Knowledge @ Wharton

How North Carolina’s Anti-discrimination Law Is Redefining Corporate Activism

Apr 07, 2016

Corporate activism to force public policy change entered a new phase over the past week with a growing number of companies protesting a North Carolina law that prevents local governments from passing rules that protect lesbian, gay and transgender people (LGBT) from discrimination. Charlotte, N.C.-based Bank of America is the latest heavyweight to join the campaign, along with 125 other companies including Facebook and Apple. Reaction to the law, along with outcry over similar legislation in states including Georgia and Indiana, shows how the role of corporate leaders in the communities in which their companies are based is being redefined, according to experts at Wharton and elsewhere.

The provocation was a civil rights ordinance passed in February by the city of Charlotte that would have prevented businesses from discriminating against gay, lesbian, bisexual and transgender people. The law was set to take effect on April 1, but the North Carolina legislature subsequently passed a statewide nondiscrimination ordinance that explicitly supersedes any local nondiscrimination measures. The statewide protections cover race, religion, color, national origin and biological sex — but not sexual orientation or gender identity, as NPR reported. In effect, the state law prevents local governments like Charlotte from passing anti-discrimination laws to protect LGBT people.

“Corporations are getting involved here in a way that is historic,” said Wharton professor of operations, information and decisions Maurice Schweitzer, noting the “rise of CEO activism.” He pointed to earlier occasions where Apple CEO Tim Cook has advocated for gay rights and Starbucks CEO Howard Schulz’s social activism efforts. “Corporations are getting more actively involved, not just to promote their own narrow economic interests, but [also to push for] social policy change,” he added.

Corporate activism goes back a long time, noted Timothy Werner, professor at the McCombs School of Business at The University of Texas at Austin. “There are many historical analogs with the civil rights movement, when much legislation enacted during that period was in part because of economic pressure,” he said. He added that the North Carolina issue over LGBT protection against discrimination is “straightforward” and not nearly as controversial as same-sex marriage as a public issue. He noted that the majority of the public has been in favor of protection against workplace discrimination since polling began on such issues in the l970s.

“Being an executive today in a corporation means you have to not only mind the shop but you also have to keep an ear out for politics.” –Maurice Schweitzer

The whole debate is a telling commentary about the level of acceptance of LGBT people, according to University of Pennsylvania Law School professor Tobias Barrington Wolff. “The fact that we are still in active debate over the basic question of whether LGBT people should have protection in the workplace [or] in places of public accommodation from outright policies of discrimination … is different from the phase that we are in relative to other kinds of discrimination like race, national origin and gender,” he said. He noted that for the most part, for issues relating to race, national origin and gender, protections have existed and have been accepted in the workplace and the marketplace for some time.

Schweitzer, Wolff and Werner discussed the rise of corporate activism against the backdrop of the North Carolina controversy on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

Tough Talk from Boardrooms

According to Schweitzer, at the national level, there is overwhelming support for promoting the LGBT community. He noted that some companies articulated their displeasure openly, like Wells Fargo, which lit up its offices at the 48-floor Duke Energy Center in Charlotte in pink, white and blue (the colors of the transgender pride flag) to show support for the LGBT community.

Entertainment producer Lionsgate has decided to move production of a new Hulu show from North Carolina to Canada in protest against the law. PayPal officials have also said that the company is canceling a planned $3.6 million expansion in North Carolina in response to the law. By all indications, that list of corporate protests seems set to grow longer, and it’s not just limited to North Carolina — Disney, Apple, Time Warner and Salesforce were the among the companies that protested a planned “religious liberty” bill in Georiga, which was ultimately vetoed by Gov. Nathan Deal. Protests by companies including Angie’s List and the NCAA led to revisions of a similar law passed in Indiana last year.

Schweitzer noted that such protests are consistent with the brand positioning of some companies. “They are on safe ground promoting LGBT rights because if they are a national brand, that is the right thing for them to do,” he said.

“We are at a turning point where we’ve begun to decouple the pro-business economic values from what were very conservative social values.” –Maurice Schweitzer

In any event, the defining new trend as an upshot of the North Carolina controversy is the increasing importance of corporate activism, said Schweitzer. “Being an executive today in a corporation means you have to not only mind the shop, but you also have to keep an ear out for politics,” he added. “We are seeing a greater sense of responsibility placed on executives, and we’re expecting executives to be not just corporate leaders, but also to be social leaders.”

Protection Gaps

According to Wolff, LGBT people don’t have explicit protection against discrimination under state law in many states. At the same time, the status of the protection they could get under federal law is “complicated,” he said. Schweitzer also said that no federal statute exists “that is dedicated to protecting LGBT people explicitly in the workplace.” Against that backdrop, he questioned the correctness of the North Carolina legislature taking “this kind of targeted, hostile, discriminatory action toward its LGBT citizens.”

Wolff suggested that North Carolina took too tough a line on trying to curtail LGBT protections. “Basically, what North Carolina said is that it is committed to preventing LGBT people from getting protection from discrimination, [and] that [it would] restructure the entire way state, county and local governments work in North Carolina around the issue of workplace discrimination laws and labor laws just so that we can prevent more progressive cities like Charlotte from extending these protections. It is a radical way of restructuring state governments simply in order to deny these protections to LGBT people.”

He noted with dismay that “hostile elected officials [try] to use mistreatment of transgender people in particular and the question of what facilities — bathrooms and locker rooms — transgender people are going to use as a wedge issue.” He said they use it “as a way of inflaming people’s passions often in a misleading and disingenuous debate and using that issue in order to implement regressive change in the law across the board.”

“In terms of a legislative repeal of this law, the key factor would just be what we call ‘generational replacement.'” –Timothy Werner

Would North Carolina’s governor Pat McCrory back down in the face of those protests? That doesn’t seem likely, Wolff noted. He pointed to a video the governor released on his official YouTube channel “in which he doubled down on this law” the state has passed. “He is turning this into a campaign issue — he is running for re-election,” said Wolff. For the controversial law to be dismantled, it would take either a court decision declaring it to be in violation of federal law or the U.S. Constitution, or repealed through another act of the legislature.

Wolff said while the repeal seems unlikely, some lawsuits have already been filed raising “serious questions about … the legality of this provision under federal law.” Perhaps the millennial generation will show the way forward, Werner suggested. “In terms of a legislative repeal of this law, the key factor would just be what we call ‘generational replacement,'” he said. He explained that as a phenomenon where the electorate changes as baby boomers retire and millennials continue grow as a proportion of the population, especially the voting-age population.

Schweitzer said the controversy is divisive. “We are at a turning point where we’ve begun to decouple the pro-business economic values from what were very conservative social values,” he said. “At the national level, you see leading Republican candidates talking about anti-trade legislation. It used to be the Republican Party was the party of free trade [and] open markets. It is a wedge and will reshape our political landscape.”