CEO Activism

CEO activism is when senior leaders of firms speak out on social, political or environmental affairs unrelated to the activities of their business, ranging from climate change and gender equality to LGBTQ+ rights and immigration policies. CEO activism is increasingly being used as a profitability strategy in the corporate world, as more firms attempt to sway economic climate and government legislation to increase prominence in the market.

Unsurprisingly, CEO activism is an objective of most global corporate giants. Notable instances include Tim Cook, Howard Shultz and James Quincey, CEOs of the companies Apple, (formerly) Starbucks and Coca-Cola respectively, advocating for causes such as racial discrimination, world peace and environmental protection. However, how does this impact firms? By publicizing support for issues that impact the lives of people- essentially, potential customers - they can win them over and aggrandize their company. Seems simple enough. Unfortunately, the 'simple' nature of the practice is deceptive.

A Nike advertising campaign in 2018 featured national anthem protest leader and former NFL quarterback Colin Kaepernick with the statement, "Believe in something, even if it means sacrificing everything." The company reported a spike in online sales the following weekend. Interestingly, there was also a temporary fall in Nike's stock price and an overall nosedive in brand favorability. Differing public opinions on CEO activism can explain this occurrence. More than 70% of American customers and employees look favorably on CEOs advocating change; others feel CEOs should boost company performance without offending stakeholders with opposing beliefs or critical views on corporate advocacy.

Nevertheless, many firms still decide to speak up. This decision depends primarily on the intention behind the advocacy - CEOs either support public issues to raise awareness or increase economic leverage. With regards to the latter, the fact of the matter is CEO activism can influence consumer willingness to purchase goods and services if their values align with those linked to the company. Studies show 51% of millennials are more likely to buy from a company with whose views they agree. Any firm aiming to dominate the market will use this to their advantage. As a result, CEO activism majorly contributes to intensifying inter-firm competition. Another point driving corporate activism is a polarized consumer base in terms of world-views. There is less scope for firms to cater to the proportion of consumers occupying common ground, and so remaining neutral is not a viable option.

Because of consumer polarization, making one group of consumers more willing to purchase from a firm by promoting shared beliefs will require upsetting another group of customers (with alternate views). The likely result is them creating widespread negative sentiment about the firm. Although this seems to be a snag for firms looking to make a profit, it is sometimes quite the contrary. Adverse public reactions ironically give way to several opportunities to maximize the value of a company. Polarization differentiates a firm from a strong competitor and makes it stand out in a crowded market, increasing brand visibility. Another possibility resulting from polarization is intentionally antagonizing sceptics. That creates buzz about the company and prompts its most loyal customers to come to its defense.

In an era where corporate and political power is neck and neck and public trust in the government is declining, CEO activism plays a crucial role in fueling the new change-driven generation. However, it is a double-edged sword. In my opinion, it must be brought into play strategically by assessing what, how and when to weigh in on matters, so that profit incentive does not trump staying true to core values or the intention to provide humanitarian or environmental aid.