Airbnb CEO Brian Chesky Enables Illegal Immigration; Shuns Fiduciary Duties

In the Trump era, information technology moguls have become more explicit in their conviction that America is first and foremost a global sanctuary. One of them, Brian Chesky, co-founder and CEO of the online lodging service Airbnb, is going that extra mile. The day after President Trump’s January 27 executive order temporarily barring immigration from seven terrorist Islamic-majority countries, Chesky announced his intent to provide free shelter to anyone barred from flights entering the U.S. as a result of the order. This gesture may or may not have been a violation of Trump’s action, but it almost certainly was a negation of fiduciary duty. The executive order later was overturned by a Seattle federal judge and upheld by an appeals court. It was overturned again in modified form by a Hawaii federal judge who only hours ago converted his temporary restraining order into a preliminary injunction. Yet that should not let Airbnb off the hook.

Corporate executives have become social activists of the first rank. This development is an outcome of a decades-long evolution of the corporation as an institution. As we increasingly live in an interconnected world, advocates argue, business enterprises must reorient their practices toward improving the world as well as their businesses. They must be agents for broad societal change. This view represents a sharp divergence from the classical liberal view that an enterprise’s primary duty is to satisfy people either directly involved in, or affected by, its operations. Corporations must go beyond serving customers, investors, clients and employees, and address the concerns of outside groups, or “stakeholders,” in America and elsewhere. A corporation must be philanthropic as well as profitable.

This, in essence, is the doctrine of Corporate Social Responsibility. Since the Seventies, and at an accelerating rate, this doctrine has become the prevailing corporate model in this country. Indeed, it is utterly crucial to understanding our Internet and social media companies. Their CEOs and other top officers, many possessed of a net worth in the billions of dollars, are outspoken in their view that the United States should have open borders and promote racial-ethnic affirmative action (“diversity”). This view is at once a manifestation of an aggressively sentimental egalitarianism that holds America responsible for the welfare of the world and a smokescreen for the less than altruistic desire to minimize labor costs.

National Legal and Policy Center has explained this tendency at length (here and here). Whether benevolent in motive or not, it may produce highly negative consequences for private enterprise and public safety. Corporate statements, especially from information technology firms in Silicon Valley and points beyond, at times resemble Black Lives Matter and National Council of La Raza press releases. Facebook co-founder and Mark Zuckerberg, a man with a $55.5 billion personal net worth as of last fall, has banned all employees from expressing disapproval of Black Lives Matter on company grounds, while Facebook managers have discouraged news aggregators from posting stories from conservative websites. Tech companies now are collaborating to block sensible and overdue initiatives to restrict immigration from countries presenting significant security risks, most of all, those countries on the State Department terror watch list. Shortly after a Seattle federal district judge invalidated President Donald Trump’s January 27 ban on entry from seven terrorist-sponsoring (or terrorist-controlled) Islamic nations pending a 90-day review, around a hundred industry executives submitted an amicus brief with the U.S. Court of Appeals for the Ninth Circuit in support of the lower court decision.

One of these executives was Airbnb CEO Brian Chesky. Not only did Chesky oppose Trump’s ban (which, following modification, was overturned once again in mid-March by a Hawaii federal judge), he also vowed to make it easier for people affected by the ban to eventually enter the country. On January 28, one day after the original ban, he tweeted: “Not allowing countries or refugees into America is not right, and we must stand with those who are affected.  Stay tuned for more, contact me if urgent need for housing.” He also posted the following blog: “This is a policy that I profoundly disagree with and it is a direct obstacle to our mission at Airbnb. We believe that you should be able to travel to, and live in, any community around the world. This is what we mean when we say anyone should be able to belong anywhere.” The company immediately put this policy into effect. To understand the significance of these statements, it is necessary to understand his company.

Airbnb, based in San Francisco, is a prime example of what many business professors and journalists call “disruptive.” And what Airbnb is disrupting is the lodging industry. Founded originally as a website in August 2008 by Brian Chesky and a pair of friends, Joe Gebbia and Nathan Blecharczyk, Airbnb is a web-based app that connects travelers with property owners or renters who list their houses, apartments or guest rooms as available for short-term occupancy. People seeking low-cost accommodations can book a room in almost every country in the world from the Web, a mobile phone or a tablet. The company functions as a real estate brokerage for niche market short-term lodging that otherwise might go unrecognized. The capacity for profit is enormous. The company has low overhead and labor costs. It doesn’t have to build hotels or motels. And it doesn’t need to establish branch offices; a cell phone call can handle all arrangements. The goal is social networking, not just accommodations. A property owner or renter just might turn out to be a lodger’s best friend for life. The whole point of Airbnb, in other words, is that it isn’t Marriott, Sheraton or the Holiday Inn.

The concept is ingenuous. And a lot of people are buying into it. In less than nine years, Airbnb has gone from a San Francisco startup to an e-commerce titan with a market valuation of at least $30 billion. It now lists around 3 million properties worldwide and operates in over 65,000 cities and 190 countries. Its worldwide guest list now exceeds 150 million people. Revenues in 2016 alone grew by more than 80 percent. While it has competitors – Roomorama, Homeaway and Housetrip – Airbnb is the clear industry leader. Talks of an ongoing IPO have been swirling around for some time, but given the continued injections of equity capital, the company might not need to go public for a while. As for Chesky, Gebbia and Blecharczyk, they are very wealthy men. Forbes magazine last fall listed the net worth of each at $3.3 billion.

