Nike has long been one of the most activist companies in its social and political campaigns, including its controversial corporate support for Colin Kaepernick in his protest during the national anthem at football games.
Recently, it also faced calls for boycotts after the company selected transgender Dylan Mulvaney to feature its sports bras and other products. Mulvaney went on Instragram to declare:
“Home for a moment and leaning into cozy workout wear life with @nikewomen ‘s newest Zenvy leggings and Alate bra! They’re so comfortable and buttery soft, perfect for workouts and everyday wear! #feelyourall #teamnike #nikepartner”
That led to an immediate backlash:
Nike pushed back on critics this weekend and told consumers that they needed to be “kind” and “inclusive” while declaring “hate speech, bullying, or other behaviors that are not in the spirit of a diverse and inclusive community will be deleted” from its sites.
The Nike decision follows another backlash against Bud Light that put Mulvaney on its beer cans.
These campaigns, particularly the beer endorsements, produced an obvious disconnect with many beer consumers who did not want Mulvaney on their beers. While networks described the outcry as a “right-wing backlash,” shareholders may question whether putting a controversial transgender personality on cans of beer will advance or deter sales.
Some expect the Bud Light campaign to alienate many consumers. In the coming weeks, we will see if the campaign increases or decreases sales. However, the legal question is whether shareholders are going to oppose such campaigns as divisive and damaging for the brand.
Disney is an example of that backlash. However, the mouse has now taken the gloves off in a bold move to defy the state of Florida. Disney’s opposition to Florida’s parental rights bill on education led to boycotts and possible retaliatory legislation.
After its unique self-governance status was removed by the state, Disney used its effective control over the former Reedy Creek Improvement District to get the board at the last minute to hand over direct control of the district’s development rights and privileges to the company. It made the transfer just before the district was gutted by the legislature.
Disney’s move is breathtaking and, in my view, uniquely stupid. I wrote earlier that Disney’s aggressive position toward Florida was harmful to the company and its shareholders. Picking a fight with a state with general tax authority is pretty dumb when you have billions sunk into fixed real estate and assets in the state.
Florida will now seek to nullify this move, but the company has declared all-out war with the state. Even if the state is unsuccessful, it can use other means to even the score with the company. While it was possible that there could be a resumption of civil relations between the state and one of its largest corporate citizens, this has burned any bridge for such a reconciliation.
Once again, the company seems oblivious to economic consequences of its aggressive postures toward the state. While this may be popular for executives, it is not popular with a sizable number of consumers, particularly in Florida. The question is: why escalate the tension?
These companies could trigger shareholder revolts if the moves continue to spark boycotts or diminish sales.
Environmental, Social, and Governance (ESG) policies have already led to limited litigation, including shareholder demands for greater transparency or ESG commitment from companies. Some shareholders have also argued that the political views of corporate officers are being pursued over the profits of the company.
Such lawsuits on both sides can be difficult. Shareholders may allege a breach of the “duty of loyalty,” but must show that the officials acted in a self-interested manner or in bad faith. Alternatively, they could argue a breach of the “duty of care,” which requires a showing that the officials acted in a grossly negligent manner.
These latest moves could force these issues. For Disney, it is a surprising decision given the departure of former CEO Bob Chapek after he triggered the controversy over the parental rights legislation. Now, Bob Iger will either move to defuse the situation or face the wrath of a motivated and infuriated legislature.
Legally, we may be entering a new phase in litigation over controversial corporate campaigns. Bud Light, for example, knew it would create buzz with Mulvaney. The question is whether it is the right type of buzz and whether shareholders can object that executives are too willing to test the “go woke, go broke” theory.