Three years after her winning appearance on “Shark Tank” in 2014, Sara Margulis decided to move her growing honeymoon registry business, Honeyfund, from California to Florida because of the state’s business-friendly reputation.

But that was before Florida Gov. Ron DeSantis signed House Bill 7 into law on April 22, 2022. Known as the Stop WOKE Act, it restricts workplace training or school instruction on diversity, equity, and inclusion (DEI). In a statement, the Republican governor said he was taking a stand against “woke indoctrination” that forces employees to attend diversity training programs that teach about white supremacy, privilege, and bias.

For Margulis, a female founder with a workforce that is 65% women and a very diverse clientele, the policy is problematic. She believes it muzzles free speech protected by the First Amendment, prevents her from providing DEI training and instruction to her staff, and is morally unconscionable. She joined other employers in a lawsuit against the Governor, the Attorney General, and the state’s Human Relations Commissioners. The lawsuit was filed by Protect Democracy, a nonprofit, nonpartisan organization that fights rising authoritarianism in the United States, and pro bono attorneys at Ropes & Gray LLP. In August, a federal judge agreed that the law violated the First Amendment and blocked it as unconstitutional. The state has appealed this ruling.

“I’m not trying to come out as some big activist or say that employers should be activists, necessarily. I’m just trying to run my own business as a single individual citizen of the United States,” Margulis told Wharton management professor Stephanie Creary during an episode of her Leading Diversity at Work podcast. “It made a lot of sense to me to challenge this law, especially because it is so blatantly unconstitutional.” (Listen to the podcast above.)

“I am generally concerned with turning to corporate America in place of government for basic protections.”— Leora Eisenstadt

The most recent podcast episode focused on how major legal and policy decisions are affecting DEI in the workplace, including the U.S. Supreme Court’s overturning of Roe v. Wade. That decision prompted some large companies, including Bank of America, Amazon, and Cigna, to offer time off and travel expenses for employees who need to seek abortions in states where it remains legal.

“I am generally concerned with turning to corporate America in place of government for basic protections, and this may just be another iteration of that issue on steroids,” said Leora Eisenstadt, legal studies professor at Temple University’s Fox School of Business and Management, who joined the conversation along with Sara Chimene-Weiss, an attorney with Protect Democracy.

Eisenstadt, who is also founding director of Temple’s Center for Ethics, Diversity and Workplace Culture, said the offer of extra help seems like a great benefit for employees, but it creates risk for companies around fairness. Who gets the benefit? Who manages it? What about workers who live in places like Texas, which provides a financial incentive for citizens to turn in women seeking abortions?

“We’re talking about worker vs. worker issues,” she said. “If you want to create a healthy workplace culture and now you live in a state that incentivizes people reporting to the police on others’ behavior, that’s not good news for you.”

Eisenstadt noted a distinction between issues that have the potential to push companies into litigation, such as abortion, and those like in Florida, which push companies into advocacy.

“I think the advocacy in the area of the Florida law is fantastic, and I don’t really see any downsides for companies,” she said. “In fact, it’s almost as if they don’t have a choice because the law, in addition to being unconstitutional, is hampering their ability to run their businesses effectively.”

Jumping into Advocacy

Margulis said she and her leadership team talked over the pros and cons of bringing this lawsuit, especially after seeing the state retaliate against Disney when the company stood against its “Don’t Say Gay” bill. DeSantis and lawmakers immediately stripped the park of a special tax designation it had since 1967.

Ultimately, Margulis and her team felt the pros outweighed the cons.

“My experience as an academic studying a variety of social movements is that sometimes our discomfort, particularly in the U.S. in talking about race, catalyzes oppositional efforts.”— Stephanie Creary

“Love is love. Everybody gets married, so we have to serve a diverse group of people. And we want to ensure that our team understands what diversity is, what equity is, what inclusion is. How does that come out in our marketing materials? How does that come out in our site interface? Are we using gendered language around our site?” Margulis said. “Things like that, just so that we can do our business well and serve our customers, make diversity training important.”

As a researcher who works closely with companies and a professor who teaches young people about business, Creary has two perspectives. She said freedom of speech is critical in both areas in order to have difficult conversations about race, gender, discrimination, and other topics that can make people uncomfortable.

Creary also pointed out that some policies meant to target certain groups, such as Black people, sweep broadly.

“My experience as an academic studying a variety of social movements is that sometimes our discomfort, particularly in the U.S. in talking about race, catalyzes oppositional efforts that end up negatively affecting all other marginalized groups,” she said.

Democracy in Crisis

Zooming out from the corporate level, political decisions can also wreak havoc on the larger economy. Clashing views can lead to political instability, favoritism, and other problems that choke entrepreneurship and keep investors away.

For example, the U.S. nearly had its AAA credit rating downgraded following the Jan. 6, 2021, insurrection, Chimene-Weiss said. And in June 2022, DeSantis vetoed $35 million for a Tampa Bay Rays training complex after the team tweeted pro-gun control messages following a mass shooting at a Uvalde, Texas, elementary school.

“When businesses are targeted, when elected officials single out individual companies for political purposes and the regulatory apparatus is weaponized against these companies, success in the marketplace seems only possible through loyalty to political officials,” Chimene-Weiss said. “That’s not good for business. That’s not the free market that the U.S. is known for.”

“[Business leaders are] uniquely positioned to act in ways that transcend our politics.”— Sara Chimene-Weiss

She said her organization, Protect Democracy, believes that business leaders are well-positioned to defend democracy because of their significant role in society, providing products, services, and jobs.

“They’re uniquely positioned to act in ways that transcend our politics. And they also have the platforms and influence either locally or nationally to do so,” she said.

Eisenstadt agreed that business has a powerful voice, especially employees in this tight labor market. She also urged employers to think longer term about their strategies in response to politics.

Margulis encouraged fellow business owners to decide whether advocacy is the best way to serve their employees and customers, while noting that plenty of studies have proven the benefits of diversity, equity, and inclusion.

“When you have more women on corporate boards and in leadership positions, when you have more people of color on corporate boards and leadership positions, those companies have better profit margins,” she said.