CEO Activism Reinforces Brand Connections, Research Finds

April 13, 2016

 

 

Recent months have seen a slew of high profile CEOs — Howard Schultz of Starbucks, Dan Schulman of PayPal and Mark Benioff at Salesforce, to name a few — speaking out on controversial social issues. Aaron Chatterji, an associate professor of strategy at Duke University's Fuqua School of Business, set out to study the effect of this activism on public opinion and the bottom line. Along with Michael Toffel at Harvard Business School, Chatterji ran experiments to see how Apple CEO Tim Cook's public stance against a religious freedom law in Indiana affected perceptions of the issue, and of his company - what Chatterji calls "the hearts, minds and wallets." Chatterji discusses his preliminary findings in this Fuqua Q&A.

Q: Why study CEO activism?

There's been a lot of work on the relationship between business and public policy, and how business shapes the rules of the game, and how policy constrains or enables business, but there's nothing on CEOs speaking out on uses that are largely unrelated to the firm - gender equality, race, LGBT rights. It's really hard to know whether CEO activism makes a difference. We may think we know by looking at the media reaction, we may see politicians take certain steps after a CEO speaks out, but we don't really know the cause and effect. The only way to know that is to run an experiment. One way a CEO might affect these issues is by convincing people to change their minds about an issue with a practical plea from the business community. Or it might lead people to change the way they spend their money.

Q: How did you go about measuring the effects, and what did you find?

We used a market research firm to ask almost 3,400 people whether they supported Indiana's Religious Freedom Restoration Act. For some, we prefaced the question with an unattributed statement that people worried the law would allow discrimination. Other respondents were told the statement came either from Tim Cook at Apple; the CEO of a smaller, Indiana-based company; or the mayor of Indianapolis. Support for the law declined steeply and roughly the same when it came from any of the three identified speakers. These results show CEOs are equally effective to politicians or other, less famous business leaders in affecting public opinion on controversial social issues. So there appears to be some power when a CEO makes an argument, but not necessarily the singular power to change people's minds. That's probably because opinions tend to be pretty entrenched.

We asked another 2,176 respondents how likely they were to buy Apple products. Some were told beforehand about Cook's stand against discrimination, some were told about his business philosophy and some weren't given any additional information. People's intention to buy Apple products increased when they were told about his views on discrimination - and that increase was mostly driven by people who already agreed with him based on their answers to prior questions.

Together, these findings tell a really interesting story. It might be hard to change people's minds any more than the next person, but when CEOs make social statements, their potential consumers are paying attention. People who agree with them already might develop more affinity toward the company, and that's important when brands are trying to establish personal relationships with customers.

Q: This CEO activism seems to be a recent phenomenon. Is it increasing?

We're not sure. It seems to us that it is, but we're trying to collect data on media to get a sense of how many instances we can find. There have been historical examples, during prohibition, slavery and civil rights, with companies and CEOs getting involved, but it certainly seems to be getting more coverage now. Also, now that you have the filter of media outlets taken away and CEOs can communicate directly with consumers on social media, they can promote their stances on all sorts of issues. Now the floodgates have opened for that maybe it's natural to see more CEO activism. We certainly expect to see more of it. And as business lines up on either side of social issues, the point of our research is that you might be more excited about brands that are more in line with your values.

Contact Info

Gregory Phillips
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.7801
Email: gregory.phillips@duke.edu

Erin Medlyn
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.8090
Email: erin.medlyn@duke.edu