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    Leadership

    When the CEO should take a stance

    by David Bach Published 17 April 2023 in Leadership • 8 min read

    The boundary between business and politics is increasingly blurred. CEOs no longer have the luxury of staying silent on hot topics and waiting to see how things play out – they are expected to express an opinion. David Bach, Rio Tinto Chair for Stakeholder Engagement and Professor of Strategy and Political Economy at IMD, explains how leaders can speak up effectively.

     

    When it comes to politics, the traditional advice to CEOs is unequivocal: unless it is a topic directly relevant to your business, stay out of it. The leader of a pharmaceutical company might have voiced an opinion on patent regulation or R&D subsidies but would have been firmly counselled to stay away from questions around race, gender equity, immigration, and any other potentially sensitive areas.  

    This conservative line of advice no longer applies. CEOs are increasingly expected to take a stance on a broad range of political questions – often questions that seem to not have any direct bearing on their business. Today’s leaders need to have a firm grasp of what is now required of them in terms of public statements, including when and how to comment on a given issue.   

    Looking to the CEO for answers 

    There are good reasons why CEOs have been reluctant to address political issues publicly. For one, most have attained the CEO position owing to their capability in the business arena, rather than a flair for public speaking or political debate. When many of today’s senior leaders were working their way up the career ladder, such skills would never have been expected of them, nor would anyone have been particularly interested in the political opinions of business leaders. Consequently, many haven’t developed the requisite capabilities.  

    CEOs are increasingly expected to take a stance on a broad range of political questions.

     The expectations of CEOs in this regard have changed for several reasons. The core change is that companies’ two most important stakeholder groups – employees and customers – increasingly expect the companies with which they associate, whether by working for them or buying their products and services, to take a stance on issues they care about.  

    This increased level of concern reflects a wider shift in how society regards business. Companies are seen as exerting influence where governments are increasingly perceived as weak, lacking the financial or executive clout to initiate real change. The 2023 edition of the Edelman Trust Barometer states that business is now “the only institution seen as competent and ethical,” and finds that CEOs are expected to take a stand º particularly on the treatment of employees, climate change, and discrimination.   

    People also recognize that companies frequently have global reach and can extend their influence across borders, even in countries where governments are stymied in their ability to deliver change. Moreover, business is solutions-oriented; people want their problems solved and will take help from the source most able to deliver.  

    It may be the case that CEOs neither seek nor welcome this new responsibility. Nevertheless, the shift in social emphasis means that the cost of not speaking out on key issues now frequently outweighs the potential risks of doing so.  

    Identifying the issues on which to focus  

    The first challenge for CEOs is to identify the areas about which they should speak out. It is much easier to see the critical areas with hindsight but, by then, employees will have already become disengaged and customers may have begun to take their business to competitors whose values they perceive to be more closely aligned with their own.  

    “CEOs should, firstly, recognize that speaking out is rarely an effort of bridge-building.”
    - David Bach

    To avoid that fate, there are three crucial questions CEOs should consider when assessing any given issue: 

    1. Is the issue relevant to the business? 
    2. Do the company’s articulated values compel you to speak out? 
    3. Does the issue resonate with your personal values? 

    The business case should be perceived broadly here. For example, a typical business driver is the need to attract and retain talent. Company values might include fairness, respect, and equity. The CEO might (ought to, in fact) care deeply about inclusion and diversity. In that position, they might decide to speak out on immigration, or LGBTQ+ rights, for example – as Apple’s Tim Cook, for example, has done repeatedly. Ultimately, when all three of these conditions are satisfied, CEOs should look to speak out. 

    Managing divisive issues 

    The risk of alienating stakeholders has long been recognized as a key issue that requires sensitive handling by business management. As former basketball star Michael Jordan once observed, “Republicans buy sneakers, too.” It is why so many CEOs tend toward staying neutral, but neutrality is no solution: being neutral is also taking a position. Trying to avoid displeasing one group usually ends up disappointing everybody.  

    CEOs should, firstly, recognize that speaking out is rarely an effort of bridge-building. Rather, it is about signaling. Stakeholders want CEOs to ally themselves with a particular set of opinions and values which they see as integral to their own identities as employees or customers. This necessarily involves opposing those who hold conflicting opinions. 

