June 19, 2012 at 7:58 AM ET
Board members come under fire from shareholders all the time over their fiscal responsibilities but now there's a new battle brewing in the boardroom: Social issues like gay rights.
When activist investor Carl Icahn recently took on Chesapeake Energy over allegations of misuse of company funds by CEO and Chairman Aubrey McClendon, the company acted quickly, announcing McClendon would be stripped of his chairman title and agreeing to replace four board members.
How the board manages a company’s money is of direct interest to shareholders. But how important is it for a board member to agree with a company’s policies on social issues if they are going to sit on the board? Will a contradiction have broader implications for clients, customers, and shareholders of both organizations?
The CEOs of telecom giant AT&T and accounting firm Ernst & Young find themselves in a unique position: Both CEOs and their companies have a strong record on supporting lesbian, gay, bisexual, and transgender (LGBT) rights. Both companies have recently issued statements in support of gay rights. But both CEOs sit on the board of the Boy Scouts of America, which has a policy that doesn’t allow individuals who are openly gay to be members or serve as Scout leaders.
Gordon Bethune, the former CEO of Continental Airlines who serves on the boards of Honeywell, Sprint Nextel, Prudential, and the New York Academy of Art, said it’s normal for directors not to be in sync on every issue with the companies whose boards they serve on.
“I don't believe any person working with a nonprofit or publicly/privately-owned company will ever be 100 percent aligned with everything another group they belong to has as a stated policy,” Bethune said. “Just look at all the elected Democrats or Republicans who disagree on some elements of their party's platform.”
Stephen Mader, vice-chairman and managing director for board services at executive-recruiting firm Korn/Ferry International agrees.
“Each member of a board who serves from another organization cannot be expected to bring all of the values and public policies of their own organization to another,” Mader said. “If the board member finds the values and policies of that board are inconsistent with his own and not intended to be remedied then he should resign, not to protest but to be free of personal conflict.”
The Boy Scouts of America recently agreed to review its ban on gay Scout leaders but said a decision likely wouldn’t be made until 2013.
Steven Spielberg used to sit on the advisory board of the Boy Scouts of America but resigned in 2001, citing his conflicting views with the organization.
"The last few years in scouting have deeply saddened me to see the Boy Scouts of America actively and publicly participating in discrimination. It's a real shame," Spielberg said when he announced his resignation. "I thought the Boy Scouts stood for equal opportunity and I have consistently spoken out publicly and privately against intolerance and discrimination based on ethnic, religious, racial and sexual orientation."
Both AT&T and Ernst & Young have issued statements in recent months stating their support of gay rights but neither CEO has suggested the conflicting viewpoints could lead to their resignations from the Boy Scouts board.
The Boy Scouts said it accepts that some of its board members will have differing viewpoints from the organization.
“The Boy Scouts of America respects the opinions of our board members and are thankful for their leadership. While we have supporters and board members with different viewpoints on this issue, and who may choose a different direction for their organizations, we believe that good people can personally disagree on this topic and still work together to accomplish the mission Boy Scouts of America,” a spokesman said.
In some cases, a board member’s personal beliefs have significantly influenced the company’s policies.
Henry Paulson, former Chairman and CEO of Goldman Sachs , also served as chairman of the Nature Conservancy. While CEO, Paulson advocated that the firm adopt more environmentally conscious policies. Some investors grumbled this would stand in the way of profit-making but the firm stuck to its guns and to this day is known for its commitment to the environment — as well as profits.
Contradictions between a board member’s beliefs and company policy can have an impact on the company’s bottom line. Tom Monaghan, founder and former CEO of Domino’s Pizza , donated money to several pro-life organizations, prompting a boycott from many pro-choice backers. Some Domino's franchises located near college campuses experienced a significant, albeit temporary, drop in sales, prompting the company to issue a statement that Monaghan wouldn’t give more money to pro-life groups.
The resolution to get the Boy Scouts to reconsider its position was first proposed in April after Jennifer Tyrrell, an Ohio mom, was fired as a den leader of her son’s Tiger Scouts troop because she was openly gay. She launched a petition via Change.org to get the Scouts to reconsider their position.
