The New Role of CEOs: Speaking Out on Social Issues

CEOs are increasingly speaking up on the important and contentious issues of the day, responding to a redefinition of a CEO’s responsibility to address social issues.

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    The New Role of CEOs: Speaking Out on Social Issues

    The New Role of CEOs: Speaking Out on Social Issues

    Michael Jordan, Hall of Fame basketball player and entrepreneur, once explained his silence on social issues by saying that “Republicans buy shoes, too.” This perspective was common for the time. Most business leaders shied away from taking a stand on political or social issues since it had the risk of alienating customers and investors.

    This perspective is fast growing out-of-date. CEOs are increasingly speaking up on the important and contentious issues of the day, responding to a redefinition of a CEO’s responsibility to address societal issues.

    According to the Edelman Trust Barometer 2020, 92% of employees surveyed agree that it’s important for the CEO to speak out on social issues, with 74% saying that CEOs should take a lead on issues rather than wait for government to take action.1

    Consumers have a similar view; they believe that brands can be a powerful force for change, expect these brands to represent them and solve societal problems, with a 64% majority saying that they use their wallet as means to a vote on companies’ actions on issues important to them.2

    To Thine Ownself Be True

    If business leaders are to take a leadership role on social and political issues, it should be on issues about which they feel a sincere passion and which are aligned with a company’s culture and values.

    Recognizing the risk of upsetting customers, shareholders, workers or investors, CEOs must be careful in how they frame their messaging around such issues. Some CEOs may choose to stay with “safer” issues, such as supporting military veterans, animal welfare, disadvantaged children or health care research.

    The Harvard Business Review suggests that CEOs ask themselves three important questions when developing an approach to speaking out.3

    1. Does the issue align with your company’s strategy? Every company has a defined mission statement and set of values. Speaking out on issues that are not aligned with those can ring false.
    2. Can you meaningfully influence the issue? Without the expertise, resources and willingness to “put your money where your mouth is,” speaking out will only come off as hypocritical or virtue-signaling.
    3. Will your constituencies agree with you speaking out? It is less disruptive when various constituencies are in agreement about speaking out. When there are differences, CEOs may want to weigh the relative importance of each constituent, (e.g., a small customer versus your workforce).

    For now, a CEO’s leadership—or lack thereof—on social and political issues may not be a material input in the investment decision-making process, but the rise of ESG and a different set of expectations from a new generation of investors may eventually change that.

    Sources:

    1. https://www.edelman.com/sites/g/files/aatuss191/files/2020-01/2020%20Edelman%20Trust%20Barometer%20Global%20Report.pdf
    2. https://www.edelman.com/sites/g/files/aatuss191/files/2020-01/2020%20Edelman%20Trust%20Barometer%20Global%20Report.pdf
    3. https://hbr.org/2020/10/when-should-your-company-speak-up-about-a-social-issue

    Please reference disclosures: https://blog.americanportfolios.com/disclosures/

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