Newswise — CEO activism — the practice of CEOs taking public positions on environmental, social, and political issues not directly related to their business — has become a hotly debated topic in corporate governance. To better understand the implications of CEO activism, we examine its prevalence, the range of advocacy positions taken by CEOs, and the public’s reaction to activism.
According to the New York Times, “Chief executives across the business world are increasingly wading into political issues that were once considered off limit.” The article cites gun control and climate change as examples of advocacy positions taken by CEOs in recent years, and references a study by Edelman as evidence that this trend is viewed positively by the public. According to that study, 64 percent of global consumers believe that CEOs “should take the lead on change rather than waiting for government to impose it,” and 56 percent say they have “no respect for CEOs that remain silent on important issues.” A separate survey by Weber Shandwick and KRC Research arrives at a similar conclusion, finding that “more Americans are aware of CEO activism, view it favorably, and see its potential to influence public policy.”
This viewpoint, however, is far from universal. Others believe that CEOs should not use their position as leaders of public companies to promote personal beliefs, and that the CEO’s obligation is to advance the performance of the corporation without offending customers, employees, or constituents who hold opposing views or do not wish to hear advocacy views from companies. A Wall Street Journal article with the provocative title, “You’re a CEO. Stop Talking Like a Political Activist,” laments:
Business leaders who feel reluctant to join the fray, or worry that discussing divisive issues will only alienate customers, find themselves in a perilous spot. The endless, real-time conversation taking place on social media, combined with the rising tide of advocacy bubbling up from their own employees, customers and investors, make their silence increasingly conspicuous.
The impact of CEO activism on corporate performance is essentially unknown. Chatterji and Toffel (2018) find that CEO activism can “increase consumers’ intentions to purchase the company’s products” but only to the degree that there is “alignment between the CEO’s message and individuals’ policy preferences.” Korschun, Aggarwal, Rafieian, and Swain (2016) find that CEO activism is viewed positively by consumers if the company is considered “values-oriented” but negatively otherwise. The authors argue that the impact of CEO activism on purchase behavior is driven by the degree of “perceived corporate hypocrisy.”
The bifurcated impact of CEO activism is exemplified by a recent Nike advertising campaign that includes former NFL quarterback and national-anthem protest leader Colin Kaepernick with the statement: “Believe in something, even if it means sacrificing everything.” The weekend following the campaign, the company reportedly experienced a temporary spike in online sales. At the same time, market-research firm Morning Consult found that Nike brand’s favorability and purchase-consideration ratings fell sharply across all demographic groups, even when segmented by age, race, and political affiliation. Underscoring the market’s uncertain view of CEO activism, Nike stock price fell 3 percent on the news of the ad campaign and subsequently recovered.
To better understand the implications of CEO activism, we examine its prevalence, the range of advocacy positions taken by CEOs, and the public’s reaction to activism.
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About Stanford Graduate School of Business and the Rock Center for Corporate Governance
CORPORATE GOVERNANCE RESEARCH INITIATIVE
The Corporate Governance Research Initiative at Stanford Graduate School of Business focuses on research to advance the intellectual understanding of corporate governance, both domestically and abroad. By collaborating with academics and practitioners from the public and private sectors, we seek to generate insights into critical issues and bridge the gap between theory and practice. Our research covers a broad range of topics that include executive compensation, board governance, CEO succession, and proxy voting. gsb.stanford.edu/cgri
THE ROCK CENTER FOR CORPORATE GOVERNANCE
The Arthur and Toni Rembe Rock Center for Corporate Governance is a joint initiative of Stanford Law School and Stanford Graduate School of Business. The center was created to advance the understanding and practice of corporate governance in a cross-disciplinary environment where leading academics, business leaders, policymakers, practitioners, and regulators can meet and work together. rockcenter.stanford.edu