The Substantial Risks of CEO Activism

CEOs can win admiration for themselves and their companies and increase company sales by speaking on political issues. On the other hand, CEO activism can also prompt the opposite results, new research shows. When CEOs speak out on a controversial issue, they may create as many or more enemies as admirers. In addition, many Americans distrust CEOs and think they comment on an issue to boost their reputation or corporate bottom line.

CEO activism is sometimes extremely effective. In the past year or so, many CEOs have spoken out on issues such as climate change, income fairness, same-sex marriage, immigration, gun control and discrimination – all issues not necessarily tied to the bottom line. Howard Schultz of Starbucks, Mark Zuckerberg of Facebook, Marc Benioff of Salesforce.com are leading examples of CEOs who have spoken out on controversial issues.

Beware of Risks

“While CEO activism has the potential to render rewards for the CEO and the company’s bottom line, the risks must be identified and addressed accordingly,” states the Weber Shandwick report Dawn of CEO Activism. The survey of 1,027 American adults finds that:

• Americans hold a more favorable opinion of CEOs who take public stances on controversial topics (31% more favorable vs. 22% less favorable).
• More than three in 10 (32%) hold a less favorable view of CEOs who speak out on issues that are not clearly tied to the company’s core business.
• 40% of Americans are more likely to buy from a company when they agree on the issue; 45% are less likely to buy if they disagree with the CEO’s position.
• Millennials (18-35 year olds) tend to favor CEO activism more than older adults.
• Nearly 40 percent of American adults believe CEOs have a responsibility to speak out on controversial issues.
• Many Americans express skepticism of CEO activism. Americans believe the top reason for CEO activism is “to get media attention” (36 percent). Just as many believe the CEOs speak out on issues to promote their reputation or sell more products as they do to be open and honest and advance the cause.
• Only 14 percent believe CEOs speak out on political issues to help society.

Key Recommendations for CEO Activism

Weber Shandwick offers recommendations to CEOs and their advisors. Some of the main ones are:

• Understand the attitudes of key stakeholders, both internal and external.

• Establish a link between the issue and the company’s values and business. Thoroughly articulate why the issue is related to the company’s mission and values.

• Consider employees. Assess how employees will be impacted by the CEO’s stance and gauge their support and plan reactions to possible responses.

• Ensure market intelligence is up-to-date. Taking a public position on a controversial issue may not be fully understood or endorsed by all stakeholders.

• Prepare to dedicate time and resources over the long term. CEO activism consumes valuable time, an important asset for a CEO.

• Look in the mirror. Make sure there are no skeletons in the closet related to the issue the CEO addresses. If your company needs to make improvements, say so before your critics do.

• Prepare a PR crisis plan for a potential social media firestorm. Social media and the 24/7 news cycle require companies to operate at lightning speed.

• Expect social media teams to be overloaded. They need to be prepared and supported.

• Develop a thick skin. Expect both stinging criticism and genuine support and admiration for a CEO’s activism – especially on social media. Learn how not to flinch at criticism and politely stand your ground.

In addition, when espousing a position on a controversial issue, keep in mind that the other side is not dumb. Yes, they see things much differently. But they are more often than not as principled in their opinions as the CEO is on the opposite side of the controversy.

It’s critical to remember and respect that everyone is entitled to their own opinion; neither side is entitled to their own facts. Make sure you are correct on the facts.

Both political parties in Washington and activists have serious problems with this aspect of debating and resolving controversial issues. The result is lack of reasonable solutions and damage to the government and the country.

What’s the Business Reason?

Whatever activist position the CEO takes, there must be good business reason for doing it, says Tim O’Brien, veteran communications consultant at O’Brien Communications. “Otherwise, the entire proposition is based on ego and not the principles of good business,” he says. “It is also important to know that ‘doing the right thing’ is never mutually exclusive from doing business the right way.

When an organization meshes social responsibility with other business initiatives, we call it corporate social responsibility, he notes. When marketing is driven by the same motivations, we sometimes call it cause-marketing. But when a CEO builds a communications program around his or her own positions on issues, it can get personal and now emerges as “CEO activism.”

O’Brien questions if advocating a particular position on an issue is a wise use of a CEO’s leadership. The answer depends on the situation. In any event, it’s better to be positioned as “corporate social responsibility” than “CEO activism.”

Bottom Line: More CEOs now speak out on sensitive issues. Yet such activism may sometimes backfire and damage the CEO’s and the brand’s image. The paradox is that CEO activism can hurt the corporate bottom line while enhancing corporate reputation. If the CEO does not have a real personal passion for the issue and does not have the support of the Board, then it’s probably better to refrain from speaking out. Before taking a public stance, CEOs and their PR teams must thoroughly research the issue and potential impact of their comments, and prepare a crisis communications plan.