A new study reveals the dilemma firms face when taking a stance on contentious issues.

Following the killing of George Floyd and the subsequent protests in the United States and abroad, corporations stood up to promote change, financially support racial justice organizations, and create diversity officers. But as Gies College of Business professor Ishva Minefee points out, that support from multinational organizations (MNCs) -- companies with a foothold in multiple countries -- doesn’t always translate to other countries where they have a presence.

Minefee and his colleague, Lori Yue (Columbia Business School), explain the dilemma that MNCs face in making a stand in countries where the society and government may not align in the same way as in the United States. Their paper, "Taking a stand while abroad? Towards a theory of MNCs’ sociopolitical activism in host countries," was published in the Journal of International Business Studies.

The bottom line, according to the paper, is that while MNCs have been able to either remain silent or strategically respond differently in a host country than in their home country, times are changing.

The paper specifically points to the killing of a black male named João Alberto Silveira Freitas by security guards in Brazil in November 2020. While companies with a presence in both countries were willing to speak out against Floyd’s death some six months earlier, they largely remained silent following Freitas' shooting.

There were relatively few instances of corporate sociopolitical activism in the beginning of the 21st century. MNCs had largely remained silent publicly on controversial issues, but Floyd’s death marked a line in the sand, so to speak, where the public took a closer look at which companies were responding and how.

“There are pressures from different groups, like consumers with purchasing power,” said Minefee, an assistant professor of business administration at Gies. “If I see a firm respond in a way I don’t agree with, I can take my dollars elsewhere. You also have your employees who might say, 'If my firm doesn’t respond to George Floyd’s murder, what does it say about the firm, and should I stay in this organization?' It could reduce morale and productivity."

“I think we have seen shareholders over the past few decades lean into more of a social orientation event among these very divisive issues,” Minefee said. “You have other stakeholders like non-governmental organizations (NGOs) that have been putting pressure on firms for decades to do something about social issues.”

Social media has made the world much smaller and has helped pressure corporations to step off the sidelines and into a more active role, but that step has needed to be much more calculated.

“These are divisive issues, which have the potential to alienate half of the consumer base who don’t agree with your stance and are going to push back,” Minefee said. “However, can you be neutral at this time? Some research has shown that silence leads to a negative reaction. If X firm hasn’t responded, we are going to criticize them.”

While firms have largely been reactive to the world around them, they have begun to employ communication specialists to strategically prepare to respond to potential events.

“As a firm, you need to have a team of employees or individuals, along with one or more members of the C-suite, who need to be aware of what is going on and have a pulse on what our consumers and employees are concerned about,” Minefee said.

The paper distinguishes between three different types of responses. First, sociopolitical activism (SPA), a relatively new idea, is defined as a public demonstration of support for or opposition to a sociopolitical issue. Two related ideas are corporate social responsibility (CSR), which is a corporation “doing good,” and corporate political activity (CPA), which is a covert action to support political candidates who align with their agenda or are likely to bring positive results to the corporation. While CSR and CPA are less likely to cause a stir publicly, SPA is a different story.

“For the paper itself, we ask the question, if you are going to take this stance at home, why not take that stance abroad as well, if it is the same issue?” Minefee said. “International business literature primarily would say that multinational firms should respect the laws and social norms of each country. We talk about this notion of institutional distance – the farther a country is from my home country, the more likely I am to give in to its rules, regulations, and norms. I think that has been a baseline assumption for the past 30 years in international business. But thanks to social media, reacting differently to similar situations is becoming easier to expose.”

Additionally, Minefee suggests that while in the past society and governments were aligned on a particular issue, the past decade would suggest otherwise.

“To me, that is the most nuanced and the most interesting direction we’ve gone in,” Minefee said. “Other actors are emerging, such as international NGOs. I think it’s important to look at complexity in a broader sense than what we have typically done in international business.  It's a dilemma.”

Minefee and Yue also make a distinction between symbolic SPA (simply making a statement that a certain belief is part of a company’s value system) and substantive SPA, which is acting either financially or making changes within an organization.

“I think it has worked for them until now,” Minefee said. “But it has started to shift over the past decade. You now have NGOs and consumers saying, ‘You’re not being consistent' on these very divisive issues, whether it be LGBTQ rights, women’s rights, or racial inequality.

“Broadly, I think we need to be talking about multinational corporations, their roles in not just their domestic settings, but in global society as well. They have very powerful roles to impact the economic, social, and political well-being of many constituents. Although they are operating in a realm of political, social, and economic climate of uncertainty, going forward, it will be important that these MNCs are consistent in what they are saying on these divisive issues. Their consumers and employees will demand it.”