Employee activism: what does the Escondido Framework say?

Staff at Wayfair, the online furniture and household goods company, have been protesting at their employer selling furniture to a company equipping migrant detention centres in the US.[1]  What does this say about the relationship of companies to their staff, about limits on the ability of shareholders to exercise power over the behaviour of that conventional theory suggests that they own, and about the rights and responsibilities of every one of us in relation to the organisations that we work for?

The relationship of companies to their staff

An organisation should consider ethical and political behaviour as part of the marketing mix when it thinks about its strategy towards its employees.  Charities and other not for profit organisations are generally able to employ staff at a lower cost than organisations without an ethical mission because their staff make trade-offs between the income they receive in cash and feeling that they are achieving something for the wider good.  As I have written elsewhere, when I headed up the buying and merchandising for the UK’s largest retailer of stationery in the 1980s, I argued to my bosses that the halo effect of developing environmentally responsible product ranges would be to enhance our standing among the students graduating from universities where we were recruiting.  By selling to a company equipping detention centres, Wayfair has effectively shifted its positioning on one of the marketing dimensions of its interface with employees.  This decision may blow over, but in the longer term Wayfair needs to consider whether to adopt a clear stance about the larger customers it sells to or it may ultimately have to accept that is will need in some way or other to change.  This might involve paying staff a bit more in order attract staff to replace those who don’t want to be involved doing something they view us unethical.  Or, if we make the assumption that one of the benefits of employing ethically informed staff is they are more trustworthy, it may need to put controls in place to cope with the risk that staff who are not as ethically sensitive to offset a lower level of trustworthiness.  Or, if the values of the staff protesting against the sales for the detention centres reflect cultural norms in the location of the offices or warehouses in which they work, Wayfair may need to go to the expense of moving its operations to locations where the local population is less sensitive to such issues.

Limits on company owners

Ownership is a complex subject.  Ownership of a piece of paper that says you have a share in the common stock of a company gives you a right to residual profits of a company and (assuming it is voting stock) in decisions about the appointment of directors of the company.  And even if you are the owner of the entire voting share capital, it does not give you the ability to dictate everything that the company can do.  Others who interact with the company can exercise their rights too.  The Wayfair employees have made it clear their views and are attempting to limit the ability of the company’s owners to sell to whoever they wish.  It is not a matter a law, or at least not law alone, the practical balance of power between an incumbent workforce, the managers and directors, as well as those of people who have invested in the company all come into play.  In the case of a company with publicly traded shares that offer the opportunity to exercise votes once a year, if at all, and then only as a very blunt instrument, the shareholders can hardly been exercise ownership rights in relation to decisions about whether to sell to the developer of a migrant detention centre.  The managers and directors will have to consider what is best for their own interests: do we concede to the employees’ demands, or do we shift the company’s market positioning in relation to the explicit and implicit interests of the workforce?

Our rights and responsibilities in relation to the companies we work for

The workforce at Wayfair may have put their jobs at risk.  Those who have walked out are likely to have breached their contracts of employment.  But acting in line with your conscience is not a matter of exercising a right as discharging a responsibility.  The staff at Wayfair will be making trade-offs (or need to realise that this is what they are doing) between doing what they believe is right and their immediate financial self interest.  The level of risk they take will reflect their own market power: can their employer find substitute staff with the requisite skills at a price that it can afford, or will it respond to the pressure from the protest, and furthermore, are they supported by the legal framework surrounding their employment or not?

[1] “Activist employees pose new labour relations threat to bosses: Wayfair walkout shows CEOs cannot duck political risks by claiming neutrality” FT 4th July 2010