Building and maintaining a strong corporate reputation in the 21st Century requires a new set of rules and approaches. Depending on the situation, the old rules may still be relevant, but in most occasions they are no longer sufficient. With declining trust in the media and other institutions coupled with the waning power of traditional media, changing stakeholder demographics, values and expectations, you cannot help but incorporate new strategies and techniques that flow with the times.
Smart organizations are now incorporating CEO activism as a powerful strategy to get into the good books of their stakeholders and the general public in order to drive their reputations to new and enviable heights. Unfortunately, many PR professionals are at a loss about what their roles should be.
This article intends to take you through what CEO activism really stands for, its roots and why it is gaining momentum as well as what the PR professionals should do in order to take advantage of its benefits to build and maintain the reputations of their organizations.
What CEO Activism Stands For
CEO activism is all about CEOs and business leaders standing up for, not just their shareholders, but also their employees, customers, partners, the community and the general public on social issues that may affect them negatively.
In his articles, Why CEOs Are Faced with Increasing Reputation Risks, Stephen Hahn-Griffiths defines CEO activism as “a phenomenon where a CEO is expected to take a stand on social or environmental issues that matter to the people and the planet, but are not always related to short-term profits or even shareholders’ expectations.”
The aim of CEO activism is to influence government policies. The traditional way companies accomplish this is through lobbying, but in the case of CEO activism, the CEOs are stepping out into the public domain, risking their careers and the companies they represent in the process, to speak out on social issues that do not have any direct impact on the bottom-line of their businesses.
It is a different kind of issues management campaign. The CEO is doing it himself, not the PR and Communication Department working on his behalf.
With their Twitter handles and in other social networks, they make their positions on social issues known and press for the needed change. Some issue media statements, make media appearances or write opinion articles to make their voices heard. Yet, others use economic actions to drive home their demands.
Great examples of CEO’s economic actions are captured by Aaron K. Chatterji and Michael W. Toffel in their Harvard Business Review article, The New CEO Activist. One of such actions is that of Bill Oesterle, then the CEO of Angie’s List, who cancelled his company’s planned expansion in Indianapolis in response to Indiana’s Religious Freedom Restoration Act (RFRA) which many viewed as being anti-LGBTQ.
Another case is Dan Schulman’s reaction to North Carolina’s bathroom law which is seen to be limiting LGBTQ protection. Using his powers as the CEO of Paypal, he cancelled the company’s plans for a new global operations centre in Charlotte which would have created more than 400 skilled jobs. His reason: “The new law perpetuates discrimination and violates the values and principles that are at the core of Paypal’s mission and culture”, he wrote in a statement.
The Root of the Matter
A cursory look at the history of business reveals that the social initiatives companies undertake at a given point in time are usually determined by the prevailing social issues of the time and the pressure of stakeholders on them to act. The case of CEO activism is not different.
In the 1950s to early 1960s, when stakeholders and the larger society only expected companies to offer contributions to communities in which they operate, businesses embarked on corporate philanthropy or corporate giving in support of social causes. When stakeholders became convinced that businesses had a duty to be responsive to their needs and at the same time operate ethically and in compliance with the laws of the land where they are domiciled, they embraced corporate social responsibility as the preferred social initiative. This responsiveness era began in 1974, according to Archie B. Carroll in her work. A History of Corporate Social Responsibility published in researchgate.net.
The concerns of climate change brought new societal demands and expectations from companies’ stakeholders. Businesses must work hard to remain a going concern, make profits to meet the needs of their investors and be able to take care of the planet and its people. This is when the Triple Bottom-line approach and Sustainability took centre stage. Several other social initiatives have come and gone. But today, we are in the age of social purpose and CEO activism, which have evolved in response to a new set of demands and expectations from businesses by their stakeholders and society at large.
As public confidence in government sinks to an all time low, people are looking up to businesses and their CEOs to lead the desired change for a better society. They want businesses to represent and stand up for those values that hold society together. And they expect their CEOs to be the voices for their collective aspirations. They expect them to speak out on social issues, such as: privacy and personal data protection, equal pay in the workplace, sexual harassment, gender equality, the environment and all other hot-button issues that violate the dignity of the human being and threaten our common good.
