CEO Activism Will Only Get More Ubiquitous

Continuing our conversation of CEO activism and speaking out on controversial issues with Aaron Chatterji, associate professor at Duke University’s Fuqua School of Business and former senior economist at the White House Council of Economic Advisors (CEA), and Michael Toffel, professor of environmental management at Harvard Business School,

In part one, Chatterji, who have written extensively about the subject for Harvard Business Review and in formal research, talked about the main drivers of CEO activism and the different types of CEO activists we’ve seen come out since the trend came to prominence in 2015. In part two, the duo talks about the importance of knowing your audience before speaking up, other tips on activism and how this trend will change over time.

Below are excerpts from their conversation.

How important is it to really know your audience before you speak up? I say this because when the CEO of Patagonia spoke up about the conservation of lands against the Trump administration, she was preaching to the choir a little bit, of who her audience is and, you know, not everyone might be afforded that luxury.

Chatterji: Yeah, it’s incredibly important. I mean, you see a lot of variation across corporate America in terms of who [a CEO’s] customers are, who their employees are, and that can be just a matter of what industry they’re in or where they are located. So if you’re at Nordstrom and you’re thinking about whether to drop Ivanka Trump’s brand, it’s a very different conversation based on consumers you have and locations you have than if you are Target, [and you’re thinking about the transgender bathroom issue].

So you see this many, many times across the board with companies like Papa John’s and the NFL issue. Publix supermarket is now dealing with the guns issue…there’s Delta and the NRA. All these companies are being forced, either before or after the fact, to grapple with, what do their customers and other important stakeholders, including their employees, really believe? And how is this issue going to sit with them?

And I think for some companies, either they have the right data or they just have a better sense of who their customers and employees, where they stand and it’s easy for them. And others it’s a much different [calculation] and sometimes it’s a big risk and sometimes they just don’t know. So I would say that’s one of the most important things for a CEO to consider when they’re speaking out, is how the stakeholders in the firm, the employees, the customers, the investors, the people you’re ultimately accountable for, feel about the underlying issue. That’s not to say you should always be a prisoner of public opinion or what other people think, but it’s just to be sort of in recognition of the responsibility you have.

Toffel: Yeah, I think also, it is important to consider, who are you trying to communicate with when you’re exhibiting CEO activism. One of the things that I thought was most interesting when we were doing a bunch of interviews…in this area, is that I had assumed that those public comments were often meant for the general public. But in fact they were often motivated by the employees of the firm…[to act as] a credible statement by the CEO of where that [the company] stands [rather] than just writing an internal memo to one’s employees, which might get leaked anyway.

What do CEOs have to know before speaking up on a controversial issue because it seems like it’s going to affect a lot of them, maybe not on the larger scale, if they’re not a Fortune 500 company, but maybe regionally?

Chatterji: First, they have to understand the issue, and that’s asking a lot of because these issues are coming at us so quickly. Issues, for example, the center of the North Carolina HB2 bill regarding transgender bathroom access. Many Americans forget CEOs these are new issues to learn about and grapple with. And so for CEOs, this isn’t their full-time job. They’re trying to run a company, not learn about all the different contentious, political social issues. But because they manage people and because they are seen as leaders, they’ve got to get up to speed on these issues.

The second thing is, you know, understanding the political context behind the issues and who’s going to be, thrilled and upset when they take a position. I think those are really important pieces of information. I think it’s harder and harder, as Mike said earlier on, to duck these issues. I think a lot of employees and customers are, you know, are basically now seem to be interpreting that silence as assent to the status quo or lack of authenticity. And so I think the choice of CEOs to get to speed on the issues is probably the only one. Now, speaking out on them or not, it kind of depends on the situation.

I also think we can’t hold CEOs too much to blame for not being prepared for these issues. I mean, imagine if every new issue that came about, I [put] a microphone in front of you and [asked] you to have an opinion on it, right away, to be broadcast to hundreds of thousands of people. That’d be a tall order.

How do you see the CEO activism issue changing over time?

Toffel: Two things. One is, I think that the ubiquity of this is going to rise as CEOs and employees see other CEOs engaging in CEO activism and not suffering the worst consequences that might be imagined or a huge backlash.

The other is I think there’s going be continued surprise backlashes emerge. And I’ll just give two examples. My sense is when Delta decided to discontinue its discount program for NRA members to get to the NRA conference, I believed its intention was to take a neutral stance and not be seen as favoring one side or the other in the debate.

It was an interpreted in a very different way. It was interpreted as Delta is moving away from NRA and taking sides. And I don’t know if Delta anticipated that. Maybe they saw that as a risk, but it seemed like the response was not commensurate with what they had intended. And I think there are going to be more examples like that. There’s another example during one of the early Trump immigration pronouncements where there were protests at JFK airport [in New York].  Uber said, “We’re not going to do surcharges because we don’t want to be seen as exploiting the situation.” Others interpreted it as an attempt to take away customers from taxis, who weren’t willing to cross the picket line. So their intent was received and then rebroadcast in a way that was quite different.

Because CEO activism is sometimes going to be misinterpreted, companies can do some groundwork ahead of time to prepare for that, to help their CEO maintain credibility that they are taking the issue seriously. This could pay dividends later. This is to say, it’s hard to know where these things are going to go, and I think we’re going learn a lot as we see more of these unfold.