CEO Activism: When Does It Make Sense to Speak Out?

By DirectorCorps

October 8, 2019 All Industries Activism

CEOs are taking a stand during divisive moments, complaining about the U.S. president and his policies, running ads on controversial topics and letting their political views be known. But is this a good thing?

Some companies are saying “yes.” But a few governance and public relations experts say “no,” or at least, “very rarely.”

“I think it’s a bad idea,” says Charles Elson, the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “It will alienate some of your employees, certainly and … your shareholders. And that’s why, generally, CEOs don’t take political positions. You were hired to run a business, not for your political viewpoints.”

The national conversation has grown increasingly divisive and partisan, which makes wading into political and social causes especially fraught. Some CEOs feel compelled to make a stand for what they think is right. Kenneth Frazier, chairman and CEO of pharmaceutical giant Merck & Co., resigned from President Donald Trump’s American Manufacturing Council in 2017 after the president said there were good people on “both sides” of violent clashes with white supremacists in Charlottesville, Virginia.

“As CEO of Merck and as a matter of personal conscience, I feel a responsibility to take a stand against intolerance and extremism,” Frazier, who is African-American, wrote in a tweet.

Apple CEO Tim Cook said in a letter that he also disagreed with the president in the wake of the violence.

“I disagree with the president and others who believe that there is a moral equivalence between white supremacists and Nazis, and those who oppose them by standing up for human rights,” he wrote in a letter to employees, which was distributed widely after it was obtained by the publication Recode. “Equating the two runs counter to our ideals as Americans.”

One of the more talked-about incidents of corporate activism was Nike’s controversial advertising campaign in 2018 with Colin Kaepernick, who had been a quarterback in the NFL. Kaepernick knelt on his knee during the pre-game national anthem to protest police brutality against African-Americans, irking conservatives.

American Airlines Group chairman and CEO Doug Parker took a stand against a proposed Arizona law in 2014 concerning religious expression, citing damage to the state’s economy. Evan Greenberg, chairman and CEO of insurer Chubb Group, came out against “our country’s brand of nationalism” and in favor of a more practical immigration policy “that responds to both our needs and the values of who we are as a nation of immigrants” in a 2018 letter to shareholders.

Contrary to these examples, few CEOs take activist positions in the national media. A group of researchers at Stanford Graduate School of Business noted in a November 2018 paper that, only 28% of CEOs at S&P 500 companies made public statements about social, environmental or political issues personally or on behalf of their companies from Jan. 1, 2000 to July 31, 2018. The rate was even lower for S&P 1500 companies, where it fell to 12%.

Of the issues, CEOs cited diversity most commonly, either about gender, racial or sexual orientation. Environmental issues were advocated by 41% of the activist CEOs, followed by immigration and human rights.

Nick Kalm, founder and president of public relations firm Reputation Partners in Chicago, says it is appropriate for the CEO to take a stand when an issue directly impacts the business. “If you’re the CEO of ExxonMobil Corp., you have to take a stand on climate change,” he says. Other issues become murkier. Sometimes, social issues cross with business interests and the decisions become harder.

For instance, what should the CEOs of a sporting goods stores do in the age of mass shootings?

That was the conundrum for Dick’s Sporting Goods’ CEO Edward Stack, a longtime Republican donor and gun owner. The company decided it would no longer sell assault-style weapons and raised the minimum age to buy a gun to 21, after the company acknowledged that it sold a gun to the person responsible for the Parkland, Florida, school shooting. The gun wasn’t the same one that killed 17 people in the massacre, but it troubled Stack nonetheless. He admitted to breaking down in tears after he heard the news of the killings.

The company also closed the hunting section of 125 stores, but Stack referenced the decline in hunting as a sport when discussing the matter.

Nike’s stance, likewise, seems to have aligned with business realities. The shoe brand reported that sales were up 31% a year after the controversial Kaepernick ad. Nike founder Phil Knight told Fast Company magazine that: “It doesn’t matter how many people hate your brand as long as enough people love it. … You can’t try and go down the middle of the road. You have to take a stand on something, which is ultimately I think why the Kaepernick ad worked.”

Still, Kalm and Elson recommend caution before taking a stand. Kalm says executives should research a particular stance before going public and consider how customers, employees and shareholders may think, perhaps conducting focus groups. Elson thinks that boards of directors should be notified in advance of any public statements. Letters to employees easily go public.

“Companies only operate when everyone is unified,” Elson says. “It’s not a basketball. You have to bring everyone together. You don’t do that with divisive issues.”