The social pressure for CEOs to speak up and contribute to addressing these issues is increasing by the day. Edelman Trust Barometer 2018, a yearly global study conducted by Edelman Intelligence, revealed that 65% of respondents said they expected CEOs to speak up and lead the desired change in our society. And in 2019 the annual study notes that there are “heightened expectations on CEOs to step up into the trust vacuum left by government.” They want CEOs to do more, and quickly too, “to invoke a sense of certainty, reassurance and confidence with employees as well as the general public.”
This increasing demand for CEO activism echoes the thoughts expressed by Earnest Elmo Calkins, in his 1928 book, Business as Civilizer, that the work that religion, government and war have failed to do must be done by business. After all, as he rightly argued, the efficiency of business is enough evidence that the “despised businessman” can be entrusted to do what government and other institutions have failed to do.
Not and American Phenomenon
It is erroneous to think that CEO activism has only taken hold in America just because CEOs like Tim Cook of Apple, Howard Schultz of Starbucks, Marc Benioff of Salesforce, and others have been commanding tremendous media attention in recent times for speaking out and standing up on social issues they believe in.
A survey commissioned by Weber Shandwick and conducted by KRC Research, which surveyed 500 corporate communication and marketing executives in the US, UK and China, reveals that CEO activism is a growing trend in these countries. six in ten Corporate Communication and Marketing Executives expect more CEOs to speak out and take a stand on hotly debated current issues in the next few years.
Another survey of 3,000 people conducted by the Committee for Economic Development of Australia has found that at least four in five respondents believe corporate leaders should offer their opinions on issues relating directly to their operations and also on broader issues.
CEO activism is happening in Japan. According to a report in Japan Times, Yoshihisa Aono, the CEO of Cybozu, a major software company is taking the lead. He has been campaigning to ensure that government amends the Family Register-Law to allow married couples retain separate surnames. Under the current law, married couples are legally required to share the same surname. And in most cases, women end up with their husbands’ surnames. Like many people in Japan, he thinks wives should keep their maiden names for professional reasons. And he has taken the government to court on the matter.
Africa has not been left out. Mo Ibrahim, a Sudanese business leader, is a good example. He has been speaking out against corruption by political leaders in Africa for years. And he is taking action in that direction too, by establishing the Ibrahim Prize, which is awarded to former African heads of state and government who did well during their times in office.
The Link Between CEO Activism and Corporate Reputation
A CEO’s reputation shapes the reputation of an organization for better or for worse. Today, building and maintaining a strong corporate reputation goes far beyond media coverage of an organization and its products or services. It starts with the CEO, who is seen to be the face of the organization.
As stakeholders, especially millennials, are demanding that companies look beyond profits and work for the stability and advancement of the society as well, CEO’s actions are constantly under scrutiny for ethical and transparent behaviours and for his stand on current social issues. CEOs who advocate business and societal gains are the ones whose reputations are rated highly, especially when the social issues they stand up for align with their companies’ competencies and values. What that means is that CEO activism done in the right way has a positive impact on a CEO’s reputation.
Interestingly, a research report by Weber Shandwick, The CEO Reputation Premium: Gaining Advantage in the Engagement Era, reveals that the reputation of a company’s leader is the fourth most important factor in determining the reputation of a company as a whole, topped only by the quality of goods and services, financial performance and the industry a company operates.
Academic Society For Management And Communication reports that a study conducted by Joachim Schwalbach at the Humboldt University, Berlin, Germany, on the reputation of CEOs and companies, showed that the CEO’s reputation has a much stronger impact on the company’s reputation than expected, and in a few cases, up to 70%.
Several other studies have shown that people want to work at or buy more from companies with CEO activists. This has prompted CEO activism to become a new role for the CEO and a big part of a broader PR strategy to enhance the reputation of a company.
Are There Failed Playbooks to Learn From?
The best lessons in the use of CEO activism as a reputation strategy is best drawn from companies that have had their fingers burnt in the process. CEO activism is a double-edged sword. You need a playbook that is clear on what your specific situation is, what the needs or demands of your stakeholders are as well as the specific approach and tactics that are capable of yielding the right amount of dividends to enhance your company’s reputation capital. A faulty playbook is certain to do your company’s reputation more harm than good.
