Sounding Board: Political fallout

As executives at Target discovered, a political donation can be a land mine for any retailer.

By Len Lewis

Free speech is the cornerstone of democracy. It’s also a messy business.

Target found this out in spades after making a $150,000 contribution to Minnesota Forward, a group that was backing Repub­lican gubernatorial candidate Tom Emmer, who opposes gay marriage and other rights for same-sex couples.

What followed was a firestorm of controversy with pickets calling for a boycott of Target stores, accusations of anti-gay activities against the chain that smacked of McCarthyistic jingoism—accuse first, then go looking for “facts” to support it. Target CEO Gregg Steinhafel made a rather courageous apology to employees, saying the contribution was meant to support economic growth and job creation in the state and that he was “genuinely sorry” for the unanticipated consequences.

In a way Steinhafel is lucky. He could have had to deal with hordes of angry waiters and waitresses, as happened when candidate Emmer said they were overpaid and should receive a sub-minimum wage and make up the rest in tips. Obviously, Emmer never worked in a restaurant.

But, the entire affair raises some interesting questions: Should retailers be so heavily involved in the political process? Are they prepared for the potential backlash on individual issues? Should there be greater transparency in corporate giving? These questions, and the fact that it didn’t do anything for customers, is why Sam Walton stayed out of politics for 20 years. The company didn’t even have a PAC until 1998.

Clearly, companies have a right to participate in the political process. The Supreme Court said so in January when it cast aside 100-year-old regulations and ruled that corporations can spend as much as they want to support candidates or parties of their choice.

Of course, what’s good for the goose… Therefore, the ruling applies to labor unions and other organizations as well. This wasn’t exactly a First Amendment grand slam, since it was a contentious 5-4 decision. But in the High Court, as in baseball, all you need is one run to win.

So the issue is not whether Target had the right to do what it did, but whether it didn’t think through the implications of its action. In its defense—although none is needed—Target has one of the best reputations in the industry when it comes to support of gay rights, contribution to the arts, schools and scores of community initiatives and social programs. There are few companies that are more transparent when it comes to corporate governance.

The latter has become a financial as well as a social imperative. The rules of the game are changing. It’s been estimated that $1 out of every $12 on Wall Street is handled by “socially responsible” investment firms, an added incentive for public companies to walk the talk.

Consider this. Three partners of the non-profit Center for Political Accountability that hold $57.5 million of Target stock—Calvert Asset Management, Walden Asset Management, and Trillium Asset Management—co-filed a shareholder resolution urging the company to adopt more comprehensive oversight and evaluation procedures for political spending. I’d like to note here that Target and Home Depot are the only retailers on the CPA’s list that agreed to full disclosure of corporate political activities.

Support of Emmer was a business decision, not social commentary. Should they be vilified for one misstep? No! Should they be more aware of the potential fallout of their decisions? Certainly! If for nothing else than for the well-being of its marketing people who have probably lost more sleep over this than anyone. Marketing and sales people hate to have their companies involved in public policy issues since their raison d’etre is to sell the brand and a brand that’s been tarnished by anything is just a tougher sell.

But in the end, and given the current political climate, it seems that retailers are caught in a “damned-if-you-do-and-damned-of-you-don’t” situation. Yet, there are some basic rules to follow:

  • It’s business, not personal. Don’t allow political contributions to be a cause celebre for any one executive.
  • Vet candidates fully to avoid being caught up in embarrassing positions or issues.
  • Analyze whether contributions really impact where people shop.

Finally, take some comfort in the words of one non-partisan philosopher who said: “Politicians are like diapers. They both need changing regularly and for the same reason.”

Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Com­munications, Inc. He is the author of The Trader Joe’s Ad­venture—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at lenlewis@optonline.net or at www.lenlewiscommunications.com.

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