By Melissa Manno
Once absent from social and political debates, CEOs have abandoned the traditional norm of staying silent on controversial issues. This new wave of CEO activism has influence over firm stakeholders, a new study claims, and individual political values play a critical role in how employees perceive these actions.
As the world has become increasingly polarized, contentious issues spanning topics such as climate change, gun control, immigration, and LGBTQ rights have been met with responses from corporate leaders who once stayed out of sociopolitical discourse. These actions, however, run the risk of alienating stakeholders with opposing views.
In a new study, Donald Hambrick, Smeal Chaired Professor of Management and Evan Pugh University Professor, and his two colleagues, University of Notre Dame professors Adam Wowak and John Busenbark, examine the impact of CEO activism on employees.
“CEO activism, where CEOs speak out on societal debates that have little direct bearing on near-term company performance, is a relatively recent, rapidly mounting, and controversial phenomenon,” Hambrick says. “Many observers assume that CEO activism accomplishes very little, while some believe that it’s downright risky.”
The researchers theorized that these actions can either “elevate or dampen” employees’ attitudes toward their employer, depending on the alignment of their own preexisting values and the CEO’s publicized stance.
To test their theory, the researchers examined the prominent public letter written in 2016 opposing the North Carolina “bathroom bill,” which prohibited LGBTQ individuals from using public restrooms that correspond with their respective gender identities. The letter of opposition to the legislation was signed by business leaders from companies such as Apple, Google, Twitter, and Facebook.
The study examined 74 public companies whose CEOs signed the letter as well as 251 companies whose CEOs declined an invitation to sign, measuring changes in aggregate employee organizational commitment and support for liberalism from a pre-letter to post-letter period. To do so, the researchers tracked data from prominent company rating websites like Glassdoor and evaluated employees’ donations to the Democratic Party, candidates, and political action committees.
By signing the letter, the CEOs’ actions gave way to stronger endorsement from employees with liberal political alignment and adverse reactions from conservative employee populations.
“The more liberal the employee population, the greater the increase in employee commitment after the CEO signed the letter; and the more conservative the employee population, the greater the decrease in aggregate employee commitment after the CEO signed the letter,” Hambrick says.
Their findings show that when a CEO takes a public stance that resonates with an employee’s prevailing values, the employee responds positively, increases their commitment to the firm, and becomes more supportive of the ideas promoted by the CEO. The study even suggests that this alignment of values could result in greater job satisfaction, loyalty, and identification with the organization.
In many cases, this means speaking out on hot-button issues can enhance a CEO’s credibility and generate feelings of pride within the organization. If the pre-existing values of the employee population match up with the CEO’s actions, CEO activism can contribute to highly effective leadership that benefits shareholders.
This positive association, however, hinges upon employees already possessing values that align with the CEO’s actions. Conversely, when a CEO’s stance conflicts with employees’ values, it can diminish commitment to the firm and adversely impact support for the CEO’s expressed ideology. Seeing leadership actions that run counter to their own values can send a signal to employees that they fit poorly within the company.
The researchers write that CEO activism has the power of “activating employees’ political identities, as the CEO’s public pronouncement serves as a stimulus that heightens the salience of one’s identity as an adherent of liberal (or conservative) values.”
To Hambrick, a remarkable finding of his study is the evidence that CEOs making the decision to sign the letter opposing the bathroom bill had a substantial impact on employees’ support for the Democratic party — thus, having the ability to impact electoral processes.
“The more liberal the employee population, the greater the increase in employee Democratic giving after the CEO signed the letter; and the more conservative the employee population, the less the increase in employee Democratic giving — and the greater the increase in Republican giving — after the letter,” Hambrick said.
While it’s unlikely that CEOs have the power to change employees’ political allegiances through sociopolitical activism, the study asserts that CEOs can propel individuals to become more engaged and informed within their favored political parties.
“CEO activism can enhance employee engagement with the company,” Hambrick said. “Moreover, it has spillover effects on employees’ ideological zeal — essentially affecting employees as citizen-voters.”