Writer and Editor, Korn Ferry Institute
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By: Annamarya Scaccia
It’s the beginning of November, and in the high school gym or the local library, they will be there with everyone else, waiting in line. Then they’ll be casting their vote for the next US president and watching the returns that night. But good luck ever finding out their favorite or figuring out the hue of their political party.
CEOs today face increasing pressure to be mouthpieces on social issues. Employees, customers, and even shareholders now demand to know where they stand on critical cultural moments and are not afraid to use their voices—and their wallets—to take their leaders to task. But while the activist CEO has become the leader du jour, experts say politics remains the third rail. “CEOs are sensitive to the diversity of political views” among their stakeholders, says David Scheffer, the author of The Sit Room: In the Theater of War and Peace. “It is a much safer bet to speak out on social issues in a nonpartisan way.”
Indeed, experts agree that politics is too divisive for CEOs to traverse and not potentially hurt their business. But some say that even objectively commenting on cultural matters can have revenue and cost implications. After all, some companies in recent memory have seen their stocks tank temporarily for taking a stand on divisive social issues. “The CEO personifies the company,” says David Larcker, director of the Corporate Governance Research Initiative at the Stanford Graduate School of Business. “If the CEO comes out with a very strong opinion, it’s going to have some ramifications.”
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For his part, Scheffer says there’s little evidence to suggest that constructive CEO engagement on public policy issues has a direct negative effect on the company’s bottom line. Although a few leaders have felt blowback for the opinions they’ve espoused publicly, the impact has been mostly neutral, according to a study Scheffer coauthored with foreign legal advisor Caroline Kaeb. Instead, in today’s climate, CEOs who remain silent on issues important to their stakeholders will likely find themselves in hot water. “It’s not the risk of engaging,” Scheffer says. “It’s the risk of not engaging.”
In fact, according to one recent study, 92 percent of employees expect their CEOs to comment on a variety of social issues, from income inequality to climate change. (“Politics,” however, was not on the list.) In another report, nearly two-thirds of global customers said when they make purchasing decisions, a brand’s position on important issues matters. “In the past, most CEOs would stay away from social causes because it wasn’t directly related to business. However, many are now realizing that because of how interconnected the world is, they need to weigh in,” says Nels Olson, vice chairman and coleader of Korn Ferry’s Board and CEO Services practice and global leader of the firm’s Government Affairs practice.
Believe it or not, before the Business Roundtable declared last year that shareholder value is no longer the North Star of corporations, CEOs had been here before. The end of World War II saw the rise of the socially responsible CEO, focused on reinvesting profits in their workforce and their communities. That meant higher incomes, greater job security, and public-private partnerships that improved social conditions and supported sustainable economic growth. Then the late 1970s rolled around, and with it a so-called Jack Welch generation of leaders focused solely on shareholder returns. “The role of CEO has gone through a lot of transformation,” says Jeff Sonnenfeld, founder, president, and CEO of the Chief Executive Leadership Institute at the Yale School of Management. “But for decades, [social impact] has been a part of the fabric of the CEO’s position.”
That said, this does take some maneuvering; experts say CEOs shouldn’t play fast and loose with their comments, nor should they comment on every issue. Rather, leaders must determine which defining cultural moments matter most to their brand and their stakeholders, while also calculating the necessary amount of risk they’re willing to face by taking a stand. Then CEOs need to stay true to that position, in both their and their company’s actions; otherwise they’ll fall into the hypocrisy trap. “It takes a high degree of sophistication, awareness, and political savvy to craft the right message, and CEOs need to embody empathetic leadership to navigate what can be some tricky waters,” Olson says.
Ultimately, some believe that while CEOs may not ever be political entities, they may need to pull a lot more double duty—serving as heads of multibillion-dollar companies and societal leaders who step in when governments aren’t compromising. As Scheffer puts it, “These are perilous times, and that includes peril in politics.”