Companies should be cautious before wading into politics, Mark Penn warns

Companies around the U.S. have faced mounting calls to involve themselves in contentious political issues in recent years and with the 2024 election likely to be particularly charged, executives will have to weigh whether it's worthwhile to wade into politics.

"I think most CEOs would sooner put their head in an alligator than get involved in politics this year," Mark Penn, chairman and CEO of marketing firm Stagwell, told FOX Business in an interview. "I think that is in contrast to previous years when there was this growing pressure on CEOs to become involved in politics and not stay silent."

"They've realized that there are two sides to the political equation and if you want to have a brand that's loved by 80% or 90% of the country, getting involved with something that maybe 40% like can be a pretty precarious position."

Penn, who worked as the chief strategy officer of Microsoft and co-founded a polling firm that had former President Bill Clinton and ex-British Prime Minister Tony Blair as clients, said that when activists from outside a company are trying to pressure a company into taking a position on a hot-button issue, companies should pause and decide if they should respond at all before doing something.

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"Maybe by responding you fan the flames, and they're trying to get a response from you one way or another, because the activist groups generally want to put a company in a position of having to favor their side," Penn explained. "They're looking for a target company that they can then kind of push over to their side."

"What we say is look, if your company has a long-standing commitment to certain issues aside from your products, then you should stick to those principles and continue. If you're somebody like a Patagonia and you've got a set of principles and you have long-term associations, then that's core to your image," he said.

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Penn offered a hypothetical situation in which an airline or hotel had a politically-aligned organization booking a significant number of rooms or seats and how that could force executives into an issue unexpectedly that would force them to develop a consistent policy.

"Is the right issue to throw them out of your hotel or plane? Is it to say, 'Hey, we're not going to discriminate on the basis of people's political views?' That's where I think companies go wrong, and they make a snap judgment in a couple of hours, and they pay for it for like years," he explained.

"What I think companies are learning is that snap judgments like this can really cost billions of dollars in lost business. And I think they also have to realize their own marketing departments have a variety of people, some of whom have a variety of interests and how they market, what they want to market," Penn added.

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To help business leaders handle those sorts of situations, Stagwell launched a risk and reputation unit with a Democrat, a Republican, a pollster and public relations specialist to serve a given client. Penn explained this format helps ensure that "CEOs do not fall into the trap of having a former Republican or Democratic staffer who is their CCO and then wind up in one of those two political pits."

"I think the most overlooked thing in CEO decision-making about political issues is not ensuring that they have viewpoint diversity in the advice that they're getting," he added.

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Penn said businesses should do periodic reviews of their stakeholders and potential hot-button issues that may arise which could cause activists to target their company for protests. He noted that those are typically social issues rather than economic issues like inflation, immigration and crime that have a more direct impact on the day-to-day and strategic operations of a business.

"The truth is, political explosions have been far more costly than almost any physical event that I can recall. And so I think they have to be better prepared," he explained. "Sometimes just staying out of it, not commenting, letting it pass is the best solution – but it's so difficult to implement at the time. It seems impossible to implement, because people are racing into your office and because there are these other forces that whatever decision you make can have some stress and strain on it."

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"But also you just don't want to wait until it shows up on your door. You know that this is enough of a potentially costly situation to have a team on your side, to have the resources that you can spring into place just as you have on security, just as you have on physical emergencies," Penn added. "Political emergencies can be just as costly and powerful."