A version of this post appeared on Risk & Compliance.
As CEOs navigate unprecedented expectations from a diverse set of interest holders, their “courage” is being tested and evaluated by the moment. Faced with identity politics, populism, the democratization of influence and the “age of rage,” business – like no other societal institution – is being summoned to lead in new and challenging ways. And the greater the outrage, the more immediate and comprehensive an organization’s action must be. Exhibit A: Walt Disney Co.’s all but instant cancellation of the popular sitcom “Roseanne” in the wake of the lead actor’s abhorrent and vile racist tweet. And Exhibit B: Google’s recent decision not to renew its contract with the U.S. Department of Defense in 2019 after employees raised concerns about “being in the business of war.”
In the last 18 months alone, CEOs have championed visible positions on vexing cultural, social, political, economic and policy debates. This zeitgeist for business leadership is labelled “CEO activism.” And this new operating reality, particularly in the United States, all but forces businesses and their CEOs to take a side on some of the most contentious societal issues. Some CEOs are going at it alone. Others are confederating with business groups and many are opting out. But no matter the scenario, business is expected uniformly to lead today’s change agendas.
From immigration reform, marriage equality, data privacy, climate change, sexual orientation, and gender identity to healthcare, religious freedom, gun control and economic policy, the issues CEOs act upon are saddled with risk and opportunity in terms that can impact market forces demonstrably. Harvard Business School professor Michael W. Toffel and Duke University professor Aaron K. Chatterji have illuminated the promise and peril of CEO activism in recent research. Apple CEO Tim Cook’s strong public position opposing a religious freedom bill in Indiana directly contributed to an increased likelihood that consumers would buy Apple products. In contrast, a prominent consumer goods CEO encountered merciless criticism for making supportive public statements on President Trump’s economic agenda. Consumer and public outrage was instant and social media was abuzz with disapproval.
At the same time, silence on political and socioeconomic issues still defines the behavior of many companies and their chief executives. In the wake of Brexit, for example, most companies in the United Kingdom have remained silent despite significant pressure from core constituents, including employees, customers and trade partners. And while British inventor Sir James Dyson has vocally supported the exit from the European Union, most executives still cling to the notion that business and politics should never mix. This has proven difficult and controversial in the U.K. and Western democracies, generally as the power of business increases and the failures of government grow more pronounced.
How did we get here?
The recent surge in CEO activism both in terms of public expectations and executive behavior has incubated sub rosa for some time. It has not erupted in a vacuum. While the complexities seem infinite, the simplest explanation is that business has largely supplanted the state as the most trusted and capable societal institution to tackle perplexing economic, political, social and cultural challenges. From the expanding class divide among the elite benefiting from the promise and spoils of Western democracies to the growing population falling by the wayside because of innovation and vocational obsolescence, the collapse of trust in government to solve economic, social and policy crises is quite real and frightening. As a result, business has been anointed, willingly or not, as the most competent societal institution to assume the reins from government institutions. In part, this coronation reflects the myriad benefits and distinct economic spoils that business and their senior leaders enjoy.
Based on recent experience involving gender inequality, healthcare crises, high-profile fraud litigation, #MeToo situations and other matters, it is strikingly clear that the prospect of public advocacy challenges many CEOs beyond their capacity. This is more sobering given the findings in the 2018 Edelman Trust Barometer. Only 44 percent of the public believe what CEOs say to be credible. Fifty-six percent have no respect for CEOs who remain silent on important societal issues. Further, 64 percent think CEOs should take the lead on change rather than waiting for the government to impose it, and 79 percent want CEOs to be visible in sharing the company’s purpose and vision.
While trust in CEOs is fragile, to be sure, the study shines a klieg light on the solution: public purpose and social engagement build CEO trust. Perhaps Salesforce CEO Mark Benioff states this new paradigm best: “CEOs need stand up not just for their shareholders, but their employees, their partners, the environment, schools, everybody.”
Benioff’s call to action is amply supported by the data. Eighty-four percent of the public expect CEOs to inform conversations and policy debates on one or more issues including, for example, jobs, the economy, immigration, education, healthcare, discrimination and corruption. While CEO activism proves a very powerful platform to build connectivity and loyalty with customers and employees, many leaders are more comfortable being “fast followers” on turbulent and polarizing pubic issues. For the bold leaders, though, an extraordinary upside exists for those with a native and durable risk tolerance.
Navigating new expectations in unchartered terrain
So, against this backdrop, how can CEOs minimize risk, maximize opportunity and course correct as necessary? The most salient rule of the road for CEOs is to make sure they proactively pick their own issues for advocacy rather than have the issues foisted upon them. Anchoring the advocacy platform on the persona, mission, core competencies and values of the CEO and the organization best positions the selection criteria and authenticity of the campaign for success. The CEO also must consider his or her core competencies, style and authority idiosyncratically, because it is crucial that CEO advocacy connects meaningfully with core constituents.
If calibrated correctly, CEO advocacy becomes a potent and powerful podium to galvanize employee engagement, influence behavior and generate greater fealty to the mission, values and competitive footing of the organization. Internal alignment with the board, employees and other critical interest holders must be secured at the very beginning to ensure alignment and avoid surprises. Also, the CEO must be an oracle of sorts on the subject he or she is advocating. Like outstanding political operatives, the CEO must know the answers to the hardest questions on the topic before being asked them. As political issues, social injustices and public policy issues frequently hit a tipping point quickly, CEOs must formalize this engagement process so it becomes a heuristic process of sorts, enabling fast action.
CEO advocacy initiatives must also include both metrics and key performance indicators that map influence and behavior back to the advocacy goals. As in a political campaign, CEOs and the organization must have access to data that provides a continual performance loop measuring the extent to which the CEO and the organization are moving the needle positively among core constituents. Frequently, messages and communications channels will need to be recalibrated based on the data in the fast-moving and fragmented advocacy environment. This was evident in the recent case of a CEO of a global manufacturing company seeking to influence the stalemate on the status of the so-called “Dreamers” (undocumented immigrants who arrived in the U.S. as children to gain a pathway to permanent legal status), who was able to utilize the results of instant surveys, predictive analytics and overnight focus groups.
Because the important public issues that CEOs often support are controversial, highly charged and potentially polarizing, it is vital to have a nimble, battle-tested campaign team in place before going live with an activism campaign. In our experience, red teaming and rapid response experience are essential and should include experts in public affairs, investor relations, digital campaigning, real-time analytics and crisis management. CEOs need to identify and turn emerging risks and mounting opposition into opportunities to build even stronger bonds with employees, customers, business elites and even influential public officeholders.
CEO activism has quickly become among the most effective ways to humanize the face of leadership and build trust in CEOs across a far greater swath of influencers who can contribute significantly to the durability, commercial footing and cultural performance of an organization. But even if CEOs elect to be fast followers or sideliners, they must be prepared to move instantly, assertively and in broad public terms when their own organization has violated the public trust and outrage is only seconds away from a digital firestorm that will change their organization forever.
Harlan Loeb is global chair, Crisis & Reputation Risk.