Recently, Tyrrell launched another petition asking the CEOs of AT&T and Ernst & Young to use their status on the board to get the Scouts to drop their ban on gay leaders and troops.
"As board members of the Boy Scouts of America, the CEOs of Ernst & Young and AT&T have the unique ability to influence Boy Scouts policy from within. Both of these CEOs are leaders of companies with near perfect records on gay rights, and have often touted their commitment to diversity and inclusion,” Tyrrell said, adding she hopes they “take this opportunity to speak up for equality, just like their companies do on a regular basis."
That just may be what both CEOs will do.
Ernst & Young Chairman and CEO James S. Turley, who sits on the board of the Boy Scouts, said he plans to use his position on the board to encourage a dialogue on the issue.
“Ernst & Young is proud to have such a strong record in LGBT inclusiveness. As CEO, I know that having an inclusive culture produces the best results, is the right thing for our people and makes us a better organization,” Turley said. “I support the meaningful work of the Boy Scouts in preparing young people for adventure, leadership, learning and service; however the membership policy is not one I would personally endorse. As I have done in leading Ernst & Young to being a most inclusive organization, I intend to continue to work from within the BSA Board to actively encourage dialogue and sustainable progress.”
After that statement of support from Turley, Tyrrell dropped Ernst & Young from the petition.
AT&T Chairman and CEO Randall Stephenson reiterated the telecom giant’s support of gay rights, but didn't go so far as to say he would use his position to take up the issue with the Scouts.
"Diversity and inclusion are part of AT&T’s culture and operations,” Stephenson said. “We don’t agree with every policy of every organization we support, nor would we expect them to agree with us on everything. Our belief is that change at any organization must come from within to be successful and sustainable."
Reactions to companies’ support of gay rights have been mixed: Goldman Sachs lost an unnamed client after CEO Lloyd Blankfein publicly endorsed same-sex marriage in a video, though Goldman said it has no plans to change its position on same-sex marriage. JCPenney came under fire from a conservative group called “One Million Moms,” a division of the American Family Association, after it chose openly gay TV host Ellen DeGeneres as its spokesperson. One Million Moms had threatened to boycott the retail chain but later backed down after it found itself under fire for its position.
There’s a growing almost intolerance among new generations of consumers for companies and brands that don’t support gay rights and an almost viral support of the ones that do. When JCPenney came under fire for its choice of Ellen DeGeneres, Facebook was peppered with people saying they now intended to shop at JCPenney in a show of support.
The size of the Facebook group “1 Million People Who Support Ellen for JCPenney” quickly surpassed that of the One Million Moms. And it is now five times the size of the original moms. The pro-Ellen Facebook Group has nearly 250,000 “likes” on Facebook compared to the moms’ 50,000.
"Corporate America has found that it's a smart business decision to stand with the majority of Americans who support gay and lesbian couples," said Rich Ferraro, vice president of communications at GLAAD. "Companies that actively support anti-gay causes are being met with vocal disapproval from the gay community as well as their friends and families, while brands like JC Penney, Johnson & Johnson and Gap are building loyal consumer bases simply by being inclusive.”
Medical-products maker Johnson & Johnson recently partnered with the non-profit Parents, Families and Friends of Lesbians and Gays to help stop gay bullying. Both JCPenney and Gap have recently launched advertising campaigns that depict gay couples. And Target, which is based in Minneapolis, recently started selling T-shirts to raise money for a group that’s trying to defeat the gay-marriage ban in Minnesota. The shirts say things like “Harmony” and “Pride” and one, designed by singer Gwen Stefani, features a rainbow and cloud and says, “Love Is Love.”
Retail analyst Stacey Widlitz sees momentum in corporate America supporting gay rights. What started as grassroots support at the consumer level has reached the highest levels of business and government with JC Penney and even President Obama coming out in support of gay rights, she said.
Support for the gay community “will become an increasing theme for retailers,” Widlitz said. “If they don’t, they will be left behind.”