The Main Drivers of CEO Activism

Aaron Chatterji on CEO activism
Aaron Chatterji

It seems like CEO activism is such a constant in the news that researchers Aaron Chatterji and Michael Toffel are finding new material to examine every day.

For instance, the day Chief Executive spoke to Chatterji and Toffel about the subject, Disney CEO Bob Iger made the call to cancel the show “Roseanne” after the star of the show, Roseanne Barr made a disparaging remark about President Obama’s former top advisor Valerie Jarrett. It was also the day that Starbucks closed thousands of stores to undergo sensitivity training, per the order of CEO Kevin Johnson.

For 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 Toffel, professor of environmental management at Harvard Business School, the subject has gone from a new trend they noticed when they began studying it in 2015 to a pervasive issue for corporate America in three short years.  They’ve already written extensively about it for Harvard Business Review, in formal research, and more.

Chief Executive talked to them about the subject, why they find it interesting, the types of CEO activists they’ve uncovered, and more in a two-part interview. Below is part one of this interview.

What makes the topic of CEO activism so interesting to you guys?

Aaron Chatterji: So I think for Mike and I, it started back in 2015 when Tim Cook, the CEO of Apple, spoke out against Indiana’s religious freedom, restoration act. And for Mike and I, we’ve been studying corporate social responsibility for a long time and what we call in business schools, non-market strategy, which is all the stuff that business does to interact with government and stakeholders.

This looked like something new and you know, in our line of work, it’s very difficult to find something new. You often find things that’ve been happening for a long time or someone else has written about. But this looked different and new to us, and it was about a CEO speaking out on a really polarizing issue that didn’t seem directly related to the bottom line. And that’s what kind of got us hooked and interested in understanding why Cook was doing it. But I think what ended up happening is that we saw so many other CEOs and their companies getting involved in these kinds of debates, either proactively or reluctantly, and it became a research topic to understand more broadly what was changing in the society that made this kind of more common and also what the impact was on business.

“[MILLENNIALs] expect CEOs and corporate leaders to have opinions and express them as being authentic leaders..”

Michael Toffel: I think we noticed a disparity between traditional ways that companies have tried to influence public policy and CEO activism. For one, [CEO activism] is done very much out in the open as opposed to campaign funding through or lobbying through industry associations. It’s done [often] on issues that are not obviously related to the company’s bottom line. So as opposed to lobbying against a policy that would put you at a disadvantage or lobbying for a subsidy that your company might avail itself of, these are issues that don’t seem to have an obvious connection to the profitability of a company.

And the fact that it’s being done in the CEOs own name, with CEOs themselves stepping out for attribution. And these are not press releases, or government affairs, people working on behalf of the company. So there’s some real differences in what we were noticing [between the two]. So that was that’s what piqued our interest.

This issue has really just kind of exploded a little bit to the point now where you’re almost called out if you don’t say anything. It seems each day there’s something that kind of ties into this issue. What are the reasons for this phenomenon becoming so prominent in 2018?

Chatterji: I think there’s three trends that we’ve been investigating as primary drivers of what’s explaining CEO activism. One is something that’s been written a lot about by political scientists, which is political polarization in the United States.  We’re divided more by our political views, we’re more fearful of what the other side might do if they had power, and our own political identity is becoming more salient. So we’re in this period where you have intense political views, and we’re in echo chambers more than we were before.

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