The role of International Business Machines Corp. (NYSE: IBM) CEO Ginni Rometty as an advisor to President Trump has caused deep concern among some of her employees. She may find out the hard way that the problem could spread to shareholders and customers, as it has to those at other companies.
The suggestion of a boycott of Starbucks Corp. (NASDAQ: SBUX) products because its CEO plans to hire thousands of refugees, as well as an analyst downgrade of Under Armour Inc. (NYSE: UAA) stock due to the CEO Kevin Plank’s positive comments about the effects of Trump on American business, show how widely the debate over association, either positive or negative, with White House policies has exploded.
Starbucks founder and chairman, Howard Schultz, promised to hire 10,000 refugees over five years after Trump’s plans on immigration were released. #BoycottStarbucks was the Twitter part of an attempt to keep potential customers out of Starbucks stores. It is not clear whether the boycott cost Starbucks any significant sales.
The problems at Under Armour were immediate. Plank spoke about Trump in a CNBC interview: “[S]uch a pro-business president is something that’s a real asset to this country. People should grab that opportunity.” Sam Poser, an analyst at Susquehanna International, downgraded the shares from Neutral to Negative because he believed that Plank’s comments hurt the athletic wear company’s reputation in some circles. The stock, already hurt by poor financial performance at the company, took a hit.
IBM is among the most public relations–driven large companies in the United States. It spends tens of millions of dollars on promotion of its artificial intelligence operations and its flagship product called Watson. IBM pumps out press releases about its sales and customer partnerships almost daily. These already have been undermined by revelations by Bloomberg that IBM laid off large numbers of American workers and then Rometty pledged to add 25,000 U.S. jobs over the next four years.
IBM has done very poorly, both financially and in the stock market, since Rometty took over. Her promised turnaround has not materialized. It is a wonder that she would risk the allegiance of a single customer or a single shareholder, particularly in light of the situations that face Under Armour and Starbucks.