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SHOULD A CEO BE POLITICAL?
corporate values and a purpose beyond profit maximisation. Second, societal expectations towards businesses and corporate leaders have changed. The Edelman Trust Barometer, for example, shows that 64% of people have already chosen, avoided or boycotted a brand based on its stance in relation to societal issues and that 56% do not respect CEOs that remain silent on crucial issues.
have not only supported the Black Lives Matter movement with a public statement, but also committed considerable resources and concrete actions to support the drive for sociopolitical change. For example, in support of the Black Lives Matter movement, Nike’s CEO, John Donahoe, announced a $40 million USD commitment to support black communities, pledged to adjust Nike’s compensation system to increase pay equity, and released the campaign ‘For Once, Don’t Do It’ to raise awareness of structural racism in the US and promote sociopolitical change. Half of survey participants (54%) reported that they find it appropriate to position themselves publicly against political extremism, but only 8% consider it appropriate to comment on specific parties or politicians. An explanation for this can be that extremism – or ‘populism’, which is named as a key threat among European business leaders in PwC’s 2020 CEO survey – are not purely political issues, but societal issues. In addition, the implication is that companies and CEOs may not have a political responsibility but rather a social responsibility, underpinning the shift in management from shareholder primacy to stakeholder capitalism and the role of business in society. These findings, combined with increasing expectation for businesses and brands to communicate what they stand for and deliver on their promises, suggest that there is more of a need for Business Schools to include teaching and discussion on topics such as corporate governance shifting from shareholder primacy to stakeholder capitalism, values-orien ted and purpose-driven leadership, and the role of sustainability and trust. Stakeholder expectations have evolved beyond performance management. Hence, it is important to know one’s values and lead with integrity. Authenticity is also key, as insincere attempts and inconsistencies are quickly exposed in the digital age and can have immediate consequences for both a leader and their business. Christoph Cewe is an MSc in management graduate of ESMT Berlin.
'Societal expectations towards businesses and corporate leaders have changed'
CEOs are increasingly outspoken about environmental, social and political issues which are not directly related to their business. This ‘CEO activism’ phenomenon is most prevalent in the US but is also a growing trend in Europe as well as in Canada and Asia. What are the associated effects of corporate leaders weighing in on politically charged issues? Previous research suggests that CEO activism can positively impact consumer buying behaviour, employer attractiveness and investors’ decision making. On the other hand, studies also affirm that it can harm company performance, lead to boycotts and increase employee turnover. Hence, CEO activism is often called the ‘double-edged sword’. However, remaining neutral can also be difficult in an ever-more polarised world. Another study finds that not speaking up can lead to criticism and declining sales. Coinbase CEO Brian Armstrong’s announcement to not engage in political activity unrelated to its core business, for example, led to 5% of total staff resigning. Among 40 European CEOs of large, predominantly multinational, corporations surveyed as part of research for my master’s thesis at ESMT, 77.5% believe business leaders should take a stand on political issues, and 62.5% state that they are (very) likely to express themselves in sociopolitical terms. But what are the rationales that drive CEOs to take a political stand? First, the management paradigm is changing. Companies increasingly take on social responsibility and commit to
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Contributing to crucial social issues and company performance advantages are not mutually exclusive. Practical examples include Merck CEO, Kenneth Frazier, who resigned in 2017 from the US presidential advisory council in protest of Donald Trump’s response to white supremacist violence in Charlottesville. Frazier says businesses have an opportunity to contribute to crucial societal issues and that reinforcing company values by taking sociopolitical positions helps Merck to compete in attracting the best talent, which ultimately contributes to the company’s overall success and provides them with a competitive advantage. In my research, the most frequently reported rationales for taking a public stance were to contribute to society (78%) and to express corporate values (72%). Meanwhile, environmental (97%), economic (87%), and social (82%) issues were cited as the most appropriate subjects on which to take a stand. This was followed by intercountry collaborations (77%), for example a stronger and more unified Europe, and emergency states (72%), such as the Covid-19 pandemic. Taking a public stance can be understood as a way of executing a defined corporate purpose. For example, many business leaders
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