United States: Activist CEOs Speak Out - Is There A Way To Do It Better?

Last Updated: March 7 2019
Article by Cydney Posner

It feels like CEOs are stepping into it—the political fray, that is—all the time these days. And recently, there has been a lot of pressure on CEOs to voice their views on political, environmental and social issues. According to the Global Chair of Reputation at Edelman, the expectation that CEOs will be leaders of change is very high. Last year, Edelman's Trust Barometer showed those expectations at a record high of 65 percent; "[t]his year, the call to action appears to be yet more urgent—a rise by 11 points in the public's expectation that CEOs will speak up and lead change. Today, some 76 percent of respondents believe CEOs need to step up." Similarly, in this year's annual letter to CEOs, BlackRock CEO Laurence Fink focused on the responsibility of corporations to step into the breach created by political dysfunction: "Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues. These issues range from protecting the environment to retirement to gender and racial inequality, among others." In the absence of action from government, he counsels CEOs, "the world needs your leadership." (See this PubCo post.) To be sure, a number of CEOs have jumped in to meet this challenge. But this study, "The Double-Edged Sword of CEO Activism," suggests that, notwithstanding the public perception of widespread CEO activism, the incidence of CEO activism is actually relatively low. And public reaction seems to vary depending on the topic, but can, in some cases, lead to consumer backlash. Is there a better way to handle it? The authors of this article think so.

What is CEO activism? As discussed in the study, definitions can vary. For example, are CEO statements that are "defensive" in response to attacks or pressures on the company "activism"? What about "statements on social or environmental matters that are phrased as personal preferences or expressions of opinion without advocating that corporations or society take action"?

In their study, the authors looked at "all public statements in national media and corporate transcripts made by the current CEOs of all companies listed in the S&P 1500 Index." From that collection of content the authors excluded "advocacy statements related to corporate matters, including statements about corporate tax rates, federal and state regulations, and political issues with widespread economic implications, such as the fiscal cliff, the debt ceiling, budget sequestration, NAFTA, and tariffs. These statements are common across a large number of CEOs in response to questions about policy impacts on their business." However, the authors included as part of the study those statements that clearly represented the CEO's personal belief as well as statements that were not so clear and may have reflected either a personal belief or a corporate position, such as statements that were considered "commercially beneficial" because they "align with the company's core line of business and appear potentially beneficial in terms of customer or employee retention, or addressing external critics." (One of the examples given in this context was a statement by the CEO of a soft drink manufacturer advocating plastic collection and recycling.) The rationale for including these statements was that it was not really possible to determine whether the statement was a "proactive" one that reflected the CEO's personal belief or a "defensive" one that the CEO felt compelled to take because of external pressures. Also included were statements touting company awards or high scores on ESG indices. These statements were then divided into five categories: "the environment, diversity and inclusion, immigration and human rights, other social issues, and politics."

With regard to activist statements in the national media by CEOs of S&P 500 companies, the authors found that 28% made "public statements about social, environmental, or political issues either personally or on behalf of the company," while only 10% made statements that were clearly personal. For the S&P 1500, the percentages fell precipitously. With respect to CEOs of S&P 1500 companies, only 12% made these types of statements and only 4% were clearly personal. The authors found that about half of the activist CEOs advocated diversity, the most frequently promoted topic, followed by the environment (41%), immigration (23%), other social issues (19%) and political issues (17%). On social media, such as Twitter, the authors found that the level of CEO activism was only "modestly" higher. The authors attribute the impression that there is "widespread CEO activism" to "a few vocal outliers," CEOs of large companies who attract a lot media attention. Otherwise, they found that most of the activist CEOs expressed activist views on only one or two topics.

The study also considered how the public responded to CEO activism, finding that, while conceptually, the majority of the public supports CEO activism, the public is quite divided when it comes to particular issues. (What a surprise....) In a survey of 3,544 persons, almost 2/3 had a favorable view of CEOs of large companies using "their position and potential influence to advocate on behalf of social, environmental, or political issues they care about personally, while one-third (35 percent) do not." The issues viewed most favorably in this context were environmental issues (78%), renewable energy (68%), sustainability and climate change (each 65%). Some social issues also received high favorability responses, such as healthcare (69%), income inequality (66%), poverty (65%), and taxes (58%). Issues regarding diversity and social equality were more mixed, and "[c]ontentious social issues—such as gun control and abortion—and politics and religion garner the least favorable reactions. Of these issues, CEOs speaking up about gun control is the only one with a net-favorable position (45 percent favorable versus 35 percent unfavorable)."

In terms of the commercial impact resulting from CEO activism, the authors found that the public was more likely to react negatively—or at least remember doing so—as a result of disagreement with a particular CEO activist position by refusing to purchase or reducing the level of purchase of the company's product (35%) than to react positively when they agreed with the CEO by buying more (20%). The authors concluded that "CEO activism is a double-edged sword: CEOs who take public positions might build loyalty with employees, customers, or constituents, but these same positions can inadvertently alienate important segments of those populations."

To the extent that CEOs are considering taking stands on contentious social, political or environmental issues, are there effective ways for CEOs to consider when and how to take a stand? In this article from the WSJ, two business school professors give us their views, based on interviews and research, on the right way and wrong way for CEOs to express activist views, especially given the risk that companies can, in some cases, face backlash from consumers and others.

The authors identify three instances when, in their view, it makes the most sense for a CEO to weigh in on a controversial issue:

  • First, when the CEO's employees provide a "nudge" to the CEO to speak out on the issue. However, the authors caution, the CEO should be sure to assess the level of employee support and opposition, given that some positions may alienate some groups of employees and potentially "undermine organizational culture." Especially recently, there have been notable instances when employee pressure has received substantial public attention and had a significant impact on corporate decisions.
  • Second, when the public statement won't be viewed as hypocritical (in light of company practices) or a "cheap publicity stunt" (because of the strong connection to the CEO's personal values and the company's corporate values).
  • Third, when the issue is still hotly debated and the CEO's voice can make a difference; remaining silent and waiting for a "safe" time to speak out can be interpreted as "an endorsement of the status quo."

To make activist statements most effective, the authors recommend the following:

  • Plan ahead for the possibility that the CEO could be asked to express his or her view on a controversial topic by assembling a "team of employees, board members and even outside experts to map out how [the CEO] will—or won't—respond to the next big political firestorm" and "war game" various scenarios.
  • Part of that planning should include anticipating the possibility of backlash from customers or employees, such as consumer boycotts or employee protests and walkouts. To that end, "[f]iguring out whether opponents or proponents will have a bigger impact on the issue at hand—and on your company's reputation—is typically more art than science today. More detailed data on customers' and employees' beliefs and values would be needed to better predict responses to CEO activism." CEOs should identify and monitor key performance indicators to continue to assess the impact of the statement.
  • Work with the corporate communications team, who can provide informative data and strategic advice, especially if the CEO lets the team know which issues are of most importance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Country
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions