The Main Drivers of 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.

Michael Toffel

And I think that is what is coming to CEOs…where there’s a statement like the one today by Roseanne and someone has to react to it. And it’s all over Twitter and quickly, Disney has to make a decision. It’s the same thing with what happened in Starbucks in Philadelphia. It’s caught on viral video and everyone has an opinion about it right away and often at it’s very divided, and it’s going to come to Starbucks and the CEO to make a decision about what to do.

And I should add that’s what leads to the second kind of factor, which is social media. I mean, both the Roseanne story and the Starbucks story and so many of the other stories have played out on social media, which is basically just a microphone that’s always on. And that means that the people behind the microphone, the CEOs in this case, are expected to speak and have opinions on things. And that wasn’t the case, even just five or 10 years ago.

The third one is that the folks who were on social media with them and part of this political story, which is the millennials [who are taking over the business world] and…seem to be more accepting of mixing business and politics. They expect CEOs and corporate leaders to have opinions and express them as being authentic leaders. And so while we don’t have sort of conclusive evidence on that point, we’re looking more and understanding the preferences of millennials. Those are the three factors at least Mike and I so far have looked at, political polarization, social media, and the increasing presence of millennials in the workforce.

What are the different styles of CEO activism that you’re seeing?

Ronnie: With CEO activism it’s not one thing, it’s a couple of different activities, at least. So one is CEOs are using Twitter and social media, in general, to speak out as these issues happened, it’s a quick way to respond, and it’s a way to get right into the thread of the debate on the same channel as these events are unfolding. The other is that they’re joined together with other companies in signing letters, like the one that the human rights campaign got together around North Carolina’s HB2. So you know, lots of companies signed onto that to affirm their support for non-discrimination and register their disapproval against HB2.

There’s also things they’re doing internally inside their companies. When the events in Charlottesville took place and the aftermath was sort of something that created a lot of controversy, a lot of CEOs looked internally to figure out what was going on and make as many improvements as they could in their own companies around racial bias, for example. So I think that you see it in very public ways on Twitter, you see it as a collective action with these letters they’re signing and getting behind, and you also see it internally inside their companies, where you see a lot of CEOs stepping out on these issues. You also see the occasional CEO writing [an op-ed] or giving a press availability, or appearing on one of these shows, so those are also common. But only the highest, most well-known CEOs are getting those opportunities. I think the other ones might be more available to folks across the CEO spectrum.

Toffel: I’ll just add to that. You know, a typology we used in the HBR article, which I think is useful is, there’s two types of tactics, one is about raising awareness. That’s like writing the op-ed or issuing a statement or a tweet. Some of that’s done individually. Some of that’s done collaboratively. And then there’s the examples that we’ve seen that is more startling in a way, where CEOs threaten economic action.

For example, PayPal deciding not to or threatening not to put its operations center in North Carolina, or Angie’s List deciding to not pursue the expansion of their headquarters in Indianapolis. Those are fewer and far between, but those certainly raise eyebrows, because that’s not just the CEO, you know, stating clearly where he or she feels on a position. It’s taking action with real financial consequences in that locality.
Stay tuned for part two of the interview.

" Gabriel Perna : Gabriel Perna is the digital editor at Chief Executive Group, overseeing content on and Previously, he was at Physicians Practice and Healthcare Informatics. You can reach him via email or on Twitter at @GabrielSPerna."