NEW YORK (Reuters) – When Bank of America Corp (BAC.N) held its annual meeting in April, activists insisted it stop financing private prison companies.
A Bank of America logo is pictured in the Manhattan borough of New York City, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri
On Wednesday, Bank of America did exactly that, distancing itself from a sector that has triggered protests over its links to the Trump administration’s immigration policy and concerns about detention center conditions. Hector Vaca, one of the activists at the April annual meeting, declared victory.
Next, he hopes to get SunTrust Banks Inc (STI.N) to cut ties with private prisons. SunTrust did not respond to a request for comment.
In the past, companies usually waited for controversies to lose steam and avoided taking a stance by declining to provide public comments, making changes slowly or not at all. Crisis communications experts say that companies are forced to act more quickly in today’s fast-paced news and social media environment.
“It’s important to understand that companies in these situations have only bad options,” U.S.-based crisis management consultant Eric Dezenhall said, adding that “there is no playbook or everyone would use it.”
Also this week, several hundred people, including employees of Wayfair Inc (W.N), rallied in Boston to protest the online retailer’s alleged sale of furniture to a Texas detention facility housing migrant children. The spat was fueled when a letter to Wayfair leaders from employees about the sale spread on Twitter.
Wayfair declined to comment on the alleged sale. But it promptly made a $100,000 donation to the American Red Cross to aid humanitarian relief at the border.
The rise in activism accompanies a surge in ESG investing, or investing based on environmental, social and governance factors. Morningstar estimates funds that invest according to non-economic guidelines managed $1.2 trillion at the end of last year.
It has prompted companies to disclose more about how, and with whom, they do business and tackle issues they might have tried to evade in the past.
Last year, a deadly shooting spree at a Parkland, Florida, high school brought long-running arguments about gun control in the United States to the fore once again. This time, some companies that had sold guns for years changed tack.
Dick’s Sporting Goods Inc (DKS.N) stopped selling assault rifles and high-capacity magazines, opting to make it a fully transparent move. The retailer’s chief executive, Edward Stack, spoke about the decision on ABC’s “Good Morning America.”
Many praised the company, but not everyone agreed it was the right thing to do. Same-store sales at Dick’s declined nearly 2% in the quarter after the decision, as customers citing a violation of their Second Amendment rights to bear arms called for a boycott online.
Walmart Inc (WMT.N) and Kroger’s Fred Meyer (KR.N) were among other retailers who also announced they would limit the sales of firearms and ammunition, in their cases only selling to buyers over the age of 21.
Others change course more quietly. Rather than going to the press, Wells Fargo & Co (WFC.N) disclosed its decision to reduce its exposure to private prison companies without fanfare on the 43rd page of a 104 page-long document in January.
Last year, Alphabet Inc’s Google GOOGLE.O faced internal upheaval over a contract to help the U.S. military analyze aerial drone imagery. The company defused employee uproar over the deal by not renewing the contract.
“Historically, we’ve relied on companies to tell us about their ESG performance, but that doesn’t work anymore,” said Witold Henisz, a professor of management at the University of Pennsylvania’s Wharton School.
Younger generations, investors themselves and equipped with more access than ever to information about companies, are at the forefront of a more transparent, activism-fueled corporate universe, he said, stressing the importance of data when it comes to ESG investing.
Millennials are “even willing to take lower wages if they feel like a company has a strong social purpose,” Henisz said.
Reporting by Melissa Fares and Imani Moise; Editing by Neal Templin and Rosalba O’Brien