MAR 12, 2019
Skillfully Maneuvering in a Politically Charged Environment
(Originally appeared in the March 12th, 2019 'Across the Board' publication, a Board Director, Board Advisor, C-Level, and Business Newsletter reaching 25,500+ exceptional business leaders in over 65 countries with articles focused on leadership, strategy, and governance topics - sign up here)
Many companies, and more specifically their Boards, are increasingly being thrust into the spotlight unexpectedly through the side effects of political maneuvering and positioning. In the ever-expanding world of inputs that form a company's public perception, governmental politics are quickly playing an increasingly volatile role. For many Boards, they are realizing that they are either woefully unprepared to be thrown into the political spotlight, or surprisingly adept at navigating this fickle realm.
Experienced Boards realize that politics intermixed with business almost always leads down a slippery slope in a zero-sum game - both within the boardroom and externally. Companies, Boards, and even individual Board Members who take any type of political stance publicly run the risk of immediately alienating half of their clients, employees, constituents, or shareholders following the smallest utterance of anything that could be viewed as even slightly political. Unfortunately, we are living in a time where politics is likely the most polarizing topic you could engage in. However, all organizations must recognize and adapt to this polarized nature of society until we (hopefully) level out to a common plane where we can sit with friends and calmly discuss politics in the same way we share how the family is doing and the new car we purchased.
Boards that solely aim to 'avoid' politics are only partially correct in their approach. Avoiding politics in business can satisfy the 'proactive' side of the formula, but can increase risk on the 'reactive' side. The reactive side includes unintentional and unplanned situations where a company is forced to play politics, take a stance, or make a public statement. The recent events with Amazon's planned HQ2 in Long Island City is a prime example of politics thrust into the corporate realm with many large-scale and long-term implications.
The plastics company Plaxall owns much of the land (roughly 12 acres) Amazon was eyeing in Long Island City for their HQ2 buildout and were likely in a position to be an early-stage beneficiary of Amazon's decision. One can imagine that there was significant 'soul searching' on the part of Plaxall's Board in the decision-making process and vetting of numerous options affecting the long-term strategy of the company.
New York property firm Savanna would have also been a major beneficiary of Amazon's initial decision to expand to Long Island City, with roughly one million square feet allocated to Amazon in the currently-occupied 53-story Citi building. After a significant funding round, then followed by the back-out of their golden goose tenant, the future of the building looks more like a liability now than an advantage - all exacerbated by the planned move out of its current main tenant, Citigroup, in 2020.
This must have been an interesting discussion within the Amazon boardroom, as well, since all eyes were on them as the process unfolded. The company's strategy basically forced cities to roll out their red carpet and present whatever tax breaks, incentives, and trinkets they could possibly offer. Talk about being in the driver's seat.
We will likely never know all of the facts and details to the rhetorical question of "what did Board discussions focus on?," both before and after Amazon's "no go" decision, due to nondisclosures and the sheer number of companies affected. However, it does bring up the question of a Board's readiness to successfully interact at this high professional and political level. A few political-based questions that may have helped numerous Boards navigate the treacherous waters forming around the Amazon deal early on might have included:
- "Is the negotiation happening in the background (politicians) including the right constituents?" Most of Amazon's early dealings and negotiation happened with New York State Governor Andrew Cuomo. He has jurisdiction over the executive branch of state government, but not the state legislature nor the City Council. Was Governor Cuomo, Amazon, and those companies in the Long Island City 'hot zone' aware of the possible misalignments and pushback that could likely derail a deal due to underlying partisanship or sinister political gain?
- "Are the required constituents (politicians) backing up the deal?" Roughly half of Amazon's proposed facility was to be located in the progressive district of a high-profile, corporate-wary congressperson - Alexandria Ocasio Cortez. Understanding early on that Amazon was the equivalent of a juicy leg of lamb thrown into a lion's den after a prolonged drought may have turned the perspective of risk discussions within the Amazon boardroom as well as many other boardrooms of Long Island City-based companies (and beyond).
- "What exactly is Amazon asking for in the entire deal, not just the areas that directly affect our company?" This one is a little more abstract, but still relevant. An example can be seen with the discussion centering on unionization of either some or all of Amazon's proposed Long Island City workers. NYC has a big union base - it gets New York politicians elected. Whether you are for workers' unions or not, the fact remains that the writing was on the wall that this area was heating up to become a potential war. Should Boards have considered this, and other defined 'mega-issues'in their deliberations? If so, it was surely time well spent.
The point is, with politics, any and all angles must be considered and anticipated by a company's Board. It's a messy space with a long tail, but it is worthwhile for a Board to roll up its sleeves occasionally to effectively size-up its risk in this area.
A prominent organization that advocates for policies, programs, and projects that create jobs and spur private investment in the Long Island region had much to say about the Amazon pullout. “Amazon’s decision to withdraw its plans for our region will go down as one of the biggest debacles in New York State history," stated Kevin S. Law, President & CEO of the Long Island Association. He continues, "...and the elected officials who are responsible for this epic disaster should be ashamed of themselves for jeopardizing thousands of jobs and billions of dollars in tax revenue and should also consider resigning.”
The ramifications of this political interference will be felt for years - likely making Long Island City radioactive to investment for the foreseeable future. On a more positive side, my hope is that this example forces Boards to prepare for their potential immersion into the political world on a moment's notice. Chalk it up as another risk, albeit an important one, for a Board to be concerned about.
Have you considered your Board's proactive and reactive political approach?
Mark A. Pfister
Board Consultant | Non-Executive Director | Strategist | Board Macro-Influencer | Speaker | Author