A Courageous Leader Triggers a Moral Revolt Among CEOs

Nothing like this has happened in the past fifty years.

Forty-three CEOs of major American corporations revolted against the president this week by shutting down two presidential advisory councils. In so doing, they may have created an unprecedented gulf between the White House and the business community.

It all came down to moral leadership. When the president refused to take the lead in speaking out against the demonstration in Charlottesville by Neo-Nazis, KKK and White Supremacist groups, America’s CEOs decided this was morally unacceptable. The revolt was led by one of America’s leading CEOs, Merck’s Ken Frazier, who grew up in inner city Philadelphia and whose grandfather was a South Carolina slave born before the 1863 Emancipation Proclamation.

Frazier was deeply troubled last Saturday after the events in Charlottesville highlighted the emergence from the shadows of the Internet of the White Supremacist, KKK and Neo-Nazi movements. President Trump’s comments striking moral equivalence between these extreme groups and people who opposed them only deepened Frazier’s angst.

By Sunday Frazier had decided to resign from President Trump’s American Manufacturing Council on which he was serving, and to make a clear statement opposing “hatred, bigotry and group supremacy.” He reviewed his resignation with his corporate team and shared it Sunday night with members of his board of directors, who were fully supportive of his action.

His announcement at 7:00am Monday morning set off a firestorm, heightened by President Trump’s Twitter post less than one hour later attacking him and Merck. While the media immediately highlighted the significance of Frazier’s statement, the initial reaction from American CEOs was quiet. Only Goldman Sachs’s Lloyd Blankfein and U.K.-based Unilever’s Paul Polman publicly supported him. Blankfein’s Twitter response was especially pointed, quoting Lincoln, “A house divided against itself cannot stand” and adding, “Isolate those who try to separate us. No equivalence w/ those who bring us together.”

Behind the scene, the 43 CEOs on the two councils were deeply troubled. During telephone calls between the three female CEOs on the Strategy and Policy Forum – PepsiCo’s Indra Nooyi, IBM’s Virginia Rometty and General Motors’ Mary Barra – consideration was given to resigning immediately and encouraging others to do so. But the President’s prepared statement on Monday cooled the tension, as Trump criticized by name the Alt-Right groups that had organized the Charlottesville demonstrations.

By late Monday there were further resignations from the manufacturing group by Under Armour’s Kevin Plank, Intel’s Brian Krzanich, and Alliance for American Manufacturing’s Scott Paul, followed by the AFL-CIO’s Richard Trumka and Thea Lee on Tuesday morning. WalMart CEO Doug McMillon also issued a statement to his company’s 1.5 million American employees sharply criticizing the president for not taking a clear stand against the demonstrators in Charlottesville.

On Tuesday President Trump again attacked these CEOs on Twitter. But the breaking point came during his Tuesday press conference, when he reverted to his Saturday language, creating a moral equivalence between the Alt-Right and those that opposed them.

By Tuesday evening, Blackstone’s Steve Schwarzman, chair of the President’s Strategy and Policy Forum, recognized the deep unrest among his members after multiple conversations with them, and decided to call a telephone meeting of the forum members for late Wednesday morning.

In addition to those who indicated they planned to resign, several members wanted to disband the forum. Soon, the entire group agreed to shut down the forum, effectively resigning en masse. Meanwhile, more members of the manufacturing council resigned, including 3M’s Inge Thulin, Campbell’s Denise Morrison, and GE’s Jeff Immelt. Schwarzman called the White House late Wednesday morning to notify Jared Kushner what was happening. This triggered Trump’s Twitter post that he was ending both councils, “rather than putting pressure on the businesspeople.”

Taking such public actions was not without risk for the CEOs and their companies. None of them wanted Twitter posts directed at their companies like Frazier and Merck got from the President. Their companies have products dependent on government approvals and major regulatory issues before Congress and the administration.

Given these issues, what does it take for CEO to speak out against the president? Moral courage.

While many CEOs prefer to stay under the radar and avoid public scrutiny, Ken Frazier led the way with his example. As the chair of PhRMA, the pharmaceutical manufacturers association, Frazier has led the initiative for restraint in drug price increases and transparency about prices. He initiated a 32% price reduction on one of Merck’s most promising new drugs for Hepatitis C, Zepatier. In addition, he called out industry miscreants like Turing’s Martin Shkreli and Valeant’s Mike Pearson for excessive price increases.

In today’s era of pragmatic CEOs, moral courage in the form of public statements is rare indeed. With such sharp divisions in the country, any statement at all is certain to incur the wrath of one side or the other. That’s why Frazier’s actions and the subsequent CEO revolt are so significant.

Today’s CEOs are public figures, with responsibility to uphold their company’s mission and values. When these values are violated, even by someone as powerful as the president of the United States, they are obliged to take a clear stand. In this era of instant global communications and social media, it is no longer possible to hide in the shadows.

Ken Frazier’s example now resounds.  Leaders of all five military branches have made public statements against racism.  Republican Congressional leaders are questioning President Trump’s statements on race.

The ripple effects of Frazier’s courageous stand could change the nation.