Signalling Corporate Values

Millions in America just wanted to be entertained. Tuned in to the biggest football game of the year, they expected to see big plays, a flashy halftime show, and some funny commercials of dogs or idiots drinking beer. Instead, many felt an ongoing continuation of noisy politics. Hundreds of millions of dollars were spent on campaign ads in the 2016 presidential election. For a viewer, there was no escaping it. Political advertisements sometimes ran wall to wall for entire commercial breaks. This went on for months. And much to the viewer’s chagrin, it has continued past election day. The 2017 Super Bowl had many overtly political ads, each one garnering considerable news coverage as well. Audi ran an ad on equal pay for women, and articles covered it before and after the big game. Google pitched its Home device with subtle, but still clear, displays of multi-culturalism. Likewise for AirBnB. Budweiser aired a triumphant telling of their immigrant history. 84 Lumber followed the journey of a woman and her daughter journeying north to America, apparently so controversial they had to cut the ending. Can’t we just kick back and relax in one politics-free zone? Is there no safe retreat for the politically weary American? So long as people are so impassioned and so inflamed, and particularly in the era of Trump, there will be companies that want to run their ad campaigns around politics. And behind these ads are strong business reasons.

Why do brands want to get involved in social issues at all? Of an infinite universe of ideas and opinions about them, buyers and sellers should only need to agree on one: price. The buyer values the widget more than their money, and the seller thinks otherwise. The transaction is completed, and both parties move on. Do they need to agree on what caused the Civil War? Are their views on marijuana compatible? Neither should matter. Any issue a corporation takes a stand on, so long as it’s relevant, divides its pool of potential buyers. Likewise, any boycott a consumer participates in will limit the range of sellers, raising the price someone has to pay at the register. Companies also aren’t particularly good at political advertising. Values pushed through committees and focus groups come often come out tone-deaf or poorly done. Nevertheless, companies are continuing to wade into social stances, and over the past couple years have seemingly increased their desire to do so. Companies, especially public ones, exist solely to make money, so there must be something beyond an Econ 101-level understanding of their markets.

This phenomenon stems from the self-sorting of America. Over the past several decades, liberals have clustered in coastal states and cities, and conservative Americans are much more likely to live in rural districts in the middle of the country. This has been reinforced by a migration of younger Americans into cities. Cities have grown faster than the rest of the country, with just 144 counties in the U.S. hosting over half the population. This clustering brings a sharp disconnect with political reality in America. The spread of power between states and among the members of congress is based on geography. Tight packing in just a handful of locations dilutes the political power of like-minded individuals, in this case the left-leaning areas. This means that there can be quite deep support for a single issue, while still having little reflection in the makeup of the national government or large stretches of the country. Only 55% of Americans overall support gay marriage, but it jumps to 71% among millennials. It’s rare for surveys like these to take into account location, though. So while a large percentage of the country might favor something, they might only be able to vote for the same handful of politicians.

The clustering of similar minds only reinforces viewpoints, and reduces opportunities to interact with the other side. Many Americans would be more troubled by their child marrying someone of the opposite party than a different religion or skin color. Some marriages are already ending over Trump. This means Americans increasingly identify with their political representatives: content when in power, and loudly unhappy when not. With few official political outlets to express themselves, people like to turn to the public pedestals of movies, sports, and consumption. “Voting with your wallet” via boycotts is usually a wash, economically. It may make the consumer feel good for the time being, but the companies involved rarely see any major changes in revenue or profits. Increased media attention can sometimes achieve the desired outcomes, though, because the court of public opinion is always in session. And there have been some recent successes. Bill O’Reilly, the most successful and popular late-night pundit, was forced out at Fox News due to a boycott. Grabyourwallet.org is also seeing moderate successes.

While politics caters to geography and voters, business cares about the raw numbers of people. And the electorate looks very different from the coveted consumers. The key demographic is younger than the average voter, almost by definition. It’s also less geographically important. A sale is a sale regardless of where it was made, or whether the buyer was eligible. Likewise, millions who didn’t or can’t vote still drink soda. Trump may have been victorious in electoral votes, but he lost the popular vote by 3 million. Targeting younger voters also means targeting people who are more likely to live in cities, more likely to live along the coasts, and more likely to be non-white. Large brands are going to go where the disposable income is, and it’s with people who are decidedly more liberal than conservative voters.

Corporations are people, my friend. And I mean that in the true spirit of Romney’s famous quote: companies are comprised of people. Those people have opinions on issues and, in some cases, they are quite strong. There are gay CEOs and gay board-members. And employers are finding an increasingly tight labor market in which to attract new workers, especially college-educated ones. Desire to replace retiring baby-boomers with up-and-coming millennials is driving corporations leftward. Companies are responding to America’s self-sorting with a similar migration to city-centers. The relative power of corporations is also shifting. The top 4 firms by market capitalization in 2017 are all technology companies, with coastal headquarters and young, global workforces. Just ten years ago, only Microsoft was even in the top ten, with oil and gas firms much more heavily represented. In addition, workforces are more global, and earn more international income, than ever before. All of this means that companies are attracting liberal-thinking employees with a more global perspective. The employees will, over time, impact each corporation’s internal group-think, reinforcing the initial goal of attracting young workers.

Companies’ adventures in social politics have their limits. Even non-cynics can doubt the sincerity, or at least the depth, of most corporate “values.” Audi, who ran the women’s pay commercial, has a board that is 100% old, white men. If not for Dr. Bernd Martens’ lack of glasses, there would no distinguishing features to separate any of the seven board members(I advise against using their faces in a game of Guess Who). Advertisements never mention how the companies, or their consumers, can actually help to move an issue forward, besides buying their wares. And vocal support for issues has so far been limited to issues with large and growing agreement among the young. We’re much less likely to see advertisements on social issues that are 50–50, like gun control or abortion. They will probably never advertise on policies that more directly impact them, such as trade, taxation, or regulation. It’s much easier to boldly declare your values when you’re sure everyone else shares them. Thus, the bulk of these advertisements fall into the category of virtue signalling.

Donald Trump’s election capitalized on the polarization and sorting of the country, and has made it much more visible. His rhetoric and actions have made the debate over political issues more personal and more public. No previous candidate has been more brazen in their personal life, or so vindictive on the campaign trail. Women’s issues, civil rights, and immigration will continue to be seen in commercials, because they are easily associated with him and have broad and growing support among key demographics. For large brands, the image of where you stand can matter a lot. Taking a stand can earn easy support from your consumers. Even if companies don’t explicitly state their virtues, they run the danger of accidentally getting associated with the other side. Threat of boycott may even get the President’s attention. If Trump remains as unpopular as he is, his family already fears they might only be able to build hotels in Oklahoma or the Ozarks. Won’t that be a sight.

I believe we will continue to see vocal, yet hollow, political advertisements because:

  • Americans have been self-sorting for the past couple decades.
  • Consumers have shown a willingness to play politics with their consumption, with increasing effectiveness.
  • Consumer demographics share little with the demographics of the electorate. The most coveted consumers are younger, more coastal, more international, more urban, and darker skinned. Each attribute makes consumers more socially progressive than the current US legislative composition.
  • Companies are competing for young workers, and are increasingly located in liberal areas.
  • Companies have more offices abroad and larger slices of international sales than ever before.
  • Quite a few social policies have high, and growing, support numbers among young Americans.
  • Appealing to liberal social policies is a way to both make money and attract talented workers.
  • Not advertising your “values” runs the risk of future boycotts.

Companies, however, are not advertising “how” they are achieving or fighting for their social beliefs, or how viewers could support issues themselves (other than using their products). This makes the advertising mostly substance-free.

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