The company has received criticism from some quarters for taking low-cost housing off the market. A number of affordable housing advocates and hotel industry lobbyists, in fact, have been trying to persuade state and local governments to limit Airbnb’s reach. To an extent, they have succeeded. Last fall, for example, the New York legislature passed a bill, signed into law by Governor Andrew Cuomo, barring online apartment listings for lodging stays shorter than 30 days. Though worded in legalese, it was clear who the target was. On libertarian grounds, one is tempted to sympathize with Airbnb. But the context here is national identity, sovereignty and rule of law, not just free enterprise. By refusing to acknowledge the legitimacy of a lawful and necessary presidential order, Airbnb may be undermining the interests of both the nation and company investors.

The company also might have broken the law. According to the Immigration and Nationality Act, 8 U.S. Code 1324, it is unlawful to hire, recruit or refer for a fee an alien whom one knows to be in this country illegally. The law states:  “Any person who…encourages or induces an alien to…reside…knowing or in reckless disregard of the fact that such…residence is…in violation of law, shall be punished as provided…for each alien in respect to whom such a violation occurs…fined under Title 18…imprisoned not more than 5 years, or both.”  Part (a)(1)(A) provides for criminal penalties for the following:

(i) knowing that a person is an alien, brings to or attempts to bring to the United States in any manner whatsoever such a person at a place other than a designated port or entry or place other than as designated by the Commissioner, regardless of whether such alien has received prior official authorization to come to, enter, or reside in the United States and regardless of any future official action which may be taken with respect to such alien;

(ii) knowing or in reckless disregard of the fact that an alien has come to, entered, or remains in the United States in violation of law, transports, or moves or attempts to transport or move such alien within the United States by means of transportation or otherwise, in furtherance of such violation of law;

(iii) knowing or in reckless disregard of the fact that an alien has come to, entered, or remains in the United States in violation of law, conceals, harbors, or shields from detection, or attempts to conceal, harbor or shield from detection, such alien in any place, including any building or any means of transportation (bold type added);

(iv) encourages or induces an alien to come to, enter, or reside in the United States, knowing or in reckless disregard of the fact that such coming to, entry, or residence is or will be in violation of law…

The law is explicit: Knowingly facilitating illegal immigration is itself illegal. But did Chesky’s gesture qualify as a crime? There is a legal gray area here. On one hand, he did not actually shield from deportation people illegally residing in the U.S. On the other hand, he did intend to make it easier for such people to come here in anticipation of President Trump’s executive order being overturned.

Aside from legality, there is an accountability issue. Airbnb owes much of its growth to generous infusions of cash from Sequoia Capital, Greylock Partners and other venture capital providers. Regardless of their views on immigration policy, these investors have a right to know if their money is funding lawbreaking. A company has fiduciary duties. And regardless of the chartering state, the company’s officers and executive board, by law, must apply their best judgment to all business decisions. The interests of the corporation and its shareholders/investors come before any personal interests. Fiduciary duties fall into three categories: duty of care; duty of loyalty; and duty of good faith. A violation of any type is grounds for a lawsuit. By putting Airbnb at risk of prosecution, Chesky was jeopardizing the reputation and money of investors.

Brian Chesky, now 35, and his partners, of a similar age, don’t seem impressed by such concerns in relation their global campaign against “intolerance.” Their resistance isn’t limited to Trump’s executive orders. Eight days after Chesky first made known his defiance, the company aired a 30-second Super Bowl TV spot that epitomized soft agitprop. The commercial depicted a diverse group of people with an accompanying text: “We believe no matter who you are, where you’re from, who you love or who you worship, we all belong. The world is more beautiful the more you accept.” There was no overt reference to the presidential order, as the NFL and Fox Broadcasting Company had established guidelines barring the use of commercial time “for viewpoint or advocacy of controversial issues.” Yet given the context, the purpose of the ad should have been evident. Chesky, Gebbia and Blecharczyk, along with Airbnb marketing director Jonathan Mildenhall, in fact, had cobbled the ad together in just three days, an effort normally taking weeks or months.

Airbnb has done a lot more such virtue-signaling. The firm recently committed itself to donating $4 million over the next four years to the International Rescue Committee, a New York City-based refugee relief fund. “Airbnb has been supporting refugees well before the current controversies,” noted IRC President David Miliband, a prominent British Labour politician. “Airbnb’s mission to bring strangers together who help each other in various ways is core to our mission as well. So many Americans were refugees.” In 2015, Airbnb provided travel credits to relief workers at Mercy Corps and the IRC, and provided matching donations to the United Nations High Commissioner for Refugees (UNHCR), the UN official with virtual dictatorial powers over refugee settlement. The company also has a donation tool on its website where people can make contributions to UNHCR; the initiative by the end of this January had raised more than $1.6 million. And in 2016, Airbnb was a partner in the Obama White House’s Call to Action on the global refugee crisis.

No decent person is against humanitarian aid per se. But in flouting a presidential order designed to protect Americans from the very real possibility of an Islamic terrorist attack (as if there had never been any prior attacks), Airbnb did more than simply lend a helping hand. It jeopardized our national security. Airbnb isn’t quite the private-sector equivalent of a “sanctuary city.” And it may not have broken the law. But it almost certainly breached its fiduciary obligations to investors. That Airbnb is about halfway through a two-year process toward an initial public offering makes its behavior all the more reprehensible. Such is the wonderful world of Corporate Social Responsibility.