Bud Light, the top-selling beer brand in the country, acquired that position over the years through advertising and promotions that brilliantly connected with its core consumers, working-class males. The company decided earlier this year to partner with several “influencers,” hoping to expand its customer base and buttress its Corporate Equality Index Score.  One of those selected was Dylan Mulvaney, a trans female.  The reaction from its customers was swift and forceful, as sales began to fall shortly after the advertisement dropped and Mulvaney began posting content in support of Bud Light.  AB was very slow to react to the customer’s pushback.  Finally, the CEO stated that a third-party agency had produced the ad without the knowledge of upper management.   Later he placed on leave both the head of marketing for the Bud Light brand and her boss. Neither of these actions placated their customers.

Weeks later, Bud Light sales have fallen precipitously, and sales of other InBev (corporate parent of AB) brands have also suffered.  Additionally, for its failure to support Mulvaney and its marketing executives who were placed on leave, the very influential Human Right Campaign announced it was suspending its Corporate Equality Index Score (previously perfect for AB). It gave the company 30 days to cure its errors.  AB appears to be caught in the jaws of an intractable vise.  How did this happen?

Bud Light’s customers were, and are, shocked that AB would risk alienating them and even more dumbfounded that AB has held its ground in the face of significant financial damage.  Is this not evidence of terrible management and leadership?  Through the lens of Shareholder Value Management, yes.  This method of management, once dominant, holds the following tenets:

  • The primary objective is to generate financial returns and increase the stock price, emphasizing maximizing profits and shareholder dividends. Shareholders who own shares in the company are considered the primary stakeholders.
  • The main goal is to maximize profitability and shareholder wealth by increasing revenue, reducing costs, and optimizing operational efficiency.
  • Shareholders are given priority over other stakeholders, and decisions are made with their interests in mind.
  • The focus is primarily on financial metrics, such as earnings per share (EPS), return on investment (ROI), and stock market performance.

Managers in this model exercise great caution and are quite risk-averse when it comes to their customers and would react swiftly and decisively in the face of falling sales that could peril the company’s stock price.  Bud Light customers expected this and received something entirely different.

AB’s management practices the Stakeholder Value Management model, which differs substantially from the Shareholder Value Management model.  Its tenets include:

  • Corporate governance considers the interests of all stakeholders involved with or affected by the company. Stakeholders include shareholders, employees, customers, suppliers, communities, and the environment.
  • The goal is to create value for all stakeholders by considering their interests and finding a balance between them. This approach holds that long-term business success depends on maintaining good relationships with various stakeholders.
  • Sustainable business practices focus on long-term value creation, even if it means sacrificing short-term profits for the forecasted benefit of stakeholders in the long run.
  • Non-financial indicators such as employee satisfaction, customer loyalty, environmental impact, and social responsibility are considered in evaluating performance on par with financial metrics.  Indeed, the implications for securing financial capital are significant regarding the highly coveted CEI score from the HRC.

 The main weakness of the shareholder value model is that it encourages short-term decision-making to the possible detriment of long-term value.  The main drawback of the stakeholder model is that, in theory, the various stakeholders hold equal sway. In reality, a hierarchy inevitably develops. The customers and shareholders at AB are obviously at the lower end of the hierarchy of stakeholders.

Under the shareholder value model, AB’s CEO would have resigned by now for overseeing the top-selling product fall out of first place in beer sales, losing massive sales volume, and, even worse, market value (-$27B) because of an unforced marketing error. The shareholders would demand no less.

Because AB utilizes the stakeholder value model, the CEO remains in charge, resolute in his decisions, and willing to suffer excruciating financial pain in allegiance to the model.  Two things are for sure:  AB’s customers will continue to make no sense of the management decisions being made, and AB’s management will continue to make no sense of their customers’ decisions.  Both sides believe that they are right, and as of now, neither side has blinked.