CEO ACTIVISM

TALK AT THE TOP

How CEOs should act when there are pressing issues by Jayashantha Jayawardhana

Corporations have long been playing an active role in the US political process by lobbying, making contributions to candidates, and funding political action committees and campaigns on various issues in a bid to shape public policies to their benefit.

But CEO activism goes beyond that.

Until recently, it was rare for corporate leaders to plunge aggressively into divisive social and political discussions about race, sexual orientation, gender, immigration and the environment.

Then the ground began shifting.

In the US, controversies erupted over the 2016 House Bill 2 (HB2 or ‘the bathroom bill’) in North Carolina. This law requires individuals to use public bathrooms corresponding to the gender on their birth certificate. It affected transgender people and saw an increasing number of chief executives being drawn into contentious public debates.

Other incidents included the White House’s withdrawal from the Paris Agreement, clashes between white supremacists and counter protesters in Charlottesville in Virginia, and the decision to rescind Deferred Action for Childhood Arrivals (DACA), which also inspired many corporate leaders in America to take action.

As political partisanship and discourse grow ever more extreme, and the gridlock in Washington shows no sign of easing, more and more business leaders have started advocating for a number of causes.

As the CEO of the Bank of America Brian Moynihan observed, “our jobs as CEOs now include driving what we think is right. It’s not exactly political activism – but it is action on issues beyond business.”

CEO activism has drawn plenty of media attention, and public relations firms are now building entire practices around it. While it has been more prominent in the United States, it’s not confined to that country.

Writing in an article headlined The New CEO Activists published in the Harvard Business Review (HBR), Aaron Chatterji and Michael Toffel seek to address some important questions about CEO activism – Does it really change hearts and minds? What are the risks and potential rewards? What is the playbook for corporate leaders who consider speaking out?

CEOs speak up about controversial topics for several reasons.

Sometimes it could be due to their corporate values or personal convictions, or arising from multiple motivations. Regardless of why they speak out on controversial topics, activist CEOs generally employ two types of tactics: creating awareness and leveraging economic power.

To create awareness, they mostly make public statements – often in the media; and more frequently, on X – to drum up support for social movements and help bring about change. Sometimes, it can be only one activist CEO advocating for a cause that he or she believes in. At other times, they may team up to build awareness.

Chatterji and Toffel cite two such occasions in their article.

Days before the 2015 UN climate change agreement negotiations took place in Paris, the CEOs of 14 major food companies (Mars, General Mills, Coca-Cola, Unilever, Danone North America, Hershey, Ben & Jerry’s, Kellogg’s, PepsiCo, Nestlé USA, New Belgium Brewing, Hain Celestial Group, Stonyfield Farm and Clif Bar) cosigned an open letter urging government leaders to create a strong climate accord that would “meaningfully address the reality of climate change.”

Similarly, some 100 CEOs cosigned an amicus brief to influence federal judges to overturn US President Donald Trump’s executive order prohibiting citizens from seven Muslim majority countries entering the country.

To leverage economic power, activist CEOs put economic pressure on states to reject or overturn legislation. In response to North Carolina’s bathroom law, CEO of PayPal at the time Dan Schulman cancelled the company’s plans for a new global operations centre in Charlotte, which would have generated more than 400 skilled jobs.

As many other CEOs followed suit, the potential damage mounted. The Associated Press (AP) estimated that the bathroom law controversy would cost the state more than US$ 3.76 billion in lost business over a dozen years.

CEO activism helps turn the spotlight on their respective brands and organisations (for better or worse) as it can help burnish a leader’s reputation or put his or her career at risk. So activist CEOs should pick their battles wisely. They should confer with their exe­cutives and decide on which issues matter to them and why; and they must carefully decide when to enter the fray.

They also need to balance the likelihood of having a positive effect and other potential benefits, such as pleasing employees and consumers, against the possibility of a public backlash.