by a Trump voter base that includes white nationalists, that started the trickle of CEO discontent. In January, Amazon CEO Jeff Bezos, Apple’s Tim Cook, and many others condemned Trump’s ban on travel from certain Muslim-majority countries. In June, Tesla’s Elon Musk and Disney's Bob Iger quit the president’s strategic policy forum after he announced plans to pull America out of a UN climate-change accord.

Into the spring and summer, CEO criticism of Trump shifted, especially after the White House’s very public failure to push health-care reform through the Senate. Could the president get anything done? In May, billionaire investor Peter Thiel, one of Trump’s few backers in Silicon Valley, reportedly called the administration “incompetent.”

Last month, that frustration boiled over in public. “It’s almost an embarrassment being an American citizen traveling around the world,” Jamie Dimon, head of JPMorgan Chase, told investment analysts in a conference call to discuss quarterly earnings. “At one point we all have to get our act together or we won’t do what we’re supposed to do for the average Americans.”

The banker quickly walked back even that oblique criticism of the president. But after this week’s fumbles over condemning racism, Mr. Dimon took the gloves off.

“I strongly disagree with President Trump’s reaction to the events that took place in Charlottesville over the past several days,” he wrote in a memo to employees Wednesday. “There is no room for equivocation here: the evil on display by these perpetrators of hate should be condemned and has no place in a country that draws strength from our diversity and humanity.”

Diminishing expectations?

CEOs’ criticism of the administration as ineffective is worrying enough. A president who can’t show results loses allies quickly.

“Just like Republican senators have no fear of criticizing the president, so corporate America has made the judgment that this guy is not going to deliver what they want,” says Elaine Kamarck, founding director of the Center for Effective Public Management at the Brookings Institution.

The business community is by no means monolithic, so support for Trump varies by industry, sometimes by company. Still, his standing among CEOs as well as other influencers seems to be dropping. In February, 76 percent of executives said the new administration would help their businesses, according to a JPMorgan Chase survey. In June, a survey at the Yale CEO Summit (which included government officials and academics) found that half the participants gave the administration an "F."

Even his tweet attacks are losing their sting, at least on Wall Street. In December, when the president-elect criticized the costs of F-35 jet fighters, Lockheed Martin stock dropped more than 5 percent. On Wednesday, when Trump attacked Amazon for “doing great damage” to tax paying retailers, its stock fell 0.9 percent before fully recovering three hours later and then following the Nasdaq index.

Trump’s increasing political isolation has been magnified by his inability to bring the nation together after the tragedy in Charlottesville. At the moment, that leadership vacuum is being filled partly by CEOs.

A handful of executives quit his manufacturing advisory board after President Trump waited two days before specifically condemning the ideologies of white supremacists, the KKK, and neo-Nazis. A day later, after a press conference in which he seemed to defend some of the white nationalists, business leaders had had enough.

The chief executives on the two White House advisory boards held conference calls, reportedly deciding themselves to disband the Trump councils, a stunning reproach.

Constraints on CEO speech

Taking such high-profile positions on nonbusiness issues is an uncomfortable position for many CEOs. They want to avoid controversy, but the president’s comments were so out-of the-mainstream that taking a stand against them offered no downside.

“This was a no-brainer,” says Yvan Allaire, executive chair of the Institute for Governance in Montreal. But he cautions that this does not signal a new era of corporate outspokenness, because CEOs can’t say anything that would hurt their company’s value. Shareholders and hedge funds would be quick to punish the stock.

“CEOs are as moral a group of people as any other,” he says. “But their ability to take moral stands is constrained.”

Presidents can rebound, scholars stress – whether that means winning reelection or simply regaining some political traction. Ronald Reagan overcame a slow start and a deep recession to win reelection by a landslide, Farber points out. Despite deep opposition to his Vietnam War policies, Richard Nixon also was reelected overwhelmingly, famously appealing to the “silent majority.”

For Trump, a path toward regaining corporate support is to begin delivering on the campaign promises that attracted business leaders in the first place, notably tax reform.