CEO Guidelines For Speaking Out On Controversial Issues

Last year, John Schnatter and Rose Marcario both followed the C-Suite zeitgeist and spoke out on hot-button issues from their CEO perches. Schnatter, then CEO of Louisville- based Papa John’s, told investors in December that the National Football League was mishandling player protests of the national anthem.

He blamed the league’s weakness for denting sales as its “official pizza sponsor.” At about the same time, Marcario, CEO of Patagonia, started leveling high-profile criticism at the Trump administration for downsizing two Utah national monuments, posting a withering message on the company website, “The President Stole Your Land,” and filing suit with an environmental coalition against the actions.

What happened next is as close to a controlled experiment in leadership as you can get, leading to two very different outcomes and plenty of lessons for those hoping to use their perch atop a company as a lectern.

Dynamics across the business and social landscape are prompting more CEOs to act like Marcario and Schnatter and create expanded roles for their companies and, often, themselves. Call it “Goodism.” More than ever, consumers, customers, employees, investors and other constituencies are expecting and even demanding a corporate embrace of values supposedly more sublime than merely making sales and profits, and CEOs are emerging as the logical spear carriers.

In recasting their brands and engaging vigorously in public dialogue, they are moving beyond mere market positioning and even comfortable “corporate social responsibility” accounting of environmental initiatives and donations to human services nonprofits.

Look at how quickly the CEOs of major gun-selling brands, including Ed Stack of Dick’s Sporting Goods and Doug McMillon of Walmart, pivoted onthe issue of increasing restrictions on gun sales in their stores in March after the mass shootings at the Parkland school in Florida galvanized public outcry about America’s approach to firearm regulation.

Dick’s and Walmart alienated a huge swath of their clientele—Second Amendment-dedicated gun owners— but they felt compelled to flip on this hugely divisive issue.

But as CEOs search feverishly for the right course, it’s worth keeping in mind that penalties for getting Goodism wrong can be extreme. In a survey conducted by our sister publication, Corporate Board Member, 26 percent of directors flat out opposed their CEOs taking public stances on controversial issues of the day, and 57 percent said the chief should consult the board before piping up.

In the case of Schnatter, customers fired back on social media that pizza quality was to blame, not the NFL. Papa John’s sank into tepid same-store sales comparisons. In the wake of the public disaster, Schnatter stepped down as CEO of the company he founded and is now chairman.

“When is it a bad idea to stand up for what you value?” – rose Marcario, CEO of patagonia

And to add insult to injury, given the chance to swap pies in February, the league took on Pizza Hut as its official pizza sponsor in place of Papa John’s.

Schnatter declined an interview request, but Papa John Chief Marketing Officer Brandon Rhoten told Chief Executive that his old boss “doesn’t love it when he has to talk about and explain his politics, because he feels that might make people uncomfortable.”

Schnatter, he says, believes that “when [Apple CEO] Tim Cook and [Amazon CEO] Jeff Bezos say something, and they don’t have the same political views as John, it’s not twisted and turned by most media sources.”

Over at Patagonia, the results were the complete inverse. Employees and customers cheered, sending letters of support to Congress for the company’s stand against the feds and expressing an outpouring of social media love for the nearly $1 billion, Ventura, California-based brand.

“When is it a bad idea to stand up for what you value?” Marcario says. “I think some companies, mostly public companies, are too afraid to express what they know is right because they are worried more about their major shareholders and delivering on earnings per share. [But] there is a responsibility now to have moral courage and speak out when something is wrong. If you’re not doing that, I’m not sure why you’re in the game.”

CEOs speaking out on issues is hardly new. The Business Roundtable, for instance, was born in 1970s as a platform for major company CEOs to take up issues facing the nation. But a conflation of societal trends over the last decade is luring more individual CEOs into taking more public stands.

First, the corporate social responsibility movement morphed beyond “green” values into a more amoebic “sustainability” ethos, even as millennials, scarred by the Great Recession, became captivated by entrepreneurs launching “world-changing” companies that purported a purpose beyond mere capitalism. (For example, consider Snap’s mission statement, which reads in part, “We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.”)

Second, the recent takeover of public discussion by social media—with their immediacy, ubiquity and global reach—has given CEOs both a new platform for expressing views and a virtual mandate to do so. Third, the elections and presidencies of Barack Obama and Donald Trump cast America’s political divisions into much higher relief, with a corresponding impact on consumer behavior. Some 78 percent of consumers who self-identify as liberal want brands to take stands on social and political issues, according to a recent survey by Sprout Social, while 52 percent of conservatives feel the same.

As a result, Goodism isn’t just for outliers anymore. Most CEOs now either are participating in the trend or at least seriously considering whether they should.

