Why CEOs Speak Out On Social and Political Issues

Prof. Aaron "Ronnie" Chatterji discusses the evolution of CEO activism

January 23, 2020

In recent years, high-profile CEOs in the U.S. have garnered praise and criticism for speaking out on social and political issues, ranging from immigration policy to climate change

As many issues become more politically polarized, business leaders have become more emboldened, Professor Aaron "Ronnie" Chatterji said in a recent discussion on LinkedIn. Many have stepped beyond issues that directly affect their businesses to comment on race relations, LGBTQ+ rights and even the actions of President Donald Trump, he said.

CEOs are willing to risk backlash from some stakeholders and the public on these issues for a couple of reasons, said Chatterji, co-author of a paper on CEO activism in the journal Organization & Environment. Chatterji has researched why CEOs speak out and the implications for companies over the past several years. He says many CEOs feel they have a responsibility to make a difference in society and that their experience and prominence can really help the cause.

“After all, these are men and women who run the largest corporations in America and around the world, and they feel like they've done something that is amazing and against all odds, which in many cases is true,” said Chatterji, who also teaches an advanced corporate strategy class focusing on CEO activism. “You think about Howard Schultz building Starbucks. After you do something like that, why not think that you could also change the conversation on race in America.”

These CEOs also believe many customers and other constituents will agree with their perspective, Chatterji said.

Capturing the minds of those who do agree with the CEO can benefit the brand and its bottom line, according to the paper co-authored by Chatterji and Michael Toffel of Harvard Business School.

They found when CEOs speak out on controversial social issues, the CEOs may be as effective as politicians in influencing public opinion. Their research also shows potential customers develop a greater affinity with a brand whose CEO takes the same stance on a controversial issue, making them more likely to buy those products.

The short-term impacts of outspoken CEOs may seem intuitive to some – for example, when a CEO says something controversial, you can expect to see an immediate drop in stock prices.

But measuring the actual financial impact of that CEO’s statement is not so simple, Chatterji said in the discussion, using a Nike ad campaign featuring controversial quarterback Colin Kaepernick as an example.

“If you're going to do analysis like this, you can't just look at one stock,” he said. “When you look at Nike's response to Colin Kaepernick, you have to look at it over a long term compared to other companies in their sector, and frankly, control for all the other things that are affecting the markets before you can draw any conclusion. I think the challenge is we all want near-term information to say that was right, or that was wrong. The stock market is going to be really useful for many things, but on a particular statement that CEO made on a day where 500 other things happened, it's very difficult to tease that out.”

Chatterji discusses these topics in greater detail with MBA students Jenny Cooke and James Adams in the video above.

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