Article originally published in the Philadelphia Business Journal on April 26, 2022. Revised 8:00am on April 27.
What is the law of unintended consequences? Robert Norton, former economics editor of Fortune Magazine, wrote, “The law of unintended consequences, often cited but rarely defined, is that actions of people – and especially of government – always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.”
The unintended consequences of a battle between Florida Republican Governor Ron DeSantis and The Walt Disney Company is in the process of playing out.
On Apr. 22, DeSantis signed legislation to retaliate against Disney for opposing the recently passed Parental Rights in Education Act, dubbed the “Don’t Say Gay” law, that limits LGBT education in schools and is viewed by many as anti-gay. The legislation dissolved the Reedy Creek Improvement District, passed by the Florida Legislature in 1967, allowing Disney to self-govern a 39-square-mile area independent of local municipal government.
The district was beneficial to Disney World by simplifying the process to build its theme park and provide supporting services. It was also beneficial to local municipalities by relieving them of the responsibilities and costs of providing services to such a large enterprise.
Disney at first did not take a position on the Parental Rights in Education legislation. After many of its employees and stockholders complained, Disney announced its opposition to the law and that it would support efforts to have it overturned in the courts. It also announced suspension of political contributions to Florida politicians. Because the company wanted to avoid the wrath of its employees, it faced the wrath of the governor and the Florida Legislature.
So, what are the unintended consequences?
Disney certainly didn’t anticipate having the Reedy Creek Improvement District dissolved by the Florida Legislature as retaliation for exercising its constitutional right to speak out on an issue important to the company and its employees.
In the 2006 case of Hartman v. Moore, the Supreme Court held, “The First Amendment prohibits government officials from subjecting an individual to retaliatory actions, including criminal prosecutions, for speaking out.”
Adam Winkler at the UCLA School of Law stated, “It is a violation of the First Amendment for the government to punish a corporation because of the company’s expressed viewpoints on political issues. I think that we will see legal challenges to this.”
Will DeSantis’ retaliation against Disney have a chilling effect on other companies, discouraging them from speaking out? The right of corporations to speak out on issues has always been a cherished value of the Republican Party. DeSantis is violating that value. In the future, when a company expresses an opinion, will it risk being punished by a GOP governor if it doesn’t share the same view?
Dissolving the Improvement District will shift the responsibility for two billion dollars of debt now held by Reedy Creek to local municipalities, as well as the cost of providing police, fire and other municipal services. Reedy Creek bond debt has been put on negative watch by Fitch Ratings.
The amount of local taxes that can be collected from Disney is limited by law. It is unclear whether the gap will be closed by the citizens of the local municipalities, who will not be happy about paying these taxes. The Florida Legislature could reinstate or reconstitute the Improvement District before the law takes affect on June 30, 2023.
DeSantis, a possible Republican nominee for the presidency in 2024, was playing to the national GOP base. Will his action chase away swing voters he will need to win the presidency?
DeSantis has handed the Democrats a gift. Most voters don’t like their elected officials using their political/legislative power to punish those who disagree with their ideological beliefs. Will the Democrats use this gift to go on the offensive and win over swing voters across the nation, rather than be passive about the issue?
It is clear that DeSantis wanted to extract retribution when he signed the legislation to retaliate against Disney. “You’re a corporation based in Burbank, California, and you’re gonna marshal your economic might to attack the parents of my state,” DeSantis said prior to signing the bill. “We view that as a provocation, and we’re going to fight back against that.”
Effective leaders use logic, not retribution when making decisions. They also don’t shoot from the hip, but identify unintended consequences. We will see how swing voters react to DeSantis’ action.
Robert Norton was right when he stated, “The law of unintended consequences, often cited but rarely defined, is that actions of people – and especially of government (italics added) – always have effects that are unanticipated or unintended.” Will voters hold DeSantis accountable? Only time will tell.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.