By Rana Foroohar on Financial Times
Each era seems to have its CEO stereotype. The 1990s were the time of the celebrity CEO (remember Jean-Marie Messier?). After the dot com bust of the early 2000s, and particularly following the financial crisis of 2008, CEOs that kept their jobs tended to also keep their heads below the parapet (even the higher profile CEOs of the era, like GE’s Jeff Immelt, for example, were much less flamboyant than their predecessors).
But in the years that have followed, as governments have become ever more debt ridden and less inclined to respond to the crises of the day, a new kind of CEO has emerged. Call him (or much less frequently, her) the “activist chief executive.”
Such industry titans are willing to take an unusually public stand. Think Merck CEO Kenneth Frazier’s resignation from President Trump’s American Manufacturing Council in response to the president’s lame handling of racial violence in Charlottesville. Or Unilever chief Paul Polman leading a charge around climate change as the US government was pulling out of the Paris Accord. Or any number of corporate leaders, from Apple’s Tim Cook to Salesforce’s Marc Benioff, threatening to move business out of US states that do not respect LGBT rights.
Many of these activist CEOs and their brethren will be in force at Davos this week, where they’ll be plenty of talk about everything from #me-too (note the WEF’s own efforts on this score, with an entirely female chair board for this year’s event), to social justice and the environment, to populism and the continued pushback against the neoliberal globalisation agenda epitomised by the forum. Of course, discontent about such issues is a big reason that corporate leaders are getting involved. Their Millennial workforces, their increasingly “woke” customers, the media and governments themselves are all putting more and more pressure on them to take a stand, particularly at a time when the private sector holds so much wealth and power relative to governments (note New York City mayor Bill de Blasio’s new legal suit to try and force the world’s largest energy firms to pay for the impact of climate change in New York City). But what does their talk actually amount to? Are these corporate leaders effecting real change around the various social and economic issues they take on? And should they be “activists” to begin with?
All this depends very much on the issue itself, and who you talk to. For starters, activism goes down a lot better with liberals. A Global Strategy Group study from 2016 that looked at various corporate actions from Pfizer signing the UN Climate accord to McDonald’s raising minimum wages to Delta banning the transport of big game hunting trophies showed that Democrats were wildly more enthusiastic about corporate activism (overt activism by CEOs on the right of the political spectrum is much more limited, the only memorable recent example being Hobby Lobby’s fight against mandatory birth control coverage by corporate insurance, and Chick-fil-A CEO’s opposition of same-sex marriage).
Academics Aaron K Chatterji and Michael W Toffel, who summarised their research around the topic of corporate activism in a recent piece in the Harvard Business Review found that at Apple, Mr Cook’s fight against anti-LGBT legislation in Indiana made liberals much more likely to want to buy Apple products, but didn’t make opponents of his statements any less likely to buy them.
Yet as Starbucks’ Howard Schultz knows all too well, it’s quite possible to mis-step when you take a stand. His calls for baristas to strike up conversations about race with customers following riots after the shooting of a black youth in Ferguson Missouri were widely panned. “The social and political environment right now is very turbulent and its easy for a CEO who speaks up to feel like a moving target,” says Harvard Business School professor Willy Shih.
Which may be one reason that when a single chief executive is brave enough to take a stand, you see many following behind. Ken Frazier’s statement resulted in mass resignations from the Trump business councils, and Benioff’s threat to pull jobs from Indiana became a call to action for multiple chiefs. “Fear stops a lot of CEOs from stepping forward,” says Benioff. “They’re under a lot of constraints from their boards, and their shareholders and investors and they are walking on eggshells. But in some cases, if you can unshackle them, they’ll walk through the door. That was my big lesson after my tweet. All [the CEOs] just wanted to know that someone had their back.”
Being an activist is easier if you are a big personality founder (like Benioff or Schultz), and it certainly helps to have a strong investor story before stepping into the fray on any social issues. Unless you can guarantee the Street that your earnings and share price are going up, it’s unlikely that you’ll be successful prioritising anything beyond that. It’s also telling that fewer CEOs have as explicitly taken on key economic issues like rising inequality, flat wages, money in politics or the effects of monopoly power in the same way they’ve tackled social issues. To be fair, numerous big and small companies alike are getting involved in the education and training space (IBM’s widely Pitch 6-year high school/community colleges and the various credentialing programs being done by businesses from Cisco to JPMorgan and Dow are cases in point). But training up a 21st century workforce is a key business issue; nothing too controversial about that. And raising minimum wages (a la Walmart’s recent announcement) is more about responding to labour market dynamics and increasing productivity than corporate activism.
In any case, there are plenty who believe that whether or not the public sector is in disarray, the business of business really should be business, and not much more. Morris Pearl, a former managing director for BlackRock and the head of the board of the Patriotic Millionaires, a group of high net worth individuals who’ve argued against tax cuts for the wealthy, says “We have a really good system for making the changes that we as a society feel are important. It’s called voting. I don’t think it’s the job of business to decide what issues to take on. It’s the job of the public to decide that, and then to tell business how to act.”
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