Tech CEOs have nowhere to hide anymore - Technical.ly

Company Culture

Jun. 4, 2021 9:36 am

Tech CEOs have nowhere to hide anymore

Whether you take a stance on combating racial equity and climate change or not, you are making a decision. And your workforce is listening.
The days of Milton Friedman’s call for shareholder value above all else are over.

The days of Milton Friedman's call for shareholder value above all else are over.

(Custom illustration for Technical.ly by Penji)

Where you at? The email from a software developer came one year ago. It was the Sunday evening following the murder of George Floyd.

“There are a lot of leaders in the DC Tech space who have been silent for the last week,” read the message sent to the Technical.ly newsroom. I had spent the weekend coordinating with our editors on how we’d cover a week of protests as a local tech economy news site with a long history of tracking access and racial equity.

Large-scale protests had swarmed cities across the country, including D.C., where one of our own reporters took part. The protests were all the more dramatic against the backdrop of pandemic lockdowns and a massive economic shock. My editors and I were questioning whether we had something important, productive and interesting to add to the swarm.

We found a consensus among many tech workers we knew who had long championed greater social responsibility from thriving tech companies. They were asking their fellow tech leaders: As millions of Americans march in the streets, if now isn’t the time for you to make a public commitment to racial equity, then do you actually care about this at all? During an historic moment in social justice, it seemed some startup founders, tech CEOs, civic hackers and meetup organizers with active public personas suddenly went quiet.

The D.C. software developer’s email to the Technical.ly newsroom concluded: “Is this okay to you guys?”

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A half-century ago, influential University of Chicago economist Milton Friedman published his iconic “shareholder value” essay in the New York Times Magazine.

The so-called Friedman Doctrine was titled: “The Social Responsibility Of Business Is To Increase Its Profits.” In the essay, he derided the “social conscience” of a CEO who takes seriously the “responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers” as preaching “pure and unadulterated socialism.”

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The essay’s 50th anniversary was marked with a telling contrast: in fall 2019, almost 200 CEOs of the world’s largest companies published a letter via the Business Roundtable that introduced “stakeholder capitalism.” Businesses should recognize that its responsibility in communities had to go beyond maximizing profit — something that has become associated with environmental degradation, tax avoidance and racial injustice.

Woke capitalism, as this shift is commonly (and often mockingly) called, isn’t only taking place inside corporate America. Over the last six months, across dozens of conversations with tech founders of companies with employees as few as a handful and as many as hundreds, I haven’t found any who don’t agree something has shifted. Tech workers, including the coveted software-building class, are no doubt a varied bunch, with both corners of activist progressivism and ambivalent libertarianism, but they too represent a shift. All the anchors of today’s global movement of local startup ecosystems — corporate leaders, university connectors, event organizers, even, dare I say, a sliver of investors I’ve spoken to — are expecting something very different than what Milton Friedman argued for a half-century ago.

More are saying: Tech leaders and their companies, no matter the size, need to make a stance on important political issues. See this as a force for good, or not, it is something new. Some leaders are thriving, some are learning and others are rejecting the path entirely. Whatever the case, tech professionals need to understand how we got here.

Expectations for founders, CEOs and tech workers everywhere have changed, and, well, we’re wondering: Is this okay to you guys?

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Startup founders have long shaped policy, locally and nationally.

A few addressed public education; others discussed government digital transformation. Mostly they’ve given voice to tax policy. This new political CEO is about a world away from that.

What’s changed? In short, generational expectations, outsized influence by coveted professionals and widespread urgency on issues that seem bigger than everyday politics.

Systemic racism contributes to fewer Black engineers. Misogyny contributes to fewer women-owned businesses. Partisanship contributes to fewer climate change actions. What are you doing about it?

In that old Friedman essay, he makes a point of clarifying that any individual should be free to support whatever cause — donate, volunteer and speak out — provided they do so privately. That’s the difference between being politically engaged as their own “principal” and as an “agent” of their company. His argument: Leave the social issues for nonprofits, government and your free time. Doing so in business is improper, inefficient, irresponsible.

Many professionals — yes, especially many privileged white professionals — have politely followed this edict: Donate, volunteer and speak out, but do so out of the eye of the workplace. In recent years, the Black Lives Matter movement worked to make that separation untenable. Climate change may be the greatest threat to life in human history. The former U.S. president ruinously championed pandemic misinformation and opportunistically endorsed false claims of election fraud. The knee of American justice suffocated a Black man on video.

“I think 2020 was really a time when we shined a light on the importance of corporate social responsibility, social impact and social innovation not just being this bolt-on thing over there, but really core to the company,” said Caroline Barlerin, the CEO of San Francisco-based Platypus Advisors and a former head of social innovation at tech companies like Twitter and HP, in an interview with me. “I think it reinvigorated a lot of CEOs to think more seriously about the role of purpose for their company, and that adjustment and flexibility is just going to be required more and more going forward.”

Principal and agent be damned: The history books are being written and your staff is wondering just what your stance on the matter is.

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Business is now the most trusted sphere of influence to make societal change, and the tech sector still leads the pack among business.

