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Last Updated : Aug 19, 2019 02:42 PM IST | Source: Moneycontrol.com

Digging Deeper | CEO Activism: Tool for positive change?

In this episode of Digging Deeper, we explore the burgeoning trend of CEO Activism.

Moneycontrol Contributor @moneycontrolcom

There is a thin line dividing corporate activism and philanthropy and the two often blur into each other because both expand the scope of a company's branding and its impact on those who may not necessarily be consumers but indirect beneficiaries of the policies and the largesse.

One of the most significant examples of this was the life and work of Dame Anita Lucia Roddick, the iconic British businesswoman and founder of cosmetic brand, the Body Shop. She was a human rights activist, environmental campaigner, a pioneer of ethical business and an advocate of responsible consumerism.  The company was one of the first to prohibit the use of ingredients tested on animals and also one of the first to promote fair trade with developing countries.

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Apart from building her company into a successful global entity, Roddick actively campaigned for environmental and social issues, supported Greenpeace and in 1990, founded Children on the Edge, a charitable organisation to help disadvantaged children in Eastern Europe, Africa and Asia. As many chroniclers of her life have noted, she equated business with moral leadership, and a force of good in societies vitiated by religion, profiteering and politics. Richard Branson, founder of the Virgin Group has also been associated with multiple causes and has spoken about global conflicts, supported post-carbon technologies, addressed issues like global warming and energy crisis.

Both Roddick and Branson, of course, can be counted among members of an exalted group of entrepreneurial influencers and in this Money Control Deep Dive, we will explore the constantly burgeoning trend of CEO Activism.

So what exactly is CEO Activism?

According to catalyst.org, CEO Activism is defined by the audible and visible stand that senior leadership takes to speak out on social or humanistic issues that are not directly related to their company’s bottom-line but underscore personal or organizational values. The issues could range from climate change, immigration, to LGBTQ+ rights and counting.

More and more CEOs around the world are realising the importance of earning social equity and are making their voices heard about contentious subjects including LGBTQ rights, gender equality, immigration policies, race-related questions and more.  In a lot of cases, this activism is enthusiastically driven by both employees who work for the said companies and also socially aware consumers.

Research shows that potential employees are beginning to choose companies that do not just resonate with their skill sets but also their values and beliefs. CEOs with outspoken and clear views on are more likely to attract a millennial workforce that connects activism to an integral view of personal and professional life. As catalyst.org says, “CEO Activism is increasingly a positive influencer of buying decisions but messaging should clearly and authentically align with the company’s mission and values.” Unquote.

Weber Shandwick and KRC Research finds that a substantial percentage of Millennials believe that CEOs have a responsibility to speak out on political and social issues. To them, as we said before,  CEO activism is a deal maker and its absence can indeed be a deal-breaker while making choices.

A new kind of a CEO

In the January-February 2018 edition of Harvard Business Review, writers Aaron K. Chatterji and Michael W. Toffel wrote about CEO Activism which they thought was a significant phenomenon.

In America alone,  there is now a visible and growing band of executives taking public stands on political and social issues unrelated to their companies’ bottom lines. According to the writers,  controversies over laws affecting transgender people in North Carolina, police shootings in Missouri, and executive orders on immigration have drawn increasing numbers of CEOs into contentious public debates. As they put it, “More recently, the White House’s withdrawal from the Paris climate accord, response to the clash between white supremacists and counterprotesters in Charlottesville, Virginia, and decision to rescind Deferred Action for Childhood Arrivals have galvanized many U.S. corporate leaders to speak out and take action.” Unquote.

They remind us though that corporations have long played an active role in the U.S. political process from lobbying, to making contributions to candidates, to funding political action committees and campaigning on various issues in an effort to shape public policies to their benefit.

But the wave of CEO Activism, they think, is something new. We quote, “Until recently, it was rare for corporate leaders to plunge aggressively into thorny social and political discussions about race, sexual orientation, gender, immigration, and the environment. The so-called Michael Jordan dictum that Republicans buy sneakers too reminds executives that choosing sides on divisive issues can hurt sales, so why do it? Better to weigh in on what traditionally have been seen as business issues, such as taxes and trade, with technocratic arguments rather than moral appeals.” Unquote.

Still, they insist, PR firms are now building entire practices around CEO activism because the world has changed.

In US alone, the writers say,  political partisanship and discourse have grown ever more extreme, and the gridlock in Washington, D.C., shows no sign of easing.  We quote, “Political and social upheaval has provoked frustration and outrage, inspiring business leaders like Tim Cook of Apple, Howard Schultz of Starbucks, and Marc Benioff of Salesforce—among many others—to passionately advocate for a range of causes.” Unquote.

Benioff also told Time, “Today CEOs need to stand up not just for their shareholders, but their employees, their customers, their partners, the community, the environment, schools, everybody.” Unquote.

The piece further cites  Bank of America’s CEO, Brian Moynihan who told Wall Street Journal, “Our jobs as CEOs now include driving what we think is right. It’s not exactly political activism, but it is action on issues beyond business.” Unquote.

The world is taking notice, say the writers and media CEO Activism has gotten lots of media attention lately. Because, as they say, increasingly, CEO Activism has strategic implications: In the Twitter age, silence is more conspicuous—and more consequential. And CEOs can be called out for not speaking.

But the piece also asks the next big question. What does all this amount to?

Does CEO activism make a difference?

But perhaps the question to ask here is, why seek an immediate report card from CEO activists when any gesture of advocacy creates a much-needed conversation about issues that often get buried in relentlessly churning news cycles? The piece reminds us of  BOA’s Moynihan and Dan Schulman of PayPal who took a stand against a North Carolina law requiring people to use the bathrooms corresponding with the gender on their birth certificates, which became a referendum on transgender rights.

The point being that companies and their leaders can aspire to something more than maximizing shareholder value.

Jeff Immelt, the former CEO of GE,  is cited in the piece for his opinion that it’s insincere to not stand up for those things that you believe in. He says and we quote, “ We’re also stewards of our companies; we’re representatives of the people that work with us. And I think we’re cowards if we don’t take a position occasionally on those things that are really consistent with what our mission is and where our people stand.” Unquote.

To demonstrate the above point, the piece gives examples of Goldman Sachs’s CEO, Lloyd Blankfein, and Biogen’s former CEO George Scangos who have spoken out publicly on government policies that affect the rights of LGBTQ individuals.

There is also a flip side to belief systems governing corporate decisions and the writers remind us of David Green, the founder and CEO of Hobby Lobby who cited his religious beliefs to oppose the Obamacare requirement that health insurance for employees include coverage for the morning-after pill among all other forms of birth control.  Chick-fil-A’s CEO, Dan Cathy, on the other end of the ideological spectrum has openly denounced gay marriage.

The mechanics of CEO Activism

So how do activist CEOs ensure that their voice reaches the maximum number of stakeholders, consumers or just interested observers?

The piece obviously points out the most direct way of reaching an audience. Via public statements given to the news media and more frequently on Twitter.

Synergy and resource pooling is another way of making a difference.

The piece recalls how days before the United Nations climate-change-agreement negotiations took place in Paris in late 2015, the CEOs of 14 major food companies—Mars, General Mills, Coca-Cola, Unilever, Danone Dairy North America, Hershey, Ben & Jerry’s, Kellogg, PepsiCo, Nestlé USA, New Belgium Brewing, Hain Celestial, Stonyfield Farm, and Clif Bar—cosigned an open letter calling on government leaders to create a strong accord that would “meaningfully address the reality of climate change.”

The Harward Business Review piece adds and we quote, “Similarly, nearly 100 CEOs cosigned an amicus brief to encourage federal judges to overturn Trump’s executive order banning citizens from seven Muslim-majority countries from entering the United States.” Unquote.

Making symbolic gestures

Apart from collective action, many CEOs have walked their talk by making often inconvenient and risky gestures alone.  Post the racial violence in Charlottesville and Trump’s unwillingness to put the blame on white supremacists, Merck’s CEO, Kenneth Frazier, resigned from President Trump’s American Manufacturing Council. Many CEOs followed, forcing Trump to disband both the councils.

Bill Oesterle, erstwhile CEO of Angie’s List canceled the previously planned company expansion in Indianapolis in response to Indiana’s Religious Freedom Restoration Act (RFRA), which some viewed as anti-LGBTQ. Under gathering pressure,  then-governor Mike Pence had to approve a revised version of the law, which forbade businesses from denying service to customers because of their sexual orientation.

