In New Political Status Quo, Big Business Bucks the Right

By Greg Ip Features Dow Jones Newswires

In January, conservative legislators in Texas backed by Gov. Greg Abbott introduced a bill to regulate transgender access to public facilities such as bathrooms. That proposal went down to defeat Tuesday thanks in part to vociferous opposition by business leaders who condemned it as discriminatory and bad for the state's economy.

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In a business-friendly state where Republicans control the entire government, it's a stunning rebuke. It's also not an outlier. On Monday, the chief executives of Merck & Co., Intel Corp. and Under Armour Inc. all quit President Donald Trump's manufacturing council after his failure to immediately blame white supremacists for weekend violence in Charlottesville, Va.

These episodes show how big business has become, at least on social policy, a check on Mr. Trump and other Republicans, ordinarily their allies.

Politically, business leaders are risk-averse. They prioritize stability and the status quo. What has changed is the definition of the status quo. Gay and transgender rights, and taking action on climate change, were once liberal causes. They are now largely mainstream, particularly in big cities that are home to corporate head offices and the educated workers they covet. Businesses have adapted their own plans, policies and attitudes to this new mainstream. White supremacy, of course, isn't in the mainstream, but for some companies, being associated with a president who didn't clearly condemn it poses risks.

This changes the cost-benefit calculus for corporate executives: Speak up and embroil yourself in unwelcome controversy, or stay silent and invite the opprobrium of customers, employees, social media, foreign governments, and, for some, their own families and consciences. Increasingly, they have concluded that inaction is the riskier path. Merck Chief Kenneth Frazier quit Mr. Trump's manufacturing council despite his company's exposure to federal decisions on drug approvals and prices. Google fired an engineer who asserted biological reasons for why women are less suited than men for tech careers, drawing accusations of liberal intolerance.

Typically, business has been a follower on social issues. Anthony Chen, a sociologist at Northwestern University, recounts that in the 1950s businesses resisted equal-employment ordinances across the Northeast and Midwest until change became inevitable. In the 1960s, Southern hotels, lunch counters, restaurants and other businesses didn't back desegregation until the cost of sit-ins, protests and bad publicity came to surpass any potential loss of white customers. Once they opened themselves to black customers, sales boomed, Stanford University historian Gavin Wright wrote in 2008: "It is small wonder that so many Southern businessmen began to change their tune on the race issue at this time."

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Business opposition to the Texas bathroom bill was in great part driven by fear of the boycotts North Carolina experienced after passing a similar bill in 2016. ( That measure was watered down earlier this year.) The Texas Association of Business, the state's main business-lobby group, gathered more than 700 signatories in opposition, including the chief executives of Texas-based American Airlines Group Inc., Celanese Corp. and AT&T Inc. IBM Corp. warned the bill imperiled future hiring in the state where it now employs more than 10,000. This apparently swayed many state legislators, who adjourned their special session Tuesday without acting on the bill, thus killing it.

Business motives are more complex than just fear of bad publicity. Many companies were actually on the vanguard of extending equality to gays, and more recently transgender people, partly in order to attract employees or customers. Half of Fortune 500 companies provide transgender-inclusive health benefits -- up from none in 2002 -- and 61% offer domestic-partner benefits to gay couples, according to the Human Rights Campaign, which advocates for gay and transgender people. Restrictive legislation conflicts with those policies.

A similar dynamic is under way on climate. Nearly half the Fortune 500 has some sort of internal target for greenhouse-gas emissions, renewable energy or efficiency, according to the Carbon Disclosure Project, which advocates for climate action. Mr. Trump's decision to withdraw the U.S. from the Paris climate accord ran counter to their adoption of low-carbon technology.

For some executives, the considerations go beyond the economic. The bathroom bill "is not just going to hurt our business and our employees, it's a moral imperative not to discriminate against this already marginalized group of people," says Jim Reinhart, the head of Tekvox Inc., an Austin-based audio-visual technology startup that is part of the coalition that opposed the Texas measure. He told the state senate it exposed Texas to ridicule: "It makes us look like backward, bucktooth hillbillies."

The many technology companies that spoke out against Mr. Trump's proposed travel ban earlier this year were bothered less by any loss of foreign workers than its perceived stigmatization of Muslims.

This pushback against the right on many issues means Mr. Trump and Republicans can't count on reflexive support from business simply because they promise to cut taxes and regulations. That Merck's stock initially rose after Mr. Trump lashed out at Mr. Frazier for quitting the council won't go unnoticed by other CEOs contemplating a similar decision.

This offers Democrats an opening to grab business's support, although that could be difficult to reconcile with internal pressures to move left on economic issues. Business could find itself a counterweight to both parties, its loyalty up for grabs.

Write to Greg Ip at greg.ip@wsj.com

(END) Dow Jones Newswires

August 16, 2017 12:23 ET (16:23 GMT)