Tech

The Treacherous Path for Companies After #DeleteUber

Russian businesses learned to avoid presidential wrath. The battle may play out differently in the U.S.
Corrected

Shattering hashtags.

Photographer: krusunshiro/Getty Images

The Uber boycott sparked by the company's refusal to join an anti-Trump strike poses a question many U.S. businesses will have to answer: Do they openly stand with those of their customers who abhor the president's policies or does it make more business sense for them to stay neutral? 

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The #DeleteUber movement appears to be something of a disaster for the ride-hailing company in the U.S. After Uber failed to join a taxi drivers' strike in New York against Trump's entry ban for citizens of seven Muslim-dominated countries, users began deleting the app and encouraging others to do so on social media. Its main competitor Lyft then leapfrogged into first place in terms of downloads, becoming one of the most popular apps in the country. This followed chief executive Travis Kalanick tweeting that the travel ban is "against everything Uber stands for" while vowing to "use his position" on a Trump advisory council to "stand up for what's right." In the view of many of Uber's tech-savvy, urban customers, that was not enough.

Say what you will about corporate social responsibility, it's not necessarily smart for a chief executive to make a political stand. A company's primary responsibility is to its shareholders, so protesting the actions of a president -- especially a thin-skinned one like Trump, who likes to meddle in corporations' business decisions -- may be counterproductive.

Essentially, U.S. businesses now face the same dilemma Russian companies faced when President Vladimir Putin began increasing the government's role in the economy and rolling back civil liberties. Everyone who went publicly against the autocratic flow was squeezed out of business in Russia. The cases of media magnate Vladimir Gusinsky, oil tycoon Mikhail Khodorkovsky, retail whiz Yevgeni Chichvarkin are commonly known examples. Other Russian capitalists, who grew rich in the freer era before Putin, decided against tempting fate and toed the party line.

For many U.S. tech executives, the choice is more complicated. Russia's general public was never particularly politicized, so it easily accepted Putin's contract -- relative prosperity and security in exchange for less freedom. Many U.S. tech companies prize the same urban, educated clientele that backed Hillary Clinton and strongly oppose Trump.

Apple, Microsoft, Twitter, and Netflix decided to stand with these customers -- and with many of their employees. Companies outside Silicon Valley, however, didn't jump on the bandwagon. There was no angry statement from McDonald's or Walmart, which employ plenty of Muslims. Their management clearly saw no benefit in sticking its neck out on a matter as incendiary as Trump's border policy. 

No one is boycotting them. 

In a 2013 paper on anticipating, preventing and surviving secondary boycotts -- those in which a firm is punished for action that didn't directly damage the protesters -- Judith Schrempf and her collaborators from the University of Richmond suggested that a company's managers keep a list of issues that might cause a boycott and attempt to work out where the company should stand on those issues. Clearly, the Trump agenda is full of boycott-inducing issues, and a conscientious executive ought to go through the list and make some preemptive decisions. Kalanick's mistake was not identifying Trump's entry ban and the drivers' strike as a business-critical issue early enough.

But perhaps making strong statements concerning Trump's divisive policies to stop the boycott is also a mistake -- a Russian entrepreneur would immediately see why.

While boycotts are perhaps easier to organize than they used to be, what with social network pressure and the ease of deleting an app from a phone, the storm will likely blow over. On the other hand, voicing opposition to Trump could provoke lasting damage.

Take Microsoft, which has come out strongly against Trump's entry ban by aiding a lawsuit to overturn it filed by Washington State's attorney general. It has just sold $17 billion worth of bonds to pay dividends and repurchase shares -- despite sitting on $123 billion in cash. Almost all of it sits in Microsoft's foreign subsidiaries to avoid paying U.S. taxes upon repatriation. Trump could move to force Microsoft, Apple and other tech companies to repatriate offshore cash on unfavorable terms, probably with broad public support behind him. The president could also wage war on the likes of Uber and Lyft, making them comply with labor market and taxi licensing laws. The same taxi drivers who rallied against his immigration policy would cheer him on.

That the tech firms are unafraid of inviting retribution shows they've lived in a permissive political climate for too long. If Trump is at all like Putin, he will counterattack and the firms will either bend to his will -- as most did in Russia -- or face serious costs. Then, the majority of big U.S. companies that decided against making loud political statements will quietly congratulate themselves on their foresight.

(Corrects reason for Uber boycott in first paragraph.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Leonid Bershidsky at lbershidsky@bloomberg.net

    To contact the editor responsible for this story:
    Mike Nizza at mnizza3@bloomberg.net

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