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Why Companies Speak Up, and Why Consumers Don't Care

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Recently, Starbucks (NASDAQ: SBUX  ) has gotten more press for its political moves than for its coffee. Last month, CEO Howard Schultz told gun owners not to come into the stores with openly carried firearms. Then last week, the company began offering customers the chance to sign a petition calling for an end to the government shutdown.

That second movement culminated yesterday in the delivery of 1.5 million signatures to political leaders on both sides of the aisle, calling for them to "come together to reopen the government, pay our debts on time and pass a bi-partisan and comprehensive long-term budget deal by the end of the year." 

These issues are just some of the big political gambits that companies -- and fast-food businesses especially -- have taken up this year. On the surface, the combination of food and politics seems unlikely, but it's not as odd as you might think. Here's why we can't seem to get a burger without a message these days.

Broad appeal
In fiscal 2012, Starbucks served almost 3 billion customers. If you break it down by week and then spread it out over geography based on revenue, it means that U.S.-based locations served about 44 million customers a week -- more than 6 million every day. That means that Starbucks has the ear of millions of Americans. As political division grows and as new legislation begins to affect businesses, it's no wonder that some companies are turning to their customers for support.

Starbucks is by no means the only company to get in on the action. On Tuesday, the CEO of CKE Restaurants, which owns Hardee's and Carl's Jr., said that Obamacare was hurting American businesses. Papa John's CEO, John Schnatter, said a similar thing last year, claiming that the pizza costs would rise as a result of Obamacare.

Why do all of these businesses put their reputations on the line for political ends? Easy. Customers don't care, and as a result, there's only upside for being a vocal CEO.

The myth of "voting with your wallet"
There may be great reason to boycott something -- see this Mark Bittman piece on why you might never want to buy chicken again -- but as it turns out, most Americans are apathetic about politics. In the U.S., midterm elections receive voter turnout well below 50%, and across elections, U.S. turnout is far below the worldwide average.

Brayden King, an associate professor at Northwestern's Kellogg School of Management, put it bluntly based on the studies he has undertaken on corporate boycotts. "Our research shows that activism ... does not have a direct impact on financial performance. So while public protests are more likely to garner media attention and raise the specter of long-term reputational damage, they do not directly influence a company's financial performance."

In effect, a CEO can say almost anything they want to without fear of hurting the bottom line. Instead, companies can simply reap the rewards of some free time in the spotlight. Starbucks has seen its name in print thousands of times over the last week due to the petition, and it has no fear of seeing sales drop.

In the defense of boycotters and protesters, sometimes monetary damages aren't the point. Sometimes, protests are meant to start a conversation or bring focus to an overlooked injustice. Those sorts of outcomes can be very successful, depending on media coverage.

The bottom line, though, is that big businesses have become immune to consumer backlash about political agendas. As even further evidence, consider how much you know about the political donations of any of the stores at which you shop. I'm willing to bet that there is very little anyone can call to mind about their grocers' CEOs' political leanings. But they have one, and the next time the government shuts down -- which should be in January or February, by the look of things -- it might be their face on TV.

The strife continues
Healthcare costs continue to be a hotly debated topic, and even legendary investor Warren Buffett called the current upward trend "the tapeworm that's eating at American competitiveness." To learn more about what's happening to America's health care system, click here.

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8/25/2016 2:40 PM
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