CEO Activism: Development and Implications

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Table of Contents

Introduction
Literature Review
Definition
The Issue of CEO Activism
Conclusion
References

Introduction

In the modern world, social issues can become instantly widespread and known to the public due to the reach of mass media and general information availability. Social injustice, war conflicts, presidential elections – various topics can draw attention and resonate in the society, becoming a matter of intensive discussion. As people debate and share their opinions, some points of view stand out among others because of their owners’ social positions. Such is the case with CEO activism – a tendency that registered a notable growth during the last decades, as its implications on society become more impactful. This form of activism, while sharing the fundamental features, differs from traditional activism in terms of possible effects. Consequently, this research will focus on the CEO activism’s development, implications, and comparison to its traditional counterpart to show this practice should be critically assessed when it comes from the people in such high positions.

Literature Review

Several analyses have already been conducted on the topic of CEO activism and its background. Branicki et al. (2020), in their work, argue that this activism is solely connected to CEO’s personal attitude toward social issues while showing how great of an impact it can have in contrast to traditional activism. They describe the character and morality of CEO activism and establish a typology of its forms. On two recent social issues provided as examples, it is empirically showcased that its nature is far more complex and diverse than it might seem at first glance.

Apart from the general social context, CEO activism has a direct influence on the organization and its human resources. Hambrick and Wowak (2021) study the phenomenon from three perspectives that are closely related to the organization – stakeholders, employees, and customers. They developed a stakeholder alignment model of a CEO, which implies the roots of CEO activism come from his personal views but are dependent on his expectations of support from inside the organization. In addition, the activism is compared to other society-oriented firm practices, such as corporate social responsibility and lobbying, in terms of their effect on insiders’ identification (Hambrick and Wowak, 2021). Consequently, a conclusion is drawn about possible CEO intentions and motivations.

In case when CEO does not receive the organization’s full support, the overall workplace outcomes might significantly worsen. Brown et al. (2020) inspected the negative impact of CEO activism on the work environment inside the organization. They study the employees’ reaction to their leaders’ actions as moderating and mediating variables regarding CEO activism while showcasing its possible antecedents, such as CEO power and industry regulation. In addition, they assessed the employees’ potential response to the CEO’s actions, such as turnover and internal or external personal activism.

The company’s internal balance is not the only risk connected to the CEO activism. Such is the claim of Bedendo and Siming (2021) in their research, where they focus on the activism’s political impact. They show that CEO activism has a more significant effect when it is politically connected with the example of business leaders’ group resignation from the roles of President Trump’s advisors (Bedendo & Siming, 2021). In addition, the crucial finding regarding this matter was that managers tend to act more boldly when they are confident of protection by the organization’s corporate governance rules.

Definition

As a relatively recent phenomenon, CEO activism’s definition is yet to be finalized; nevertheless, the differences in definitions are helpful in its more profound understanding. Generally speaking, CEO activism is an expression of a business leader’s position on a social or political debate, with the goal of visually addressing the issue and influencing opinion in a supported direction (Hambrick & Wowak, 2021). This definition explains the purpose of the expression, although it omits a critical concern. In the meantime, Brown et al. (2020) define CEO activism as “corporate leaders speaking out on social and environmental policy issues not directly related to their company’s core business.” The absence of relation to the company’s business is essential since it shows the phenomenon’s reach exceeds the business boundaries. Consequently, the CEO activism’s definition for this paper will include both the business exceedance and the intent to influence public opinion.

The Issue of CEO Activism

To understand the reasons behind CEO activism’s recent emergence, one should take a closer look at the world’s tendencies. Brown et al. (2020) mention that individuals have sorted themselves within partisan divides in recent decades; it has strengthened activism, bias, and anger resulting from these identities. In this context, activism by CEOs has increased as well, with CEOs of large organizations taking stances on various social and political issues outside of their primary business activities. While environmental and social activism is not directly tied to political objectives in and of themselves, the increasing ideological sorting and public support have led to CEO activism naturally becoming political (Bedendo & Siming, 2021). It attracts significant media attention and is generally supported by the general public (Bedendo & Siming, 2021). It also suggests that CEOs can sway public opinion – the majority believe that CEOs should play a leading role in public debate and have a duty to speak out on political and social issues.

The ability to directly influence public opinion can be disturbing with the consideration of possible implications on society. One recent example of CEO activism is an effort by Intel and Salesforce executives to pressure the governor of Georgia to announce his intention to veto a bill that would allow discrimination against same-sex couples (Brown et al., 2020). On the whole, business leaders have recently shared views on various issues, such as LGBT (lesbian, gay, bisexual, transgender) rights, immigration, racial and ethnic tolerance, climate change, and income inequality (Hambrick and Wowak, 2021). In comparison to traditional activism, CEO activism might seem a sign of a genuine ethical practice of corporate leadership.

Both traditional and CEO activism do share similarities; it can be seen in the definition of traditional activism. According to Branicki et al. (2020), social activism is the pleas of nonstate actors to invoke the morality of society on some issues – there is a clear ideology, reasons, and consistency behind social activists. However, the general definition resembles only the tip of the iceberg. Differences become apparent during the closer inspection – notably, with the answers “why,” “what,” “where and when,” “how,” and “so what” in relation to activism (Branicki et al., 2020). In other words, every form of activism has its background (motivation, focus, context, process and tactics, outcome); the same is the case with CEO one.

In terms of motivation, traditional activism is deeply personal most of the time. In contrast, the CEO assumes an entirely different disposition than the regular people, which implies other motives, such as personal and corporate image and consumer and employees expectations (Branicki et al., 2020). The chosen issues to address also vary between traditional and CEO activism. The former can target topics not yet explored by the community, no matter the subject. The latter is mainly a late adopter who chooses already discussed issues of primarily social and environmental direction (Branicki et al., 2020). Geographically, CEO activism is predominantly American; the actions are made in a way that most of the traditional media are able to capture, and the impact is direct and immediate (Branicki et al., 2020). Traditional activism, however, is global; the actions vary from legal and economical to political and sometimes radical, with the possibility of no outcome at all. Overall, the evidence does not support the idea of CEOs as purely moral leaders; on the contrary, it is essential to question their actions in terms of motives and effects behind seemingly moral actions.

Conclusion

A thorough analysis shows the ambiguity behind the phenomenon called CEO activism. It appeared simultaneously with the ideological and political instability in the society. As time passes, its effect on the public opinion on specific social and political issues strengthens to the extent of its ability to sway the authority of political institutions. While it might seem similar to social activism in general, it is crucial to understand the difference in disposition and motivations between CEO activism and its traditional form. In a world where facts and data are invaluable resources, people should not forget to apply critical thinking to everything they see and hear – even when information comes from a well-known and trusted source.

References

Bedendo, M., & Siming, L. (2021). To advocate or not to advocate: Determinants and financial consequences of CEO activism. British Journal of Management, 32(4), 1062-1081.

Branicki, L., Brammer, S., Pullen, A., & Rhodes, C. (2021). The morality of “new” CEO activism.Journal of Business Ethics, 170(2), 269-285.

Brown, L. W., Manegold, J. G., & Marquardt, D. J. (2020). The effects of CEO activism on employees person‐organization ideological misfit: A conceptual model and research agenda. Business and Society Review, 125(1), 119-141.

Hambrick, D. C., & Wowak, A. J. (2021). CEO sociopolitical activism: A stakeholder alignment model. Academy of Management Review, 46(1), 33-59.

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