CEO Activism Can Drive Sales, Less So Public Opinion
I was so pleased to run across this interview on CEO activism with Aaron Chatterji who has written extensively on the subject with Michael Toffel and whom I’ve cited on this blog. Since we asked a question in our research about CEOs taking stands on political and societal issues, my interest in this topic is clearly evident and something I am enjoying watching take hold.
This section of the interview (below) with Julia Taylor Kennedy for Policy Innovations is about CEOs who take stands on societal issues of the day and the whys and repercussions. The full interview which you should read because it includes terrific commentary from John Browne, former chairman and CEO of BP, on LGBT issues and Sir Mark Moody-Stuart, former chairman CEO of Shell, on a tragic episode in its history in Nigeria. The interview also has a counter view from Tom Bower, a journalist, on CEOs putting a stake in the ground in these areas. Fascinating all around. However, I wanted to pull out this part because it provides more background on CEO activism and a survey that Chatterji did on Apple‘s CEO Tim Cooke’s stand on gay rights in Indiana when the Religious Freedom Law made headlines. Take it away!
“AARON CHATTERJI: Aaron Chatterji, I’m an associate professor at the Fuqua School of Business at Duke University.
Together with my colleague Michael Toffel at Harvard Business School, we’ve been studying corporate social responsibility for quite some time.
We started to see something new with CEOs like Howard Schultz, and COOs like Sheryl Sandberg, and other corporate leaders speaking out about social issues that were, in many cases, unrelated to their businesses. We termed this “CEO activism” in our Harvard Business Review piece, and started a whole research agenda on this topic to figure out: Why were CEOs speaking out? What was the impact? And what we could expect in the future from corporate leaders?
JULIA TAYLOR KENNEDY: Now, the way Chatterji sees CEO activism is very different from your standard approach to corporate social responsibility, or CSR. In traditional CSR, you’d have a CEO saying their company needs to do certain things to help society. CEO activism isn’t even that more holistic approach to sustainability that Lord Browne undertook at BP, or that Pepsico CEO Indra Nooyi is using as she is trying to bake global health into the core operations of her company.
AARON CHATTERJI: In contrast, what Howard Schultz is doing when he’s speaking out about race, or what Tim Cook is doing when he speaks out about sexual orientation and gay rights, is something very different. It’s of course related to what people at Apple and Starbucks might believe about certain issues, but it’s not as intimately related to the bottom line, in our view, as Indra Nooyi’s activism on food and beverage products are. We see CEO activism as speaking out on social issues that are largely unrelated to the firm’s bottom line. That’s what makes this so interesting.
JULIA TAYLOR KENNEDY: Of course, Chatterji knows CEOs have spoken out about political issues before.
AARON CHATTERJI: Henry Ford published an article about capital punishment back in an earlier era. There were CEOs speaking about the Prohibition movement, women’s rights and suffrage, the Civil Rights Movement, gun control, and a wide variety of issues. There has been, it seems, a “boomlet,” if you will, of CEOs speaking out more recently.
JULIA TAYLOR KENNEDY: He thinks it might come from a sense of frustration with U.S. politics.
AARON CHATTERJI: When you hear CEOs talking at corporate round tables and at retreats and conferences, they often lament the political gridlock in Washington and some state capitals. There’s the sense that if we could be less ideological, less partisan, talk about the facts, that we could get more done.
I think a lot of CEOs of different political persuasions are hoping to break that logjam by jumping into the public debate. I think that’s what you’re seeing with many of the recent examples we talked about.
JULIA TAYLOR KENNEDY: But the impact of CEOs using that megaphone they’re afforded by their stature remains unclear.
AARON CHATTERJI: We ran a field experiment with a market research company called CivicScience. I should disclose that I’m an equity-compensated advisor to CivicScience.
JULIA TAYLOR KENNEDY: Together, CivicScience and Chatterji’s team wanted to understand the effect of a specific example of CEO activism. When Indiana passed its Religious Freedom Restoration Act, allowing business owners to refuse to serve LGBT customers, Apple CEO Tim Cook was one of its most vocal critics. He published an op-ed in The Washington Post and put out several tweets that went viral. So the research team wanted to understand whether these activities influenced public opinion.
AARON CHATTERJI: We used their platform to ask people all around the country questions about their attitudes toward Indiana’s law, and their intent to buy Apple products.
By running this experiment with different preambles to our questions regarding Tim Cook’s statement, we were able to isolate an impact of hearing Tim Cook’s views on RFRA—as they call it in Indiana, the religious freedom law—and willingness to buy Apple products.
