Since the days of Adam Smith, economists have assumed that businesses hate regulations. Government-imposed mandates, according to the theory of laissez-faire economics, slow down economic growth and stand in the way of innovation.
In a rebuke that would make these capitalists proud, the Supreme Court struck down President Joe Biden’s executive order that imposed a COVID-19 vaccine and testing mandate for all businesses of more than 100 staff. The petitioners challenging the executive order and the mandate comprised business groups, as well as state governments. Business leaders, it would seem, opposed the mandates.
However, this isn’t true for the business leaders I have spoken with, from consulting companies to accounting firms and investment banks, who appreciate the vaccines mandates, as do 80% of the public.
One thing the Supreme Court has overlooked is that mandates make a CEO’s job a little bit easier. Many business leaders embraced the government mandate because it solved a number of vexing issues that company decisions regarding a COVID-19 vaccine mandate can unleash.
Organizations want certainty in their liabilities and a reduction in their risks. Uncertainty is portentous, holding open the possibility of facing crippling costs that can bring a business to its knees. Having all its employees vaccinated dramatically reduces the uncertainty an organization faces. Because the vaccines powerfully reduce the risk of both disease progression and transmission, they produce a healthier and less susceptible workforce. That means fewer lost days of productivity and lower health care costs. Thus, it would seem that most companies would impose their own vaccine mandate.
Here’s where, however, chief executives face a dilemma: No matter the economic benefits, the decision to impose a company vaccine mandate isn’t simple, especially in our politically fractured world. As Milton Friedman noted, business leaders are motivated to offload the responsibility for their actions onto others.
Vaccine mandates are divisive. Surveys show Americans’ attitudes have solidified into pro and anti-camps. That means, no matter what decision a business makes, some of its employees and customers will be spitting rageful fire. When companies make their own decision, they are the source of that ire, the one to blame.
However, if the mandate is government-imposed, then business leaders are off the hook. Someone else has made the decision and their libertarian employees can blame the government instead. Similarly, if they don’t impose a mandate, their safety-conscious employees may cry foul and look for safer pastures elsewhere.
This is exactly what is already happening. When Starbucks undid their vaccine mandate, directly citing the Supreme Court decision for its decision, people took to Twitter to announce their decision to #BoycottStarbucks. In response, clothing maker Carhartt reiterated their commitment to their vaccine mandate and faced calls to be boycotted.
Business leaders also dislike having to make a decision that might put them at a competitive disadvantage. If some companies in an industry impose mandates and others don’t, it raises the real possibility that some of these companies may lose both employees and customers. Unless all companies make the same decision, some of them risk getting the short end of the industry stick.
In U.S. Capitalism, business leaders are strictly motivated toward actions that increase the bottom line. In many cases, they unsurprisingly resist or reject regulations that eat directly into their profits. But business leaders don’t hate all regulations. They often hope for governments to impose regulations and mandates that lower their uncertainty, reduce their responsibility, and prevent a competitive disadvantage.
Now that the Supreme Court has struck down President Biden’s vaccine mandate, the ball is back in every CEO’s court. Here is one approach leaders can take. CEOs will ultimately have to make a decision and deal directly with the consequences–because the government is no longer there to shield them.
Adam Galinsky is the Paul Calello professor of leadership and ethics at Columbia Business School. He is the co-author of the best-selling book Friend & Foe.
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