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Bosses will pay a price for mixing politics and corporate values – The Economist

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The downsides of CEO activism will become rather clearer in 2020

The World in

THERE USED to be an iron rule for any American boss tempted to talk about politics: don’t. Recently, this rule has been discarded as chief executives have been drawn into taking stands on inequality, the culture wars and climate. So far they have had an easy ride: it is more fun to outline your vision for humanity than for increasing EBITDA margins. But in 2020 this new breed of activist CEOs will face three problems that politicians know well: the charge of hypocrisy, the risk of a recession and destabilising ideological shifts.

Corporate America’s drift away from political neutrality and inactivity began after the financial crisis in 2008-09. Banks gave displays of contrition. A new generation of woke consumers and workers grew up during the crisis. Some were preoccupied by cultural injustices; others attacked capitalism, too. Climate change became an urgent problem and economic nationalism meant firms had to demonstrate their patriotism.

Bosses have responded to these signals. Jamie Dimon, of JPMorgan Chase, pens 50-page letters, ostensibly to its shareholders: the latest touches on education, and military procurement and demands “CEOs: your country needs you!” Silicon Valley chiefs humour a minority of radicalised employees. Bosses like to claim their firms are leading the fight against carbon emissions. In 2017 bosses joined flag-waving summits in the White House. And over 180 CEOs have signed a declaration by the Business Roundtable that their objective is not just to serve shareholders, but customers and workers, too.

Business folk are motivated by idealism, vanity and calculated self-interest. But it also helps that, so far, CEO activism has been cost-free. Like some politicians, some bosses gladly take credit for things they do not control. Most of the CEOs who pledge to fight climate change do not run firms that are responsible for it. Take the biggest 200 Western firms that disclose emission figures. Of these, the top 20 are responsible for 70% of all emissions: the other 180 don’t matter much. And like some politicians, some CEOs make promises they don’t keep. Despite the Roundtable’s concern for workers, executive pay is rising and there is no sign of a rethink on how the spoils are split between labour and shareholders. Profits for the S&P 500 index are forecast to rise by 8% in 2020.

By then the three downsides of CEO activism will have become more apparent. First, the accusations of hypocrisy: it is not hard to find. Nike, which has pushed virtuous branding, has been embroiled in a doping scandal. BlackRock, a fund manager that pushes other firms to invest more, spent over 100% of its own cashflow on buybacks in the past 12 months. Visa signed the Roundtable letter championing customers, but is part of a payments oligopoly. If the inconsistency between bosses’ words and actions becomes too glaring, reputations can suffer, as Mark Zuckerberg of Facebook knows.

Second, if there is a recession, CEO activists will struggle to reconcile the interests of employees and their fiduciary duty to shareholders. In the past two downturns American firms cut their wage bill by 6%; if they had not, profits would have been 24% lower. This flexibility is a hallmark of American capitalism. The conflict between business logic and political posturing is already evident at firms facing technological disruption. Consider Mary Barra of General Motors, a prominent Roundtable signatory. In September 2019 she faced a strike by 46,000 workers who complained of unfair pay and factory closures as she tries to shift GM to electric vehicles.

And third, as any member of Congress will tell you, the ideological ground can shift quickly. CEOs hope that by adopting social and political causes they will defuse more radical sentiments. Dream on. The presidential campaign in 2020 will feature lots of criticism of big business, some of it legitimate. Democrats’ proposals include workers on boards, beating up health-care firms and tackling monopolies, most obviously in big tech.

No such thing as a free declaration
By the end of 2020 the leaders of America Inc will realise that political posturing is no free lunch. Many will worry that it is a gimmick that elicits a backlash. Prudent firms will adopt a simpler vision: it is the job of government to set the rules, and the job of companies to maximise value within these rules. That means delighting customers (including socially conscious ones), investing in profitable innovation (including in green technologies), and attracting workers (sometimes by paying them more). It doesn’t mean standing on a soap box. That is what politicians are paid (much less) to do.

This article appears in “The World in 2020”, our annual edition that looks at the year ahead. See more at worldin.economist.com.

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Youri Chassin quits CAQ to sit as Independent, second member to leave this month

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Quebec legislature member Youri Chassin has announced he’s leaving the Coalition Avenir Québec government to sit as an Independent.

He announced the decision shortly after writing an open letter criticizing Premier François Legault’s government for abandoning its principles of smaller government.

In the letter published in Le Journal de Montréal and Le Journal de Québec, Chassin accused the party of falling back on what he called the old formula of throwing money at problems instead of looking to do things differently.