The latter was the case with Starbucks’ “Race Together” campaign in 2015, which was launched in response to incessant killings of black people by policemen in the United States of America. Starbucks’ baristas were instructed to write the phrase “Race Together” on cups used to serve customers, all in an effort to spark discussions on racial inequality in the country. In his book, From the Ground Up, Howard Schultz, the CEO of the company at the time of the campaign, revealed that it was his decision to have the baristas do that despite internal concerns about the approach.
The campaign attracted widespread condemnation and ridicule. The company was accused of trying to exploit a moment of national crisis to sell its products and promote its brand. The backlash on social media was so great that the company’s Senior Vice President of Global Communication, Corey duBrowa had to delete his twitter account because of the deluge of negative messages and personal attacks he received from concerned stakeholders and members of the public.
Why would a campaign with so much good intention suffer such a fate? The answer is not far-fetched. The key reason is that Starbucks lacked the moral authority to speak out on the issue of racial inequality. Only two out of the 19 members of its leadership team were blacks. Its shortcomings on the issue of diversity and inclusion were obvious. You cannot speak out on an issue for which you are guilty. It shows that you are not authentic and, therefore, cannot be trusted. Howard Schultz admitted in the book that they made mistakes in the campaign.
How to Hit the Bull’s Eye
Your goal is to use CEO activism to enhance the reputation of your company. You can take the following cautious steps:
- Begin With A Committee
Set up a committee with members drawn from legal, PR and other relevant departments. Their responsibility should be to vet CEO’s message on matters of activism for political, cultural and situational correctness. Reputation risk is regarded as a meta-risk that must not be left in the hands of the PR and Communication department alone. The CEO must not be allowed to be a lone wolf with powers to tweet or say anything whenever he or she likes. Legal and company board approvals are necessary to prevent an ugly situation such as that witnessed by Starbucks.
The committee should also work with the CEO to determine the issue or issues he or she should speak out on and stand up for. Such issues must connect with the mission and values of the company in order to pass authenticity test in the eyes of company stakeholders and the general public. They should not be issues that end up washing their dirty linen in the public.
- Train the CEO
What the CEO says and how he says it can have tremendous impact on the reputation of the company. Most CEOs are good at speaking out on issues affecting business in general, such as trade and tax policies, but social issues are a brand new domain for them. It is the business of the PR professionals to research extensively on the social issue or issues selected for the CEO to speak on, train him on the different angles to the issue, train him on how to use the channels selected for his delivery and on how to articulate his points.
- Brief and Train Employees on the Issues
Assess their reactions. Whether they will support the campaign depends on their perception of the effects the CEO’s stance would have on them. Work hard to win their support by listening to their concerns and meeting their needs.
- Understand the Position of Other Stakeholders
Do a survey to know where your customers, investors, suppliers and other stakeholders stand on the issue or issues you have decided to take a stand on. Know their expectations. Let them know why you are venturing into CEO activism and how their expectations will be met.
- Train members of the leadership team on CEO activism and on the issues you have chosen
Train them on how to support the CEO’s position in order to ensure the company speaks with one voice.
- Monitor and analyze the reactions of your audience in real time
Tweak the campaign strategy and tactics to meet their expectations so that you reap the desired reputation benefits.
- Assess your risks and vulnerabilities and prepare in advance for them
Ensure your crisis management plan captures crisis scenarios from CEO activism. Do not fail to conduct crisis drills covering these scenarios at least twice a year. This sharpens the response of your crisis management team or CEO activism committee in the event of any backlash.
CEO activism has come to stay. In this age and time, neutrality of the CEO on pressing social issues is regarded as evil. The CEO is expected to be a force that shapes public policies for the good of society. His voice and actions must have the human touch, connect with the mission of his company, and echo the aspirations and value of its stakeholders. The business of the PR professional is to help him achieve these objectives in order to build and maintain the desired reputation for his organization.
.Vincent Utere is a Public Relations Trainer and Consultant. He is the CEO of Vinakom Associates.