Tag: CEO activism
How do companies address governance issues for corporate political activity?
In the last couple of years, many CEOs have felt the need to voice their views on political, environmental and social issues, such as racial justice and voting restrictions. For example, after the murder of George Floyd and resulting national protests, many of the country’s largest corporations expressed solidarity and pledged support for racial justice. After January 6, a number of companies announced that their corporate PACs had suspended—temporarily or permanently—their contributions to one or both political parties or to lawmakers who objected to certification of the presidential election. However, as The Conference Board has recently stated, in the current “era of intense political polarization in the United States, and with the immediacy, ubiquity, and (often) inaccuracy of social media, companies are subject to ever-greater scrutiny for their political activities.” In this article, Deloitte and the Society for Corporate Governance report on a survey they conducted in July 2021 about companies’ approaches to publicly addressing controversial social and political issues. As the authors note, “taking a stance publicly on controversial or sensitive topics poses both risks and opportunities, including alienating or appealing to key stakeholders; enhancing or damaging the corporate culture; and eroding or building trust and brand reputation,” leading some companies to consider more systematically how they approach public engagement on these types of issues.
How should we approach corporate political activity?
A new piece in the NYT, “Corporations, Vocal About Racial Justice, Go Quiet on Voting Rights,” starts off this way: “As Black Lives Matter protesters filled the streets last summer, many of the country’s largest corporations expressed solidarity and pledged support for racial justice. But now, with lawmakers around the country advancing restrictive voting rights bills that would have a disproportionate impact on Black voters, corporate America has gone quiet.” The author is talking about new voting laws just passed in Georgia and the reluctance, with some exceptions, of the largest corporations to say anything or do anything—beyond anodyne statements of support for voting rights in general—that might pressure the state to back down, as major corporations did when several states passed their infamous transgender bathroom bills and many companies threatened to move business out of those states. As the NYT observed, the “muted response—coming from companies that last year promised to support social justice—infuriated activists, who are now calling for boycotts.” Last night, the NYT reported that two of the largest corporations in Georgia have abruptly reversed course and issued statements in opposition to the voting bills after a large group of prominent Black business leaders called on companies “to publicly oppose a wave of similarly restrictive voting bills that Republicans are advancing in almost every state.” In an interview with the WSJ, one of those business leaders emphasized that this “is a nonpartisan issue, this is a moral issue.” This battle is expected to continue as other states enact similar legislation, not to mention potential fights over guns, immigration and climate, to name a few. How do companies navigate the terrain of political activity and public scrutiny while staying true to their core values? In this new report, “Under a Microscope: A New Era of Scrutiny for Corporate Political Activity,” The Conference Board attempts to address this complicated issue.
How do companies cope with social risk?
How do companies cope with social risk? In “Blindsided by Social Risk—How Do Companies Survive a Storm of Their Own Making?” from the Rock Center for Corporate Governance at Stanford, the authors look at “social risk,” essentially, reputational risk that can impair a company’s social capital and, in some cases, its performance. These risks can arise from a variety of circumstances—a damaging statement or action by a company representative (a CEO, a board member, an employee) that triggers an adverse reaction from customers, employees, regulators or the public; a troubling interaction with a company’s services or a product name considered offensive; a damaging event at a competitor that fuels a broader inquiry across the industry. In these types of cases, “media attention (social or traditional) amplifies the impact, sparking a backlash that extends well beyond the directly affected parties.” Because social risks can be more nebulous and unpredictable than traditional operating or financial risks—and the extent of potential damage more difficult to gauge—companies may find it especially challenging to anticipate, prepare for and guard against them. Yet, the paper asserts, “so called ‘social risk’ can be just as material as any operating, financial, or strategic disruption.” What can companies and boards do to protect against these types of risk events or mitigate their impact?
Activist CEOs speak out—is there a way to do it better?
It feels like CEOs are stepping into it—the political fray, that is—all the time these days. And recently, there has been a lot of pressure on CEOs to voice their views on political, environmental and social issues. According to the Global Chair of Reputation at Edelman, the expectation that CEOs will be leaders of change is very high. Last year, Edelman’s Trust Barometer showed those expectations at a record high of 65 percent; “[t]his year, the call to action appears to be yet more urgent—a rise by 11 points in the public’s expectation that CEOs will speak up and lead change. Today, some 76 percent of respondents believe CEOs need to step up.” Similarly, in this year’s annual letter to CEOs, BlackRock CEO Laurence Fink focused on the responsibility of corporations to step into the breach created by political dysfunction: “Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues. These issues range from protecting the environment to retirement to gender and racial inequality, among others.” In the absence of action from government, he counsels CEOs, “the world needs your leadership.” (See this PubCo post.) To be sure, a number of CEOs have jumped in to meet this challenge. But this study, “The Double-Edged Sword of CEO Activism,” suggests that, notwithstanding the public perception of widespread CEO activism, the incidence of CEO activism is actually relatively low. And public reaction seems to vary depending on the topic, but can, in some cases, lead to consumer backlash. Is there a better way to handle it? The authors of this article think so.
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