Chassin says public services are more fragile than ever, despite rising spending that pushed the province to a record $11-billion deficit projected in the last budget.

He is the second CAQ member to leave the party in a little more than one week, after economy and energy minister Pierre Fitzgibbon announced Sept. 4 he would leave because he lost motivation to do his job.

Chassin says he has no intention of joining another party and will instead sit as an Independent until the end of his term.

He has represented the Saint-Jérôme riding since the CAQ rose to power in 2018, but has not served in cabinet.

This report by The Canadian Press was first published Sept. 12, 2024.

The Canadian Press. All rights reserved.

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‘I’m not going to listen to you’: Singh responds to Poilievre’s vote challenge

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MONTREAL – NDP Leader Jagmeet Singh says he will not be taking advice from Pierre Poilievre after the Conservative leader challenged him to bring down government.

“I say directly to Pierre Poilievre: I’m not going to listen to you,” said Singh on Wednesday, accusing Poilievre of wanting to take away dental-care coverage from Canadians, among other things.

“I’m not going to listen to your advice. You want to destroy people’s lives, I want to build up a brighter future.”

Earlier in the day, Poilievre challenged Singh to commit to voting non-confidence in the government, saying his party will force a vote in the House of Commons “at the earliest possibly opportunity.”

“I’m asking Jagmeet Singh and the NDP to commit unequivocally before Monday’s byelections: will they vote non-confidence to bring down the costly coalition and trigger a carbon tax election, or will Jagmeet Singh sell out Canadians again?” Poilievre said.

“It’s put up or shut up time for the NDP.”

While Singh rejected the idea he would ever listen to Poilievre, he did not say how the NDP would vote on a non-confidence motion.

“I’ve said on any vote, we’re going to look at the vote and we’ll make our decision. I’m not going to say our decision ahead of time,” he said.

Singh’s top adviser said on Tuesday the NDP leader is not particularly eager to trigger an election, even as the Conservatives challenge him to do just that.

Anne McGrath, Singh’s principal secretary, says there will be more volatility in Parliament and the odds of an early election have risen.

“I don’t think he is anxious to launch one, or chomping at the bit to have one, but it can happen,” she said in an interview.

New Democrat MPs are in a second day of meetings in Montreal as they nail down a plan for how to navigate the minority Parliament this fall.

The caucus retreat comes one week after Singh announced the party has left the supply-and-confidence agreement with the governing Liberals.

It’s also taking place in the very city where New Democrats are hoping to pick up a seat on Monday, when voters go to the polls in Montreal’s LaSalle—Émard—Verdun. A second byelection is being held that day in the Winnipeg riding of Elmwood—Transcona, where the NDP is hoping to hold onto a seat the Conservatives are also vying for.

While New Democrats are seeking to distance themselves from the Liberals, they don’t appear ready to trigger a general election.

Singh signalled on Tuesday that he will have more to say Wednesday about the party’s strategy for the upcoming sitting.

He is hoping to convince Canadians that his party can defeat the federal Conservatives, who have been riding high in the polls over the last year.

Singh has attacked Poilievre as someone who would bring back Harper-style cuts to programs that Canadians rely on, including the national dental-care program that was part of the supply-and-confidence agreement.

The Canadian Press has asked Poilievre’s office whether the Conservative leader intends to keep the program in place, if he forms government after the next election.

With the return of Parliament just days away, the NDP is also keeping in mind how other parties will look to capitalize on the new makeup of the House of Commons.

The Bloc Québécois has already indicated that it’s written up a list of demands for the Liberals in exchange for support on votes.

The next federal election must take place by October 2025 at the latest.

This report by The Canadian Press was first published Sept. 11, 2024.

The Canadian Press. All rights reserved.

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Social media comments blocked: Montreal mayor says she won’t accept vulgar slurs

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Montreal Mayor Valérie Plante is defending her decision to turn off comments on her social media accounts — with an announcement on social media.

She posted screenshots to X this morning of vulgar names she’s been called on the platform, and says comments on her posts for months have been dominated by insults, to the point that she decided to block them.

Montreal’s Opposition leader and the Canadian Civil Liberties Association have criticized Plante for limiting freedom of expression by restricting comments on her X and Instagram accounts.

They say elected officials who use social media should be willing to hear from constituents on those platforms.

However, Plante says some people may believe there is a fundamental right to call someone offensive names and to normalize violence online, but she disagrees.

Her statement on X is closed to comments.

This report by The Canadian Press was first published Sept. 11, 2024.

The Canadian Press. All rights reserved.

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