Getting Political: As More Companies #BoycottNRA, Legal Departments Have Much to Consider
The #BoycottNRA movement is reaching Corporate America, leaving companies and their legal departments to decide: Are you in?
March 01, 2018 at 03:11 PM
6 minute read
Dick's Sporting Goods Inc. announced Wednesday morning it will no longer sell firearms to those under 21 years of age, and is removing assault-style rifles and high-capacity magazines from its stores.
The company said its announcement was inspired by calls for tighter gun control from students who survived the Feb. 14 shooting at Marjory Stoneman Douglas High School in Parkland, Florida. The shooter bought a gun from Dick's last November.
“Following all of the rules and laws, we sold a shotgun to the Parkland shooter in November of 2017. It was not the gun, nor type of gun, he used in the shooting. But it could have been,” the company said in a statement. “Clearly this indicates on so many levels that the systems in place are not effective to protect our kids and our citizens. We believe it's time to do something about it.”
And the Coraopolis, Pennsylvania-based company isn't alone in taking a public stance on gun control in the wake of the shooting. Walmart also announced on Wednesday it would no longer sell fire arms and ammunition to those under 21.
In the past week, Enterprise Holdings, Hertz and Avis Budget Group, the three largest American rental-car companies, announced they were ending their discount program for National Rifle Association members. Hertz and Budget were tagged in tweets pressuring the companies to end their discounts to NRA members. Delta and United Airlines have also cut ties.
When faced with the option of taking a stand on a political issue, companies have plenty of risks and rewards to weigh. Legal departments and their leaders can play a major part in helping the company brass decide how to proceed.
“The general counsel is going to be in a good position to say to company executives or employees who might be emotionally involved, this is really, at the end of the day, a calculation you have to make,” said Jill E. Fisch, the Perry Golkin Professor of Law at the University of Pennsylvania Law School. “There's nothing wrong per se in getting involved politically, but you have to think, 'Who are the relevant constituencies, let's not jump to adopt a particular perspectives, let's think carefully.'”
According to poll results from Morning Consult released Wednesday, 58 percent of Americans think it's appropriate for companies to take part in the gun control debate, and 71 percent said it's important for companies to take a stance on social issues in general.
Charles Elson, the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware and vice chairman of the ABA Business Law Section's Committee on Corporate Governance, is not in that 71 percent.
“Companies stay out of political disputes for very good political reason,” Elson said. “The problem is companies are economic vehicles that represent shareholders with other economic interests. They shouldn't use [shareholder] funds to make political statements.”
Elson noted that a company's employees and investors may strongly disagree with a public political stance taken by the company. He also said there's a duty of care for companies and general counsel to not make political announcements that could hurt stock prices and, in turn, cause investors to lose money.
Morning Consult findings showed 40 percent of Americans try to avoid purchasing products or services from companies whose social or political stance they disagree with, and 21 percent avoid purchasing from such companies even if there is no substitute. And while companies that cut ties with the NRA saw a boost in favorability with Democrats, their favorability fell with Republicans, the study found.
“When a company, for example, takes a political view, not because it's tied to its business, but in an effort to appeal to consumers, that's what the rental car companies are doing, and that can be riskier,” Fisch said. “Because the company might not have accurate information on how consumers feel, and even if consumers agree with the politics, they may disagree with a company taking a political stance.”
Fisch said in some cases, companies may take a public stand because it aligns with a key component of their business plan, where the company has a financial interest at stake. But regardless of a company's motivation, there could be legal concerns at play, she said.
“There's always issues with respect to corporate communications, defamation, securities liability. Having legal involved is a good way of navigating those concerns,” she said.
There have also been legal concerns raised that moves to prevent gun sales to those under 21 but over 18 could violate age discrimination laws in some states.
Rees Morrison, a partner at Altman Weil, which provides management consulting services to legal organizations, says legal advice is only a small part of a general counsel's role when a company is debating political action.
“A GC needs to sit and think, 'What is good for our company? What is good for our country? What do we believe in, and how do we exhibit our values?” according to Morrison. He said general counsel can help companies make informed decisions by listening to their direct reports and keeping a finger on the pulse of the company on certain issues. But he cautions that's a big task, and may not be possible.
Companies could face legal or fiscal challenges because of an issue whether or not they decide to take a political stance on it, he said, and there may be times where, as an organization with significant money and power, a company may feel standing for its values is worth the risk.
“The question comes down to, is the company in the business of making money for its shareholders, or does a company have a broader gambit of responsibilities?” he said. ”I think a GC ought to be thinking of the general community.”
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