Merck’s Ken Frazier Just Gave Other CEOs A Blueprint For Standing Up To Trump

Merck CEO Kenneth Frazier recent­ly stepped down from President Donald Trump’s man­u­fac­tur­ing coun­cil amid con­cerns that the pres­i­dent did not suf­fi­cient­ly con­demn the behav­ior of white nation­al­ists this past week­end in Charlottesville, Va.

Not only did Frazier step down, but he offered a pow­er­ful state­ment: “America’s lead­ers must hon­or our fun­da­men­tal val­ues by clear­ly reject­ing expres­sions of hatred, big­otry, and group suprema­cy, which run counter to the American ide­al that all peo­ple are cre­at­ed equal.”

In addi­tion to pos­i­tive respons­es on social media, Merck’s stock price rose approx­i­mate­ly 1%, its biggest improve­ment in near­ly a month. Given the pos­i­tive response to Frazier’s coura­geous actions, why are many busi­ness lead­ers ret­i­cent to speak up about issues of social jus­tice?

Research demon­strates that when peo­ple in orga­ni­za­tions speak up about moral issues, they are often cas­ti­gat­ed. For exam­ple, employ­ees who take a moral stand when oth­ers do not are often viewed as holi­er than thou. Research also shows that most whistle­blow­ersoften face scorn and retal­i­a­tion from their employ­ers rather than being cel­e­brat­ed for their courage. Given that speak­ing up can also open some­one up to claims of hypocrisy if they ever act in a less than vir­tu­ous man­ner, many peo­ple in orga­ni­za­tions are hes­i­tant to voice their opin­ions on eth­i­cal issues.

But there’s an impor­tant caveat: Research I coau­thored, led by W.P. Carey School of Business pro­fes­sor Ned Wellman and includ­ing Ross School of Business Dean Scott DeRue, finds that although low­er-lev­el employ­ees may be vil­i­fied for rais­ing issues, orga­ni­za­tion­al lead­ers are gen­er­al­ly praised for tak­ing a moral stand. Given the legit­i­ma­cy of their roles as orga­ni­za­tion­al author­i­ties, we want lead­ers to speak up and respect them when they do.

Further, research demon­strates that a CEO’s moral val­ues are pos­i­tive­ly asso­ci­at­ed with firm per­for­mance. CEOs who focus on doing good for all stake­hold­ers — includ­ing soci­ety at large — are more like­ly to be seen as vision­ary and have employ­ees who exert extra effort not for­mal­ly required in their job descrip­tions. Ultimately their com­pa­nies per­form bet­ter finan­cial­ly, as com­pared to those of lead­ers who focus almost exclu­sive­ly on eco­nom­ic out­comes.

Fortunately, Frazier is part of a new gen­er­a­tion of CEOs who have the courage to speak up about moral issues. After hear­ing a share­hold­er com­plain that Starbucks had lost cus­tomers for sup­port­ing gay mar­riage, then-Starbucks CEO Howard Schultz said, “Not every deci­sion is an eco­nom­ic deci­sion. … The lens in which we are mak­ing that deci­sion is through the lens of our peo­ple. We employ over 200,000 peo­ple in this com­pa­ny, and we want to embrace diver­si­ty.”

Similarly, Sheryl Sandberg, COO of Facebook, recent­ly insti­tut­ed a 20-day bereave­ment leave pol­i­cy for employ­ees to grieve los­ing an imme­di­ate fam­i­ly mem­ber. She has also made great strides to not only have equal pay for men and women at Facebook but to encour­age top lead­ers in oth­er busi­ness­es to do the same.

As I write this arti­cle, 422 new full-time MBA stu­dents at Michigan Ross are begin­ning the Impact Challenge—a four-day project aimed at inspir­ing future busi­ness lead­ers to have a pos­i­tive impact on soci­ety through busi­ness. Much like Frazier showed the courage to speak out against racism, I am hope­ful and opti­mistic that our future lead­ers will have val­or to stand up for their prin­ci­ples.

David M. Mayer is an asso­ciate pro­fes­sor in the man­age­ment and orga­ni­za­tions area at the University of Michigan’s Ross School of Business.