I have long cautioned readers about the dangers of mixing politics with their investing. Politics is so emotional, so tribal, that it can easily cloud an investor’s thinking. Anything interfering with factual and logical analysis will disrupt even the best decision-making processes. Indeed, changes to your investment strategy based on hot emotions rarely work out.
But what about when politics affects how corporate executives make their decisions? There are dangers and opportunities when hot-button topics are mixed into a business model.
Consider some recent examples where politics appeared to influence corporate decision-making:
• First National Bank of Omaha, the nation’s largest closely held bank and thus one might assume not subject to outside shareholder pressure, dropped its National Rifle Association affiliate credit card “in response to customer feedback.”
• Papa John’s International Inc. ended its relationship with the National Football League, in large part because some players kneeled during the national anthem.
• Dick’s Sporting Goods Inc. ended sales of assault-style rifles and high-capacity ammunition magazines; it would also require any gun buyer to be at least 21, regardless of local laws. Walmart Inc., the biggest gun seller, said it too would no longer sell assault-style rifles, and would stop selling guns to anyone under age 21.
• Chick-fil-A Inc.’s chief in the past made comments about “the company’s support of the traditional family;” it was subsequently reported that the company donated to anti-LGBTQ groups.
Outdoor retailer Recreational Equipment Inc., better known as REI, said it planned to stop sales of five brands, including firearms maker Vista Outdoors Inc., amid customer complaints. Enterprise Rent-a-Car, Hertz and Avis, meanwhile, have ended co-branding partnerships with the NRA.
Delta Air Lines Inc. rescinded a one-time group travel discount for the NRA’s annual meeting. (It was only used by 13 people.)
It would be easy to see the actions related to the latest mass shooting as a knee-jerk response. But there's a big difference between the hotheaded reaction by traders to political news, and what seems to be more deeply considered moves by corporate executives in response to customer feedback. But with the #BoycottNRA still unfolding, I want to use something with more distance from today as a leaping-off point for discussion.