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cTHE LAWS OF HIEF have long been 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 futile than ever. The world is becoming dangerous and chaotic as governments try to control corporate behaviour. Global companies and their leaders find themselves pulled in all directions.
Few multinational companies are unscathed. As tensions between China and America escalate, chip makers 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 outside investment include private equity giants and venture capitalists. Automakers who once stayed behind are now looking at their investments, as countries scramble to host the next electric car factory. China’s tech behemoths have been tamed by Xi Jinping. Everyone from bankers to brewers is caught up in America’s toxic culture wars.
All of this is tearing up the unspoken agreement between government and business that dominated America and much of the West after the 1970s. Businesses focused on shareholder value, by maximizing wealth for their owners, guaranteeing efficiency, prosperity and jobs. Governments set taxes and wrote regulations but generally left business alone. Although the benefits of the system were not evenly distributed across society, trade flourished and consumers benefited from greater choice and cheaper goods.
The rules have changed. Governments are getting bigger lead, prompted by fragile supply chains in the pandemic, a more dangerous China and the dangers of climate change. Company fogs a new approach is needed for a new age.
Businesses began to enter politics again before the Trump era. By taking a stand on social issues, bosses saw a way to celebrate their nostalgia for the republic – and certainly also a way to celebrate their virtues to their employees and customers. It was around this time that Larry Fink, the head of BlackRock, America’s largest asset manager, became an advocate of investing using environmental, social and governance principles, or esq.
But instead of solving social problems, that seemed to only deepen divisions. As we explained in an extended profile, Mr. Fink has been pilloried by the right for going too far and the left for not going far enough. He is not alone. Former Disney chief Bob Chapek’s gay rights battle with Florida’s Republican governor, Ron DeSantis, was one reason he lost his job. In Great Britain, Lady Alison Rose, head of NatWest, resigned when the bank fired Brexiteer Nigel Farage, partly because of his political views. Such meetings bruise egos but do little for the bottom line in the long run.
The real face is wider and the stakes are higher. Governments seem to be everywhere at once. They want to fix the problems of globalization by getting manufacturing jobs back. They want to enhance national security by protecting critical technologies. And they want to fight climate change by accelerating decarbonisation.
Each goal is worthy on its own terms. But the methods of making it happen are flawed, or involve trade-offs. Manufacturing jobs aren’t the high-earning prize they’re cracked up to be. About $1trn of green subsidies in America will reduce efficiency and increase costs for companies and consumers. America says national security requires a “small garden and a tall fence”, but unless policymakers are clear about the dangers of subsidies, export controls and investment curbs, the garden is likely to grow and the a higher fence. These crises affect large companies far more than arguments about who should use the bathroom. But, out of joint after the wakelash, few leaders are willing to say that.
Some companies wrap themselves in the flag, to become national champions. That’s been the norm for a long time in places like China and India, but it’s going to the West. After Intel broke up two American chip-making outfits last year, Pat Gelsinger, its boss, said he could “feel the national pride rising”. Similar jingoism has been exhibited over a generation AI. Many venture capitalists such as Marc Andreessen express horror at the risks posed by the Chinese. ai influencing the world.
Others hope that by keeping under the radar, they will avoid political flake. Taking a cue from Jack Ma, the once-beloved Alibaba boss who was mercilessly brought to heel by the Chinese government, fogs has gone out of public view. Pony Ma, the founder of Tencent, emerged recently just to pay lip service to new guidelines set by the Chinese Communist Party. In America, Shein, a fast-fashion giant that loves Gen Z customers, is doing its best to hide its Chinese roots. So also TikTok, which says it is a “myth” that Bytedance, its owner, is Chinese. Among the West CEOEven loudmouths like Elon Musk are learning the value of silence in China. His recent visit to the Tesla factory in Shanghai did not allow for the media. He didn’t even tweet.
But 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 only in America but also in Germany. The average American multinational has eight foreign subsidiaries; a giant like General Motors has a hundred. And what the boss sees as a stealthy under-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.
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What do you do? In a chaotic world, businesses cannot hide from politics and geopolitics. But the lesson of the wakelash is that speech can backfire. When deciding whether to speak up, global company leaders should use long-term shareholder value as their lodestar. The more directly what they say affects their business, the more credibility they will have and the less risk of exposing fraud or deceit.
This approach may include reminding politicians of the benefits that efficiency and openness once brought to economies around the world. When there seems to be a shortage of champions in governments for either, that would not be bad. ■
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