When Kevin Plank, founder and CEO of Baltimore-based Under Armour, quit the American Manufacturing Council in August – following a barrage of criticism against President Trump regarding statements he made about protests held in Charlottesville, Va. – he was not alone. Seven members of the council reportedly stepped down before Trump concluded the best move was to disband the panel of business leaders.
Plank’s experience with government service illustrates some of the drawbacks when CEOs get involved in politics – despite good intentions.
“I joined the American Manufacturing Council because I believed it was important for Under Armour to have an active seat at the table and represent our industry,” Plank said in explaining his resignation. “We remain resolute in our potential and ability to improve American manufacturing. However, Under Armour engages in innovation and sports, not politics.”
Earlier in the year, Plank was somewhat supportive of Trump, given his business background, but Trump’s comments on the racially divisive and violent protests – where one woman was killed and many others were injured in clashes (which involved white nationalists) led to his resignation.
Also, when Plank complimented Trump, there were threats of consumer boycotts against the company by those critical of Trump, and these were followed by threats of boycotts against Under Armour by Trump supporters following Plank’s resignation, news reports revealed.
Yet, resigning from the council was the right move, Plank said.
“I am appreciative of the opportunity to have served, but have decided to step down from the council. I love our country and our company and will continue to focus my efforts on inspiring every person that they can do anything through the power of sport which promotes unity, diversity and inclusion,” Plank said.
Similarly, when Merck CEO Kenneth Frazier quit Trump’s manufacturing council he explained the move in part, in a tweet, by saying, “I feel a responsibility to take a stand against intolerance and extremism.”
Still, despite the potential for controversy, many CEOs and other corporate leaders sometimes think about taking a position in government. After all, they were successful in the private sector, they have experience that could be useful for the government, and they may believe they know how to bring about efficiency and professionalism in the public sector.
It could mean serving in an administration in an executive role, on a national panel or even running for elective office. CEOs who live or work around Washington, D.C. may be especially interested in the opportunities, given they usually do not have to relocate to take a government position. One long-time Maryland resident, Ben Carson, is now Secretary of Housing and Urban Development, after working as a doctor at Johns Hopkins.
An obvious example of a business leader who opted for government service is President Trump, who is soon to finish his first year as president. He never served in government before getting elected president, but ran relatively successful businesses.
Look, too, at the number of former employees and managers at Goldman Sachs who have made their way to politics. Phil Murphy was just elected governor of New Jersey. He follows the example of John Corzine, who also worked at Goldman Sachs before becoming governor of New Jersey. Other former Goldman employees who made their way to government or politics include Stephen Bannon, Joshua Bolten, Jim Himes, Henry Paulson and Robert Rubin.
But be forewarned. There are reasons to be cautious.
Just look at the number of Trump appointees who resigned or were fired after only brief service. Anthony Scaramucci is an example of someone who had a career in investment banking and politics before working for the Trump White House. He was fired as communications director after about two weeks at the job.
Rex Tillerson is still the secretary of state, but the former CEO of Exxon/Mobil has had a strained relationship with Trump over policy disagreements.
Beyond policy differences, many CEOs simply are not used to taking orders, but instead were used to giving orders in the private sector. So, serving a president in a cabinet position or as head of an agency may be a new type of challenge.
In addition, many businesses try to avoid being involved in controversies; they can lead to a loss in revenue and damage to a company’s reputation.
When asked about elective and appointive positions for business leaders, Christopher DeLacy, an attorney at the Washington, DC office of Holland & Knight, urged caution over whether a CEO or member of a C-Suite should take such a post.
“This is always a case-by-case analysis as not all political positions – or CEO positions – are created equal,” DeLacy said. “In general, the government benefits from private sector expertise and vice-versa, assuming relevant ethics rules are followed in letter and in spirit. When the opportunity is presented to serve the government in a meaningful way and to develop expertise, business leaders should consider the opportunity. But government jobs are not for everyone and historically there have been situations where private sector success does not translate into public sector success. Successful CEOs run the risk of being remembered as a failed cabinet secretary.”
Specifically, here are some questions from DeLacy that CEOs or other business leaders should ask before getting involved in an administration or in politics:
- Am I doing this as an individual or on behalf of my company or both?
- Am I willing to make information regarding my financial holdings public?
- Am I willing to divest my financial holdings in order to serve?
- Does my family understand and support my decision?
- Is there something in my past that could embarrass me or the administration?
Beyond asking these questions, DeLacy recommends hiring an ethics counsel, which he calls “a smart move for anyone considering a political position and a must for anyone with significant or complicated financial holdings.”
“It would be a good idea to speak with others who have served in political positions and essential to prep extensively for the confirmation process,” he added. “In some cases, hiring an investigator can be helpful to determine what information may be discovered by the press or others during the confirmation process.”
Be advised, too, that at the federal level, hurdles for political appointees can be “daunting,” DeLacy said. These include “intense vetting, exhaustive financial disclosure, FBI background checks, contentious confirmation hearings and divestiture of financial holdings,” he explained. “If your appointment or position becomes a distraction to the administration or may cause lasting harm to you or your family, you should consider withdrawing or resigning.”
Meanwhile, the company’s board of directors has a role to play here, too. It should have a political activities policy and should provide legal resources – internal and external – to vet campaign contributions and political activity in advance, DeLacy said, adding that the board should ensure the company has a public relations strategy to respond to inquiries regarding the political activity. It is noteworthy, too, that there are “limits to what companies can do politically, particularly when it comes to campaign contributions. However, company resources can generally be used to ensure compliance with the law and to lobby for nominations,” DeLacy said.
Are there special concerns, too, if the CEO is considering joining an administration that could be controversial? “While a cabinet position can serve as a nice capstone to a business career, politics always comes with the possibility of scandal or infamy,” DeLacy responded. “All possibilities should be considered before accepting a position.”
Also, Rachel Curley, Democracy Associate at the Washington, DC-based Public Citizen’s Congress Watch, noted that the current political environment makes political involvement different now. “In this political climate Americans are paying close attention to which companies have close ties to the President and endorse his agenda,” Curley said. “That means that transparency is critical when it comes to corporate engagement in politics. One way that companies and executives can prove that they are above the political fray is to disclose all their political spending and lobbying activity.”
Overall, she recommends that a business executive wanting to get involved in government leadership should be transparent and accountable – as should his or her company.
“Many companies — more than half of the S&P 100 in fact — are already following robust transparency and accountability standards,” she said.
Curley added that companies also need to ask themselves, when getting more involved in the political process, if the “political engagement we are seeking [is] in the best interest of our shareholders.”
Furthermore, CEOs being considered for a political appointment should work with their company and the Office of Government Ethics “to resolve any possible conflicts of interest,” Curley said.
“Disclosure of any corporate political spending and clear oversight of that spending will ensure that companies don’t open themselves up to reputational risk,” she added. “At the end of the day, being completely upfront with shareholders and the public is the smartest way for CEOs to go. If a company chooses to engage in the policy making process for the sake of their business, there should be no reason why they would want to hide that critical information from their shareholders and customers.”
Feature photo: Donald Trump at the RNC convention in Cleveland. Photo by Doug Christian.