The Harvard Business Review piece also recalls how in response to North Carolina’s bathroom law, Schulman canceled PayPal’s expansion plans for a new global operations center which would have created more than 400 skilled jobs. Leveraging economic might is one of the many ways CEOs can impact policy and shift perceptions.

More recently, you will recall that streaming giant Netflix has taken a stand against Georgia’s proposed anti-abortion law. In a May 2019 piece, BBC reported Netflix’s stand against Georgia’s prohibitive and what the piece calls as almost dystopian abortion law. Netflix has categorically stated that it would consider relocating its film and TV production from the state. Disney also announced that it too would reconsider the production it currently houses in the state of Georgia.

BBC also recalls how in 2018, Delta made headlines when it removed flight discounts for National Rifle Association members to show support for gun control, despite the negative short term impact it might have on revenue.

But coming back to Netflix, the BBC piece cites Chief Content Office Ted Sarandos who said and we quote, “We have many women working on productions in Georgia, whose rights, along with millions of others, will be severely restricted by this law. It’s why we will work with the ACLU and others to fight it in court. Given the legislation has not yet been implemented, we’ll continue to film there, while also supporting partners and artists who choose not to. Should it ever come into effect, we’d rethink our entire investment in Georgia.” Unquote.

Moving the needle

Georgia may or may not be impacted by Netflix and Disney taking a stand against its lawmakers but as Harvard Business Review points out, momentum begins often with a trickle. It offers the example of Indiana’s RFRA (The Religious Freedom Restoration Act ). We quote, “When legislators passed a religious freedom bill in Georgia, threats to stop filming in the state from leaders of many studios and networks—including Disney, CBS, MGM, and Netflix—and similar kinds of warnings from Benioff and other CEOs were seen as instrumental in moving the governor to veto it. And leaders of the National Basketball Association, NCAA, and Atlantic Coast Conference have been credited with forcing North Carolina to revise its bathroom law.” Unquote.

As the piece further explains, more than 160 CEOs and business leaders chose to sign a letter by the Human Rights Campaign opposing the North Carolina bathroom law. By doing this, they diluted the risk of consumer backlash, intensified the newsworthiness of their action and increased the impact of their activism.

It is important however that both high profile individuals, as well as companies, do not sport cracks in their ideological armour and charges have been levied against  Benioff and Cook for denouncing religious freedom laws while continuing to do business in countries that persecute LGBTQ individuals.

Pepsi’s use of Kendall Jenner in a Black Lives Matter scenario was also roundly criticised for its trivialisation of race issues. Nike’s much-hyped 'equality' campaign featuring LeBron James and Serena Williams was also termed hypocritical because the company has often been accused of employing inadequately paid factory workers in ‘sweatshops’.

These examples show that companies and CEOs have to choose their issues carefully and with authenticity. They also have to factor in elements like consumer backlash and must educate themselves adequately about the issues they are supporting. Another key element of successful CEO Activism is seeking a broad consensus across the organization so that there are no inner divisions to distract from the public messaging. A company has to also take into consideration if it is strong enough to take in its stride, political or public backlash because just a trending, negative hashtag could dent its financial equity.

Against this background, as Victor Lipman reported in a December 2018 Forbes piece, it is remarkable that  Starbucks closed stores for racial sensitivity training. Patagonia sued President Trump to make an environmental statement over his administration's plan to reduce the size of protected land in Utah and Dick's Sporting Goods stopped selling assault rifles. They did so perhaps because to them making a statement was more important than playing it safe.

An expanding trend

A piece in theceomagazine.com states that the wave of CEO Activism is only going to grow across the world and in 2017, many Australian CEOs also took a stand to support the legalisation of same-sex marriage.

The most prominent in this list was Alan Joyce, Chief Executive of Qantas, Australia’s biggest airline whose vocal support to the cause even invited a critic to smash a pie in his face. But Joyce continued to campaign and informs the piece, even donated $1 million of his own money to the cause. He was finally joined by over 20 high-profile CEOs of some of Australia’s largest companies, all offering their support for same-sex marriage.

The piece cites Joyce and we quote, “I think it is very important for our employees, customers and our shareholders, and that is why Qantas is a supporter of marriage equality and a supporter of gender equality and a supporter of Indigenous rights.” Unquote.

In a Live Mint piece published in  Aug 2019, writer Shweta Taneja noticed how Indian company heads are breaking from tradition and taking a stand on social issues online. This move, she says, is making them popular among millennials as well as helping them build brand value.