    Secondly, it is crucial to recognize public issues that appear to be highly socially divisive but, in reality, are not. Abortion is an example of such an issue in the US. While clearly a highly politically charged issue, research suggests that a large majority of US citizens believe abortion should be legal in some form. Similar dynamics in public opinion exist in relation to background checks for guns, and action on climate change. CEOs should not confuse the loudest voices with those of the majority.  

    micheal jordan
    Former basketball star Michael Jordan once observed, “Republicans buy sneakers, too”

    In a US tech company, for example, the majority of employees might be younger, well-educated, generally urban, perhaps coastal. That sort of employee profile is associated with support for transgender rights, to take one hot topic. If that business’s CEO were to speak out on that issue, they could certainly expect criticism from certain news outlets. However, the business’s workforce would support such a public stand from their leader and, as a result, would likely feel galvanized as a company. So, when assessed in context, “risky” stances may actually be relatively safe positions to take, with a net positive effect, even if a few customers or employees are not on board. 

    Calibrating communications to circumstances 

    Companies can minimize the risk of alienating audiences by considering their channels and modes of communication and thereby avoiding a confrontational or judgmental approach. Take Walmart’s decision to ensure all its employees continue to receive access to abortion, even in states where it is now illegal. The company’s communications have been carefully managed to avoid it appearing to speak from a soapbox and pronouncing on the political elements of the issue. Instead, Walmart has focused on its responsibility for ensuring its employees have equality of access to healthcare. Such a calm, measured approach mitigates downside risk. 

    For other issues – or where it is important that the particular stance is more widely recognized outside of the company – other channels may be appropriate, whether a newspaper op ed, tweet, or comments made to a reporter. The most important aspect, of course, is to have consistency across communications and to ensure that company practice is aligned with the principles it is professing. If, for example, a CEO tells a reporter, “We absolutely care about empowering historically marginalized communities,” but the company has a leadership team that is entirely white and male, the optics are not good.  

    Taking an effective stance

    How, then, can CEOs maximize their chances of achieving the desired outcomes when they do speak out? 

    Focus on issues that are relevant to the business, allow you to showcase its values, and align with your own priorities as CEO. Resist being drawn into debates where any of these conditions do not apply. Recognize that speaking out represents an opportunity to get closer to critical stakeholders: effective use of a public voice can help CEOs engage employees and customers in new ways. 

    To avoid being caught off guard by unexpected challenges, invest time in understanding the issues that affect your workforce and customers, and how those groups feel about these issues. Use events such as town hall meetings to gather and explore current employee opinions.

    Effective intervention arises from careful thought about when and how to take a stance. Starbucks was pilloried in the media for its 2015 Race Together initiative. Had CEO Howard Schultz spent a little time in one of his stores, he might have decided that the queue for a coffee was not the ideal place to attempt a nuanced discussion of the politics of inclusion. 

    It is smart to have a sense of how your position will play out before you speak out. Read current media opinion and public polls, and consider how they relate to your employee and customer base – existing and potential. CEOs should also be aware that, even if they do not intend to take a stance on political issues, politics may still come looking for them. Disney’s dispute with Florida Governor Ron DeSantis arose when the company objected to legislation banning classroom teaching on sexual orientation and gender identity, but the fight was escalated by the politician.

    Taking a stance on political issues is unlikely to be without drawbacks. There is always the risk of a backlash, whether led by consumers or the media. While this may be most obvious in the US, the same dynamic can be observed in countries worldwide. Nevertheless, with employee and stakeholder expectations rising, the potential cost of perceived indifference is now too great for the CEO to remain silent.  

    Authors

    David Bach

    David Bach

    Professor of Strategy and Political Economy, and Dean of Innovation and Programs. IMD

    An expert in strategy and political economy, David Bach is Professor of Strategy and Political Economy, Rio Tinto Chair in Stakeholder Engagement, and Dean of Innovation and Programs. He will assume the Presidency of IMD on 1 September 2024. He is also the Program Director of IMD’s Shaping the Business Environment for Sustainability program. Through his award-winning teaching and writing, Bach helps managers and senior executives develop a strategic lens for the nexus of business and politics.

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