AMONG ALL THE responses to the election of Donald Trump as President of the United States of America, at least one story didn’t amount to much. Most Americans forgot about it as other events pushed it out of the picture. But the story symbolized something that could not be ignored.
It involved New Balance Athletics Inc., the Boston-based company best known for its sporting footwear. New Balance, despite its name, is hardly a new company. Founded in 1906, its annual sales volume has hovered around $4 billion for several years. Against competition from Nike, Adidas, Puma and other brands, it faces an uphill challenge, partly because it is among the last shoe companies to manufacture at least part of its product line in the United States. All of its major competitors make their shoes in China, Vietnam, Malaysia and elsewhere. The lower wages and other cost savings associated with doing business in those nations enable New Balance’s competitors to undercut them in price.
New Balance insists on partially assembling some of its line of shoes in the United States, where it pays decent wages and is taxed at state and federal levels. The company recovers at least part of its higher costs by using its domestic manufacturing policy as a marketing tool. The company’s pitch has been that you may pay a little more to purchase New Balance shoes, but you support American workers and American industry in the bargain. It’s a plausible message, and along with other features—New Balance offers a choice of shoe widths that is much wider than its competitors, for example—it has served the firm well over the years.
Like many aspects of global business, it’s easy to simplify things to support a chosen point of view. New Balance capitalizes on its domestic production, but not all its shoes are made in America. Most of its volume, by far, arrives from Vietnam, and the company maintains a factory in the United Kingdom to produce shoes for sale in its European markets. Nor is New Balance a major manufacturer of athletic wear generally. The number of the company’s employees in the United States is dwarfed by the almost seven thousand factory workers in Nike’s American plants (although most are admittedly busy producing athletic apparel other than shoes). Still, the firm has found a brand position, and positioning is critical in helping any company to cut through marketing and promotion clamor.
New Balance enjoys marketing leverage based on its plants in New England, and the company sought to make the most of it. So when Donald Trump shook not just the United States but also the rest of the world by being declared the winner of the 2016 presidential election, the company’s VP of public affairs celebrated the event by declaring that the firm was looking forward to Trump assuming the office of the presidency (Sara Germano, “New Balance Faces Social Media Backlash After Welcoming Trump.” Wall Street Journal, November 10, 2016.)
Why? Because Trump opposed the proposed Trans-Pacific Partnership (TPP), which would have cut import duties on products originating in much of Asia. The shoe firm’s opinion had nothing to do with other qualities of Trump and his campaign promises. The spokesperson made no reference to Donald Trump’s confessions about his misogynistic behavior, his multiple bankruptcies, his attitude toward minorities and people with disabilities or a dozen other unpleasant aspects of the man’s values and behavior. The comment was only an observation on one specific aspect of Trump’s policies and made by a spokesperson whose concern may have been legitimate but whose logic was essentially shabby. Anyone with knowledge of international business in the twenty-first century knows that capital is far easier to migrate than labor. The reasons behind the shift of manufacturing to countries beyond North America and Europe are complex, and their impact is permanent.* No one in industry seriously believes that the manufacturing jobs lost from the U.S. over the past three decades are going to return to America—especially old-school work like making sneakers. Many of those jobs were lost not just to foreign competition but also to the impact of automation. For example: The U.S. produces almost as much steel today as it did in 1990 but with one-tenth the number of workers. Robotic tools do most of the work that people once performed, and they do it accurately and safely 24 hours per day without striking for higher wages. They, not illegal immigrants or foreign workers, took jobs from middle-class Americans.
Still, the idea that America has lost jobs to foreigners played well during the 2016 presidential election campaign. So well, in fact, that Trump’s Democratic opponents Hillary Clinton and Bernie Sanders decried the TPP along with Trump. On that basis, the New Balance spokesperson might well have celebrated the election of either nominee had he or she defeated Trump. Had Clinton won, and had New Balance praised her policy, it probably wouldn’t have generated a blip on the surface of the post-election news waves. But when the company spokesman praised Trump, the reaction was swift and intense.
Guilt by Association
When the Wall Street Journal ran the story about New Balance’s satisfaction with Trump’s victory, it unleashed storms from two opposing directions. From the right wing of American politics came rejoicing over New Balance’s comment. The racist neo-Nazi blog The Daily Stormer declared New Balance “The official shoes of white people.” Others on the extreme right rejoiced in similar style.
The most powerful reaction, however, rose among Americans who didn’t necessarily identify with either political wing. Their response to Trump’s election and New Balance’s half-hearted endorsement was not just immediate but emphatically negative. Thousands of Americans made a point of publicly burning their New Balance shoes, raising such an outcry that it forced the shoe company to respond. In a statement issued three days later and distributed via Twitter, among other sources, the firm declared:
New Balance does not tolerate bigotry or hate in any form. One of our officials was recently asked to comment on a trade policy that was taken out of context. As a 110-year-old company with five factories in the U.S. and thousands of employees worldwide from all races, genders, cultures and sexual orientations, New Balance is a values-driven organization and culture that believes in humanity, integrity, community and mutual respect for people around the world.
It served as a means of separating New Balance from the president-elect and setting the record straight, but the association with Trump continued to reverberate, shaking New Balance sales in dramatic fashion. One credible sales industry source claimed that within weeks of the statement praising Trump, sales of New Balance products dropped 23 percent in California, 17 percent in Oregon and a whopping 25 percent in New York State.5 How much of those sales recovered when the memory of the New Balance spokesperson’s slipup faded? It remains to be seen. The lesson to be learned, however, is clear.
Political pundits and philosophers are certain to argue for years to come over the consequences of Donald Trump’s stunning victory in the 2016 presidential race. I have neither the insight nor the intent to deal with that aspect. I’m interested in the fact that an enormous number of Americans recoil from businesspeople whose actions and statements are (or appear to be) aligned with Trump’s views and who are, therefore, in opposition to this country’s fundamental ethical standards and values. This is what cost New Balance its abrupt drop in sales. And it is a lesson to American businesses generally about the value of operating with principles, fairness and equity, despite the immediate appeal of dispensing with those qualities in search of profit and sales status.
The lesson appears destined to be relearned and retaught over and over again. Like all lessons based on experience, the cost can be both painful and unnecessary.* What’s more, the price is not immediately apparent, which makes it all the more tempting to discard ethics if the focus is fixed exclusively on the bottom line.
To be clear: The dividends earned from operating a business based on fairness to all concerned—employees, customers, suppliers and shareholders—are measured not only in potentially enhanced profits but in avoided costs as well. The most obvious example of the cost of unprincipled business practices is the loss of reputation suffered by companies whose management policies are revealed to be unfair, illegal or simply disrespectful to the wide communities they serve. Profits may be immediate, and vengeance can take time to arrive; when it does arrive, however, the damage it inflicts is both deep and widespread.
The above text is excerpted from THE DIVIDENDS OF DECENCY: How Values-Based Leadership Will Help Business Flourish in Trump’s America, learn more and pre-order your copy here.