What’s trending? The rise of CEO activism5 min read . Updated: 12 Aug 2019, 11:19 PM IST
More company heads are breaking from tradition and taking a stand on social issues online, a move making them popular among millennials as well as helping them build brand value
Kiran Mazumdar-Shaw can be quite upfront about issues close to her heart. In a tweet in late July, the chairperson and managing director of biotechnology company Biocon asked finance minister Nirmala Sitharaman to clarify if the tax rebate she announced would be on corporate tax too. The same month, she tweeted on Nike’s innovative tribute to Chandrayaan 2 and congratulated women scientists in space science.
“I took to social media because I realized that these platforms enable you to share your views with the world at large and shape opinions as well as engage and influence people and policy in the right direction," says Shaw, who often tweets about rampant urban development in Bengaluru, social hypocrisy, consumer awareness initiatives and gender issues in science. The calculator at online influencer marketing agency Webfluential estimates each of Shaw’s tweet to be worth $4,380-$5,355 (around ₹3-4 lakh). With 1.4 million followers on Twitter and a LinkedIn profile, which was in India’s Power Profiles 2018, that’s a lot of influence.
“Business leaders have a much larger role to play in shaping the ecosystem, beyond just the corporate sector," insists Shaw. “I enjoy sharing my opinions on a variety of global and local issues and play the role of a responsible citizen," she says.
Like Shaw, other business leaders too are coming out of the boardroom into the social space, talking about social and cultural issues. A working paper written by Aaron K. Chatterji, professor of Duke University, and Michael W. Toffel, professor at Harvard Business School, updated in April, this year, has a word for this phenomenon: “CEO Activism".
This trend of leaders speaking out on social and environmental policy issues not directly related to their company’s core business can influence not only public opinions about government policies but also consumer attitudes about the CEO’s company, say the authors.
Worldwide, the trend has caught on. In May 2018, PayPal’s CEO Dan Schulman took a stand against an American law firm that required people to use the bathrooms that corresponded with the gender on their birth certificate. The same year, over 100 CEOs co-signed an amicus brief to overturn US President Donald Trump’s 2017 executive order to ban citizens from seven Muslim countries from entering the US.
Good for business
For public figures like CEOs, social media offers a route to directly engage with prospective consumers. According to a 2018 survey by the Stanford University, CEO activism resulted in people spending 91% more on a product or service the CEO represented. When researchers asked people if CEOs of large companies should use their position and potential influence to advocate social, environmental or political issues, 71% of millennials agreed.
“Accessibility and direct engagement with authenticity is something that consumers, including citizens as consumers of government services, increasingly demand from a leader," says Amitabh Kant, CEO, National Institution for Transforming India (NITI) Aayog.
“CEOs are expected to take a stand on individual issues. The hope is that years of experience has given us good judgment to make the right decisions," Kant says, adding that personal social media accounts of leaders are like their “real-time autobiography" and can help strengthen the brand of the company they represent if they reflect personal values.
His posts on Twitter and Instagram talk about issues close to his heart, disruptive technology, art and culture. The causes he stands up for, in a lot of ways, reflect the scale and ambition of initiatives that NITI Aayog is taking up. “Personal brands of leaders and organizations brands help reinforce one another," he says.
Increase in loyalty
Other than impact on the company’s consumers, activism by a leader can also lead to an increase in loyalty among employees, especially millennials. A 2017 study of over 1,000 people, aged 18 and above, by public relations company Weber Shandwick and KRC Research agency shows that 44% millennials say they would be more loyal to their organization if their CEO took a public position on a current issue. The same report also found that 65% people in India believe company leaders should take a stand and express their opinions on issues like race, gender, immigration or the environment.
“Leaders today need to inspire their employees and their consumers by taking a stand on issues of global importance," says Vineet Nayar, author of Employees First, Customers Second and former CEO of HCL Technologies.
As a leader, Nayar developed a reputation for speaking out against business practices of letting go of employees within the IT industry because of discrimination or to save costs, and strict company hierarchies that led to suffocation of innovation. “Millennials want to be associated with ideas and people, who demonstrate a concern for humanity, and want to work with organizations that have a point of view on critical matters that impact humanity and are socially responsible and responsive," he says.
Caution on excess
Though the idea of CEO activism is usually positive for both the brand and the leader in question, it could also become a detriment.
Chatterji and Toffel’s study found that CEO activism is a double-edged sword that can promote or erode purchasing intent, depending on the audience and the cause. In June 2018, Airbnb followed up on its CEO Brian Chesky’s political opinion and took a stand on a political issue by removing 200 listings from Israeli settlements in the West Bank. The step caused Airbnb not only Israeli customers, but also multiple lawsuits in the US over the alleged discrimination.
In case of issues on religion and politics, people prefer that corporate leaders do not talk about them, according to the Stanford study. It found that in case a customer disagreed with the CEO over an environmental, social, or political issue, 69% would stop using the service of the company.
David F. Larcker, professor, Standford Graduate School of Business, says in a press release, “The cost of CEO activism might be higher than many CEOs or companies realize."
Kant believes it’s a thin line and a leader should maintain their own code of conduct when talking about issues close to their hearts. “I feel it’s my responsibility to this country and its constitution to maintain a balance in what I say," he says.
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