That’s according to the freshly released annual Edelman Trust Barometer. With great power comes great responsibility. It follows then that the general public and, increasingly, tech workers, hold increasing expectations for business to do something that matters. A majority of 16,000 professionals surveyed last year expected their company to “speak up publicly for the Black Lives Matter cause,” including four in five tech workers.

And after the conviction of the police officer responsible for George Floyd’s murder, Baltimore HR pro Joey Price implored tech company leaders to engage the topic: “This is the time to listen,” he wrote. Technical.ly rounded up advice for CEOs and HR leads to do just that.

But enthusiasm for discussing social justice at work isn’t universal.

You’ll recall the cultural explosion that took place last month at Basecamp, perhaps the country’s most influential 60-person tech company. The purveyors of project management software helped make cofounders Jason Frieid and David Heinemeier Hansson rich, tech famous and influential. They are bootstrapped, highly profitable, privately held and demanders of excellence. They wrote books about company culture.

Then Fried published an internal memo about how they weren’t welcoming talk about politics anymore. Do so privately (as a “principal”) but not at work (as an “agent” of the company). In today’s climate, it was a contrarian stance from a tech CEO proud of his contrarian stances (like his criticisms of venture capital). The result? A third of his staff quit in a week.

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Progressive demands from tech workers didn’t begin in 2020.

There’s a small tech labor union movement in D.C. Technical meetups have worked to create trans-safe spaces — including events at venues with gender neutral bathrooms. Surging tech worker salaries and dismal gains in diversity brought widespread scrutiny and activism.

Some of that progressivism follows familiar generational change. In 2016, three quarters of millennials surveyed said they’d take a pay cut to work at a socially conscious company. Today elder millennials are in their late 30s, leading their own companies and shaping others, so they’ve brought social consciousness into the workplace like never before.

Those tech workers also happen to have far more sway today than office workers of the past.

Because data is the new oil, the technologists who keep that oil flowing are important, and demand for them has outpaced supply for decades. Many are waking up to this influence, like those behind the new workers’ union at Google, a company made famous for high salaries and endless perks. Three-quarters of employees at big tech companies think their own companies have too much power, and many want to right that power imbalance they see. The world’s most profitable and fastest-growing companies couldn’t be what they are without technologists — a group of professionals who demand increasingly more of their employers.

I asked a SaaS startup CEO what would happen if her entire engineering team quit over a stance she made, or didn’t make. Her answer? “Cease to exist.”

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There are risks to the new political CEO.

After the first weekend of protests following George Floyd’s murder, so many companies rushed to display their social consciousness on social media following that they were derided as taking part in “Black Tile Tuesday,” in which even those with checkered racial equity and inclusion reputations took part. That’s wokewashing, and it caused its own pushback.

For the biggest companies, a new $13 million politics-style ad campaign is targeting “woke corporations.” Likewise, in private conversations, many startup founders and tech CEOs express worry with the heightened expectations — and what stumbles that could lead to.

“I have clients and recruiting and payroll and I’m supposed to be a thought leader on social media,” one said to me. “You want me to solve racism, too?”

Another CEO pointed to a coalition of tech firms working to diversify the workforce in their city. The effort was spearheaded by a tech exec: “Some guy with 80 staff who are almost all white woke up one day and decided he’s going to lead the charge on diversity now?” the CEO said to me.

Leaping exuberantly into treacherous waters can be disastrous. Better for CEOs to tell their teams to only focus on work? Not if doing might actually hurt your company’s prospects.

“You have to sell your company to a candidate more than ever before,” said one longtime business executive. “They expect this.”

In Friedman’s essay, he describes “the cloak of social responsibility,” which is his phrase for when a company is credited for doing a social good that they’re really doing because it is best for their business. His example is a company that invests in amenities in its small town that might help them more effectively attract and retain a workforce.

Then is a tech CEO exercising their “social conscience” when they speak out about Black Lives Matter, if four in five tech workers say they want their leaders to do so? Even if you were to take a stance on a moral issue on your personal time, surely it seems you could do it for your team during work time.

But what about Basecamp? After a third of their staff quit, the company promptly began making new hires to replace those who left.  You may want to follow a similar path. The tricky thing is that Basecamp, Coinbase and Google are outliers — with enough of a reputation to attract talent that fits their views of the most effective work environments.

For now, though, most tech workers — no, not all, but when surveyed, most — do want to work at a company with leadership who take clear stances and show real follow through on the most important issues. At the least, two issues that seem to fit in that category are racial equity and climate change.

But if you speak out about racial inequality or climate change, and then voting rights, what about gender equity and abortion? How do you avoid getting lost in a thicket of complex societal issues? Define what is most important to your organization because you won’t be able to handle them all. Whether you do, or don’t, take a stance, the point is you are making a decision, and your workforce is listening.

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What happened in D.C. one year ago?

Our newsroom did reach out to the business leader named by that software developer. The business leader was privately furious at the software developer for criticizing on social media their silence, but did send a banal Black Lives Matter tweet.

Later last year, I noticed the business leader was hiring for technologists. I doubt the developer applied.

“I’m so happy that you are using your voice and your platform!” the developer wrote to us. “I will remember this forever.”

Series: Journalism
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