The Calculus of Engagement

Argenti says that during the past few years companies have watched as political and social movements have deeply affected their employees, customers, investors, and the communities in which they operate. “The big question is, what should an organization do about this?”  He proposes a framework, detailed in a Harvard Business Review piece “When Should Your Company Speak Up About a Social Issue?,” that equips executive teams to evaluate when they should speak out, how they should prepare and position the response, whether the company should take the lead in driving the conversation or instead partner with other organizations to have more meaningful influence on the issue, and crucially, whether they should speak out at all.

Argenti suggests companies should answer three critical questions in evaluating engagement with a social issue:

1) Does the issue align with my company’s strategy?

2) Can we meaningfully influence the issue?

3) Will our constituencies agree with our speaking out?

Argenti says when the answer to all three of these questions is “yes,” a company might speak out as a leader about the issue—as Starbucks did on the issue of racial bias by closing all of its stores to conduct anti-bias training. When the answer to at least one of these questions is “no,” Argenti says it may make sense to speak out as a follower—as Coca-Cola did in partnering with non-governmental organizations with greater credibility on humanitarian initiatives to conserve water.  When an executive team cannot answer “yes” to any of the three questions, Argenti suggests the company should not speak out—noting the example of John Deere not commenting on the Paris Climate Agreement.

Argenti says this framework aids leadership in decision-making and offers a business case for how to speak out, enabling companies to determine which issues are most relevant to their businesses to make both a positive impact on society and on their bottom lines.

While some regard CEO activism as a contemporary phenomenon, Stacy Sharpe of Allstate says that her company has a long history of engaging on important societal issues such as safe driving, seatbelts and air bags, domestic violence and financial abuse. “We were early advocates for seatbelts and air bags that many of us take for granted today that are in every car, but was a big fight and very controversial at the time,” she says.

As a result of Allstate’s history of social activism, the company now places a priority on issues where it believes it can affect systemic change, “not just where we can lend our voice.” Sharpe shares the company’s approach to determine which issues to engage with and how the company should engage with them.

Juan Suarez of Southwest says that a vital change for his firm in recent years has been looking at a wide range of issues.  “There was a time period when we took the position that if a social issue did not affect the airline industry directly or did not affect Southwest directly, we would not engage,” he said. Over time, though, expectations regarding the company’s social engagement, spurred by customers, shareholders and the company’s employees, caused the company to take a broader approach. 

Still, in the age of social media, speed of response is critical. Today the company has developed a decision framework on social issues based on “speed, courage and consistency,” Suarez says. He notes his company’s Social Topics Committee which reviews these issues has particular time guidelines. “If it’s a critical matter that comes before us, we are committed as a group to meet within 12 hours and we then commit to a recommendation to our senior leaders within 24 hours,” Suarez says.

Reflecting on the evolution of CEO activism, Chatterji says that while the initial perception was that these decisions were maybe off-the-cuff, now we are seeing companies develop organizational structures—like those discussed by Allstate and Southwest—where the organization is delegating the work of making these kinds of decisions, similar to other functions inside an organization.

At Allstate, Sharpe says that change comes from both the top down and the bottom up. She believes the CEO has a great microphone and voice and helps with systemic change, but cannot do it alone because he or she needs the weight of the organization to get behind it. Sharpe says whether the effort starts or ends with the CEO, making a true change requires other people in the firm lending their expertise and knowledge and investing their time in a full court press.  

Chatterji says because some issues are fundamentally political, different stakeholders of an organization may hold hyper-polarized views. He says it’s important that companies consider how they communicate a decision to stakeholders, including employees, who are deeply valued members of the team, but may disagree.

Suarez says Southwest considers the simple act of listening to be the most important factor in communication. Suarez says the company’s leaders are traveling around the country building relationships with employees, and helping to explain aspects of an issue such as what it means that Southwest is a federal contractor. Suarez says while issues around masking and vaccines are very challenging in the travel industry with extreme polarization in views, it is important that employees understand the thinking of the organization as they move forward.

Chatteriji says the media has moved beyond covering statements on social issues, to report on what companies are doing to follow up on those statements. Chatterji says a company’s stakeholders are now more aware of implementation, and silence on an issue can be conspicuous in itself—thus, companies must evaluate when it is better not to speak.

Argenti suggests that when a company does not have much to offer on an issue, or that issue is not connected to anything the firm is doing, it is better the company not speak out about the issue at all. He says social media can quickly amplify a statement, so if a company’s name is associated with an issue but it is not taking any meaningful action to advance that issue, it can become a significant problem for the organization.

Chatterji says when he first started researching CEO activism, some people thought of the trend as CEOs just responding to the news of the day, rather than a strategic decision for an organization. Instead, Chatterji says weighing speaking out on an issue is now becoming a strategic business function—pointing out employees are often speaking out and representing their employers. Chatterji believes this means people throughout an organization need to be equipped with the skillset to analyze corporate activism decisions and responses as a strategic part of their business.

View the full discussion of “The Calculus of Engagement”  below.