Politics moves into the boardroom

Though never easy, the job of managing a global corporation has gotten much harder in recent years. Just ask Facebook CEO Mark Zuckerberg.

With his summons to testify before Congress on how the personal information of Facebook users ended up in the hands of a data analysis firm with ties to President Donald Trump's 2016 campaign, Zuckerberg is being forced to deal head on with the political fallout from his company's spectacular growth as an intermediary for communication and news consumption.

That is something Zuckerberg has been loath to do. When evidence first started emerging in late 2016 that fake news transmitted over social media networks might have influenced the outcome of the election, Zuckerberg dismissed the notion as a “crazy” idea. But concerns continued to mount, and last fall Facebook, Twitter, and Google were forced to send executives to testify before Congress on the issue.

This time, lawmakers are demanding that Zuckerberg himself come.

To be sure, politics has always been an important factor in the business operating environment, forcing companies to rapidly adjust to unexpected developments and develop plans for minimizing exposure to risks. But a weakening of international rules, heightened polarization, and rapid technological change are creating ever more volatile conditions for firms to navigate.

What's more, given their size, global companies and the executives running them are increasingly seen by society as political actors, KPMG and Eurasia Group write in a report entitled “The CEO as Chief Geopolitical Officer.” In this environment, a company's CEO is expected to actively engage in government and public relations and even to take stances on issues of public concern. “Any CEO who appears unprepared on political matters of public interest may be seen as aloof at best, and inauthentic at worst,” the report says.

This expectation has driven a new wave of corporate activism in the US over the last couple of years, mostly in response to the concerns of progressive segments of the population. Following Trump's surprise election in 2016, many companies responded to calls to boycott his family businesses over the president's controversial rhetoric and policy proposals. Retailers such as Nordstrom and Gilt, for example, dropped Ivanka Trump's fashion line.

More recently, following the school shootings in Parkland, Fla., companies such as Delta and Hertz moved to distance themselves from the National Rifle Association by ending benefits for its members. Georgia lawmakers responded by eliminating tax breaks for Delta over the decision. As conservative forces also start to mobilize, companies are discovering that the effects of activism can cut both ways.

Please view the full KPMG/Eurasia Group report for more discussion of the political challenges faced by today's CEOs.