JULIA TAYLOR KENNEDY: The results were pretty surprising.
AARON CHATTERJI: We found the public opinion didn’t shift very much when Tim Cook spoke out.
What we’ve found is when people hear about Tim Cook’s views, they are more likely to buy Apple products.
In some sense, the preaching to the choir effect might be much more powerful than changing people’s minds.
JULIA TAYLOR KENNEDY: So a cynical listener might think this kind of political speech is just a marketing ploy. Chatterji isn’t sure that’s the whole story. After all, some CEOs’ political views have actually hurt their reputations.
AARON CHATTERJI: It’s not just CEOs who are speaking out for progressive issues, but also folks who are speaking out in more conservative positions. By and large, those haven’t necessarily been received as well.
CEOs like Dan Cathy, who expressed support for traditional marriage, came under a lot of criticism, and threats of boycotts of Chick-fil-As on college campuses.
JULIA TAYLOR KENNEDY: Chatterji does think that the boost in Apple sales after Tim Cook spoke out against the Indiana law says something about public opinion in the United States.
AARON CHATTERJI: It does feed this notion that we’re already pretty dug in, and our views are pretty set on some of these controversial issues. It’s really hard for a single individual to change somebody’s mind. What we did see was sort of signaling which side of the cultural divide Apple and Tim Cook were on, and that was very powerful.
I think that this notion of choosing sides and telling people who are with you that you’re with them is as important as any change in public opinion from the CEO activism comments.
JULIA TAYLOR KENNEDY: So CEOs could strengthen the resolve of folks who already agree with them politically—and boost their company’s revenues. Now, CEOs continue to meet privately with political figures too.
AARON CHATTERJI: With the Indiana law specifically, I know that the legislators in that case were meeting with business leaders all the time.
I think there is something really powerful, though, about these large public statements—the op-eds by Tim Cook and others in The Washington Post; in his case, the tweets that got lots of retweets and lots of favorites. These things create the buzz and a momentum that really couldn’t have been accomplished with behind-the-scenes meetings.
JULIA TAYLOR KENNEDY: Taking on an international issue like John Browne did with global LGBT rights adds another level of complexity for CEOs.
AARON CHATTERJI: For a CEO to speak out about something in their own country where the primary location of their business is and where they’re deriving most of their revenue and profits is one thing. To make statements about a country half a world away where they don’t necessarily have as much of a foothold, or their power could be under more scrutiny, or they might be blocked from entering that market in the future, it’s certainly a lot more risky.
In the international context, there’s a risk of overstepping our bounds and meddling into the affairs of these developing countries and their governance. Certainly, there’s been a long history to learn from there.
JULIA TAYLOR KENNEDY: And Chatterji thinks that as CEOs look for a reputational boost by speaking out on one issue that will endear them with the public, they may look to diminish scrutiny on other corporate behavior, say on safety or labor rights.
AARON CHATTERJI: Perhaps not speaking out on labor rights on one hand, but speaking out forcefully on a domestic issue where the country is behind you, there’s some sort of compensation. We haven’t done the research on that particularly, but I know a lot of people think about this when they analyze what CEOs speak about and what they don’t speak about.
JULIA TAYLOR KENNEDY: Chatterji shared a few rules of thumb that he thinks can help guide CEOs when they think about becoming politically active.
AARON CHATTERJI: I would advise them that people are going to listen to you if you speak out. Choosing your spots is very, very important. It should be an issue that you have real credibility on. I think, to the point, Tim Cook has real credibility on these issues related to discrimination against LGBT individuals, partly because of his own background and his cover story in BusinessWeekabout his own background.
Secondly, speaking out when there’s actually a debate or a flashpoint like there was in Indiana, is really important to maximize the impact.
I would say, the last thing is also being humble enough to listen to the other side, to compromise and to figure out ways to reach a solution. I think what Americans, at least, are looking for in their business leaders is some of that pragmatism that we don’t see in other parts of society. It’s not just your way, or my way or the highway, but it’s actually trying to find a real solution.
JULIA TAYLOR KENNEDY: When it comes to exerting political influence, CEOs have to also think about the moral implications.
AARON CHATTERJI: Almost every moral or ethical dilemma has its roots or can be explained by a line from a comic book. For this one, I would say, “With great power comes great responsibility.” CEOs are listened to. They’re listened to because they’re job creators. They’re listened to because they have been successful running large organizations. And they’re listened to because they’re often seen as set apart from the political divides that are plaguing Washington and some of our state capitals.”