LONDON – US President Donald Trump may seem like a dream come true for business. A businessman himself – as he so often reminds us – Trump is eager to please companies with extensive deregulation. But, if companies aren’t careful, they will come to regret what they wished for.
Just as Trump governs by id, he wants to allow business leaders to manage their companies the same way. It is certainly tempting for some. Indeed, companies are lining up to take advantage of rollbacks of data privacy, environmental rules, worker protections, banking regulations, consumer rights, and rules regarding conflict minerals. Many are keen to see how far they can push an administration that, so far, seems willing to agree to just about anything.
But, contrary to Trump’s rhetoric, this approach is not really pro-business. By pursuing radical deregulation, the Trump administration is practically begging businesses to harm consumers, the environment, and, in the long run, themselves. Indeed, as the consequences of companies’ actions are exposed, public trust in those businesses – not to mention in the government that was supposed to regulate them – will be decimated. Boards of directors’ risk committees should be sounding the alarm.
Public trust in corporations is already weak. Throughout the developed world, companies, like governments, are confronting growing cynicism and anger, with much of the public feeling violated and dismissed. Far from seizing on deregulation to improve their own profit margins, at the expense of consumers and communities, companies should be working hard to boost transparency.
But what about job creation? That is, after all, a pillar of Trump’s economic plan – an objective that he claims deregulation will go a long way toward achieving. Here, too, the likely result doesn’t live up to Trump’s rhetoric.
To be sure, deregulation may create some new jobs over the next decade or so. But they won’t be the desirable mining and manufacturing jobs Trump keeps promising. They are more likely to be in areas like environmental remediation. Perhaps additional medical specialties will emerge or grow, to deal with the consequences of outcomes like polluted waterways.
Maintaining regulations, particularly environmental rules, would also produce new kinds of jobs. Clean energy, for example, is already creating new jobs faster than almost any other sector in the American economy – a trend that could, with the right policies, continue to gain momentum. Yet, far from implementing the right policies, the Trump administration wants to decimate them.
This creates a conundrum for businesses around the world. Previously, companies were largely able to avoid thorny discussions about ethics and morality, if they just followed the law. Now, boards and executive teams must consider carefully how to balance their short-term commercial objectives not only with their long-term business prospects, but also with their fundamental ethical obligations. In something of a prisoner’s dilemma, CEOs will have to decide whether they can risk losing ground to competitors who take advantage of supposed opportunities, like the ability to dump toxic coal ash into streams and rivers with complete impunity.
Fortunately, some companies seem to be making the right choice, speaking out in support of maintaining regulations, especially those aimed at mitigating climate change. Retailer Gap Inc., global food and drinks manufacturer Mars Inc., beer maker Anheuser-Busch InBev, and technology company Microsoft, among others, have committed to continue adhering to now-eliminated environmental regulations. But these companies remain in the minority. Boards of directors, large global investors, and consumers must step up to persuade more companies to join them.
As the “shareholder springs” of the last several years have shown, investors – particularly private-equity and sovereign-wealth funds – can shift the trajectory of corporate decision-making. Likewise, outspoken consumers, using means from protests to social media, can help swing the pendulum on a wide range of issues, from remuneration to corporate responsibility.
Indeed, just last week, the Fox News host Bill O’Reilly lost his job, despite having America’s most popular cable news show, when advertisers, facing concerted grassroots pressure, quickly deserted him. The revelation that O’Reilly and Fox News’s parent company had paid $13 million to multiple women to settle complaints of sexual harassment against him made him a high-risk proposition to advertisers, many of which decided that the danger of alienating their customers – and their own employees – was too great.
With general-meeting season for publicly traded companies just beginning, now is the ideal time for shareholders and stakeholders to let companies know what they think. If company leaders decide to take advantage of Trump’s deregulation spree, they must be made to feel the repercussions immediately and directly.
This is not just an American problem. The impact of deregulation in the US will be felt worldwide, especially if the US-based multinational companies that take advantage of it are allowed to benefit from that choice. The result would be to encourage companies based elsewhere to follow suit.
No one elected companies to run the world. (The kind of leadership demonstrated recently by the likes of Uber, Pepsi, and United Airlines is certainly not what voters seek in their government.) But there is no denying that companies’ decisions have far-reaching consequences. If their managers fall prey to the same governance by id that Trump has brought to Washington, DC, they will lose, just as Trump will lose. The only question is whether they, unlike Trump, will have to clean up their own mess. Lucy P. Marcus is CEO of Marcus Venture Consulting.
By Lucy P. Marcus