Before you do, here are six guidelines:

Start with authenticity: Successful public advocacy of social or political values requires the CEO’s stand to be closely tied to a company’s actual needs and outcomes.

For example, when Facebook CEO Mark Zuckerberg and Chobani Founder Hamdi Ulukaya opposed President Trump’s attempts at a controversial immigration ban, their established history of hiring immigrants backstopped their comments and made them credible.

Brands and market positions often provide the most obvious clues to whether a CEO’s stand will ring true. “It makes a lot of sense for [Coca-Cola] to project progressive, international sorts of values,” says Americus Reed, a marketing professor at The Wharton School, because it is “an international brand, openly supporting diversity.”

Decide what purposes can work: That’s easiest if a company grows up with a stated purpose, such as Plum Organics, a childhood nutrition company co-founded by Neil Grimmer in 2007 and sold in 2013 to Campbell Soup for $249 million.

“A purpose and a mission must be at the epicenter of your culture,” says Grimmer, who went on to found an individualized nutrition startup called Habit. “That’s different than saying, ‘Our purpose is XYZ’ and not having proof points. And people need to see evidence of their work delivering on your mission on a weekly basis.”

Indeed, the more closely a CEO can tie transcendent corporate purposes to a company’s actual products, services and missions—and not necessarily to sublime cultural or social values—the better his or her chances of success will be.

“IBM’s purpose is to put technology to use to transform businesses and make them thrive,” says Constantine Alexandrakis, head of the U.S. region for Russell Reynolds Associates. “That’s a purpose that millennials can get excited about, but it isn’t around social issues.”

Prioritize crucial constituencies: CEOs may want to reach NGO leaders and politicians and even consumers with their appeals to purpose, but they ignore the most important audiences—including shareholders and directors—at their peril.

“All CEOs should be unilaterally focused on their customers and their employees and the market they serve,” says Alexandrakis.

Millennial employees also should loom large in this consideration. “You have to step back and say, ‘What values do we believe in that would resonate with the workforce we’re trying to hire?’” says John Grace, president of the BrandTaxi consultancy.

Have a rein on social media: The C-Suite must make sure it has control of the marketing department—and especially trigger-fingered social-media staffers—when it comes to company statements and positioning on issues of the day.

Keurig Green Mountain CEO Bob Gamgort learned that lesson the hard way in November after the company pulled ads from Fox News in the wake of a host’s defense of Republican Senate candidate Roy Moore of Alabama against allegations of sexual harassment. Irate consumers smashed Keurig coffee makers and put videos online.

Gamgort apologized to employees, saying the decision to “pause” advertising was “highly unusual” and “outside company protocols. This gave the appearance of ‘taking sides’ in an emotionally charged debate that escalated on Twitter and beyond…which was not our intent.”

Social media are hamstrung “by the inability to have thought-out, thoughtful conversations,” says Andrew Caravella, vice president of marketing at Sprout Social. “So CEOs have to be extra careful.”

Beware me-tooism: Consumers may grow tired of the exercise if every brand feels obligated to make a political or social case. And each successive company that goes in this direction runs a bigger risk of encountering such resistance.

No one is likely to mimic how Interface approached the notion of purpose. The $1 billion, Atlanta-based commercial carpet manufacturer has been pursuing purpose around environmental sustainability for almost 25 years. One of Founder Ray Anderson’s defining moves was to pioneer the procurement of used fishing nets from places as diverse as Cameroon and the Philippines as raw material for new nylon carpets, creating a huge and ecologically beneficial recycling loop that is central to Interface’s supply chain.

“In finding purpose, you have to get to the intersection between what the world needs and what your company can be the very best at,” says Jay Gould, who became Interface’s CEO in 2017. “One-third of architects make decisions about purchases like carpet based on a company’s position on sustainability. So it’s actually central to our position in the market.”

Get everything else right: Some research shows that CEOs who embrace standing up had better perform well in traditional metrics— or else. Examining the exits of Fortune 500 bosses over several years, a team led by University of Notre Dame Professor Tim Hubbard found that CEOs who heavily invested company resources in good corporate citizenry were 84 percent more likely to be fired amid sluggish financial results than CEOs at poorly performing companies who spent less on do-good initiatives.

“I didn’t expect to find the negative side of this when I started,” Hubbard says. “I’m a big fan of CSR. But the perception is changing that CSR is good for business. The research doesn’t support that.”

On the other hand, according to Hubbard’s research published in Strategic Management Journal, at “high levels of financial performance,” boosting spending on Goodist initiatives can reduce a CEO’s chances of dismissal by 53 percent.

“CEOs should be thinking about purpose that leads to profitability,” says Sara Roberts, executive director of purpose-led transformation for consulting firm EY. “Not rainbows and unicorns, but something that really creates longevity for their company.”

Read more: 5 Lessons in Corporate Citizenship for CEOs