She offers the example of chairperson and managing director of biotechnology company Biocon Kiran Mazumdar-Shaw who tweeted in late July and asked finance minister Nirmala Sitharaman to clarify if the tax rebate she announced would be on corporate tax too.

She was also in news recently to critique “Inspector Raj” and what many called was “tax terrorism” post the tragic death of Cafe Coffee Day founder VG Siddhartha.

Kiran Mazumdar-Shaw told Mint that she took to social media because these platforms enable one to share views with the world at large and shape opinions as well as engage and influence people and policy in the right direction.

The piece informs that the calculator at online influencer marketing agency Webfluential estimates each of Shaw’s tweet to be worth $4,380-$5,355 (around Rs 3-4 lakh). With 1.4 million followers on Twitter and a LinkedIn profile, which was in India’s Power Profiles 2018, that’s a lot of influence.

“Business leaders have a much larger role to play in shaping the ecosystem, beyond just the corporate sector,"  Shaw told Mint and added, “I enjoy sharing my opinions on a variety of global and local issues and play the role of a responsible citizen.”

Vineet Nayar, author of Employees First, Customers Second and former CEO of HCL Technologies also told Mint that leaders today need to inspire their employees and their consumers by taking a stand on issues of global importance. We quote, “As a leader, Nayar developed a reputation for speaking out against business practices of letting go of employees within the IT industry because of discrimination or to save costs, and strict company hierarchies that led to suffocation of innovation.” Unquote.

Demystifying CEO Activism

In February 2019, Dan Pontefract wrote a piece in Forbes and used Merriam-Webster to define  the word activism as “a doctrine or practice that emphasizes direct vigorous action especially in support of or opposition to one side of a controversial issue.”

Cambridge Dictionary, he informs, defines the term CEO as “the person with the most important position in a company.”

But he adds and we quote, “And therein lies the rub. When the two phrases get mashed together, I suppose we are left to believe it’s a good thing to have CEO Activism. But what are the true intentions of a CEO and their attempts at corporate activism?” Unquote.

How does this activism begin? Are there members of the marketing and communications team vetting whether or not the particular issue should be discussed publicly or not?  He wonders further if polling agencies or survey firms are employed to see which way the wind is blowing in terms of customer opinion on the issue. Third, is the legal team also engaged along with executives from the sales team to make the activism fail-proof?

He concludes wryly, “ If too many customers are likely to impact the revenue or sales numbers for that quarter negatively, you can bet your last dollar there isn’t a chance the CEO will speak out.

The activism has been squashed by the need to keep all customers happy. Rather than doing what's right, the CEO refrains from saying anything.” Unquote.

He further asks, “ what truly is a CEO activist?

When Howard Schulz was CEO of Starbucks, did he demonstrate CEO Activism when he asked gun owners not to bring their guns into its shops? Or, was it simply a common-sense plea?

When Apple CEO Tim Cook publicly criticized his home state of Alabama over the incredulous dearth of LGBTQ rights, was it CEO Activism or, again, was it simply doing what’s right?

Perhaps it’s just semantics, but rather than coining it as CEO Activism I’d like to see CEOs demonstrate a commitment to purpose.” Unquote.

He thinks a CEO need not poll to see whether or not they should take a public stand for ethics, human rights, and good citizenship. That’s not activism, that’s societal table stakes.

His point being that the intent of a CEO should be to become a moral compass.

His punchline being, “ We don’t need CEO activists we need leaders—pure and simple—defining and building a better form of humanity.

Stop calling it CEO Activism; it’s simply a saner way of leadership.” Unquote.

He cites Salesforce founder Marc Benioff who said that CEO Activism is not a leadership choice, but a modern — and an evolving — expectation.

The piece states categorically that if an organization is not 100 percent committed to a purpose-driven way of working, there’s no point in huddling in a meeting room to debate whether to speak out on an issue.

As the writer concludes in the end, “If you are a CEO employing this tactic, you are not an activist; you’re merely a walking contradiction. That’s not leadership either.” Unquote.

But still, whatever may be propelling this shift, the fact is, that if CEO Activism impacts political policy and impacts lives positively, there cannot be any losers in the long run. Because when envelopes are pushed even a little to make a difference, everybody wins.

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First Published on Aug 19, 2019 02:39 pm
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