Risks and Rewards of CEO Activism
As a long-time observer of CEO trends, we wanted to get a good read on this new dynamic and its impact on reputation. To be sure, CEO activism has at times been very effective. In the past year or so, a number of CEOs have spoken out about social and environmental issues such as climate change, income fairness, same-sex marriage, immigration, gun control and discrimination – all issues that are not necessarily tied to the bottom line. Yet, we also learned that there are some risks that should be carefully considered. Here are the key findings.
1. First, nearly 40% of Americans believe that CEOs have a responsibility to speak out on hot-button social issues. However, the survey also showed that chief executives need to be cautious with the topics about which they choose to speak out on, as three in 10 (32%) have a less favorable opinion of CEOs who speak out on issues not tied to their companies’ bottom lines.
2. The belief that CEOs carry such a responsibility is most likely to translate to favorable opinion toward CEOs who do speak out. When respondents are asked their opinion of CEOs who take public positions on hot button issues, the scales tip in favor of the CEO (31% more favorable vs. 22% less favorable). Yet, when the issues are not directly linked to a company’s bottom line, the reverse is true and Americans feel less favorable. Favorability is thus dependent on how strongly an issue’s link is to the bottom line.
3. A CEO’s stance on controversial issues can also impact purchase intentions. While 40% say they are more likely to buy from a company when they agree with the CEO on an issue, a comparable number (45%) say they are less likely to buy if they disagree with the CEO’s position. Since a CEO’s external stance may affect behavior as basic as buying a product, companies need to have a firm understanding of the attitudes of key customers and other stakeholders before CEO activism goes public.
4. The public does not fully credit CEOs’ motives for taking public positions on hotly debated issues. Americans believe the top reason for CEO activism is “to get media attention” (36%). At the bottom of the list is “to attract and retain the best employees” (7%). Clearly, if CEOs want to signal that the well-being of employees is at the heart of their activism, their message is not resonating loud enough.
5. Millennials (18-35 year olds) are the generation more inclined to favor CEO activism. They are more likely than other Americans to be aware of CEOs having taken public positions on controversial issues, to feel favorably toward CEOs who speak out, and to say that they will buy from companies whose CEOs take a public position they agree with. For companies looking to appeal to the next generation, CEO activism might just be the right course of action.
As the world grows more complex, polarized and politically-charged, our research provides an early roadmap for CEO activists to consider when speaking up on pressing societal issues. It is understood that CEOs have to carefully balance many constituencies but they will find themselves increasingly in the spotlight as they try to make a difference in a world that requires them to stand up and be counted. This new strain of CEO activism requires leaders to articulate their positions in a straightforward, unambiguous and meaningful way in order to be fully understood. Because of the need to protect reputation and not find oneself in the eye of the social media firestorm for being misunderstood, we provide 12 Guidelines for CEOs and their companies who decide to speak up and out. Take a look.