A new form of corporate risk has arrived. Boards of Directors that do not see it coming can suddenly discover that their companies are caught up in it. Once it happens, there is no way out.
I call this unpleasant new reality Whipsaw Risk. It arrives courtesy of the red-hot culture wars that are raging all around us. The CEO of Target just resigned after leading that company into the trap, and the new CEO of Cracker Barrel is finding out that, through no fault of her own, that company is now caught up in the culture wars with enemies on every side. No company wants to have enemies, but here they come anyway if management fails to notice that times have changed.
The proximate cause of Cracker Barrel's difficulties is a quite-necessary corporate facelift that involves redecorating the company's iconic restaurants, simplifying the logo, and introducing some lighter fare to the menu. I call these steps "quite necessary" because the company has been very slowly going out of business. Traffic in the restaurants is declining every year. Their fans, and there are many, are aging out, and not enough new arrivals are taking their place. Their current ambience, however much it is loved by today's regulars, is not turning "newcomers" into "repeat customers." They obviously need to change that while they are still profitable and still have the money to make the changes.
There were always going to be people who didn't like the changes and were going to complain about them. But that would have blown over, and the new design would have succeeded or failed on the merits. That may still happen, but the risk of failure has now gone up exponentially. As Brandon Morse detailed, the company's website is festooned with twenty-year-old "alphabet causes" that were once considered broadly popular and non-controversial, but today are hot buttons that draw vicious social media attacks that reach millions and never stop.
For Cracker Barrel, these causes include ESG, DEI, and LGBTQ+. They have entire web pages devoted to each. Armed with that, the people who don't like the remodel are able to characterize the entire company as "woke," their new CEO — who wasn't even there when those web pages went up — as "woke," and all the changes as a form of "going woke." If they were Nike, that might not matter. But for a company that specializes in Southern Home Cooking, being attacked as "woke" will not be a pleasant experience.
And it need not have happened. Yes, Blackrock and Vanguard hold sizeable positions in the company's stock, and both probably did at one time push Cracker Barrel toward making a big deal of ESG. But even they have walked away from it.
DEI? Leave that on your website, and the Assistant Attorney General for Civil Rights may come after you for violating the Civil Rights Act. That used to be corporate boilerplate. Now it's trouble. Get rid of it. And unless your product actually has something to do with human sexuality, don't trumpet your interest in that subject either.
What Target found out, and Cracker Barrel is finding out now, is that once you commit to these causes, you can't back away from them, even if some new segment of people comes along to attack you for supporting them. If These Guys don't boycott you, The Other Guys will. There is no way to escape. Target got whipsawed from one side and then the other, on both DEI and support for LGBT causes.
Companies should start now to disengage from these "alphabet causes" from two decades ago. Lose the policies. Scrub them from the website and the investor relations materials. The days when these causes were anodyne boilerplate, such that everyone felt obligated to chirp them in unison, are over. All they will bring you now is trouble... first from one side, then the other. Before you know it, everybody is mad at you.
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