Published April 1, 2015
Starbucks CEO Howard Schultz has faced intense criticism for asking his baristas to engage customers in a discussion about race in America. But this kind of “CEO activism” is actually a step forward for corporate involvement in the public square. As researchers who study the intersection between business and public policy, we’ve noticed the rise of CEO activism and its increasing influence – and we see a need both to encourage it and define its limits.
Schultz is already well-known as one of this generation’s CEO activists, a group which includes Goldman Sachs’ Lloyd Blankfein, Duke Energy’s Jim Rogers, and Google’s Eric Schmidt — and other high-ranking corporate leaders like Facebook’s Sheryl Sandberg. Though they have made their mark in the private sector, these men and women are taking public stands on hot button social and environmental issues ranging from gay marriage to climate change to gender equality.
Armed with information on where corporate leaders and their organizations stand, all stakeholders can make informed decisions about who to do business with.
While some CEOs have been celebrated for speaking out, this new wave of activism has also drawn criticism from all sides. Critics from the left have noted that corporations already have too much influence on our political system, and that encouraging these unelected corporate titans to use their ever larger megaphones only further erodes our democracy. Critics from the right tend to be concerned about the content of their message, noting that successful CEO activism often advances left-leaning arguments on issues like gun control and diversity.
All of these critics are missing the bigger picture. Schultz’s efforts and other instances of CEO activism should be commended, whether we agree with their sentiments or not, because they are seeking to exert political influence in an unusually transparent and delimited way. Historically, corporate involvement in the political sphere has consisted of narrow efforts to shape policy to benefit the bottom line, such as lobbying for a favorable regulation. More recent efforts, branded as corporate social responsibility, tend to have dual objectives to create economic and social value simultaneously, such as initiatives to spark clean technology innovation.
But CEO activism is a different animal. These CEOs are intentionally courting controversy by weighing in on contentious issues without any obvious pretense of raising profits. As Schultz said about Starbuck’s “Race Together” initiative, “This is not some marketing or PR exercise. This is to do one thing: use our national footprint and scale for good.”
CEOs who speak out are taking transparent and highly visible stands that their employees, customers, and the media can evaluate and decide how to respond to. The results have been varied. Schultz and Chick-Fil-A’s Dan Cathy (who spoke out opposing gay marriage) have faced withering critiques for their activism, while Facebook’s Sandberg and Goldman Sach’s Blankfein have generally been praised for their public statements supporting gender and marriage equality. Regardless of the response, we view this kind of public CEO activism as a welcome counterpoint to the largely hidden involvement of corporate leaders in shaping policy through the hundreds of millions of dollars they direct to Super PACs, trade associations, and think tanks to promote liberal and conservative causes. Preserving a robust democracy requires that such engagement be visible to shareholders, customers, employees, and citizens more broadly. Armed with information on where corporate leaders and their organizations stand, all stakeholders can make informed decisions about who to do business with.
But, unfettered CEO activism has the potential to cause harm, particularly to employees if they are coerced into promoting the chief executive’s position. The power of this activism is somewhat constrained by the very fact that it relies on media coverage to be effective, and employees or consumers who disagree can often take their labor or purchases elsewhere. We nonetheless need strict rules that prohibit CEOs from requiring their employees to espouse particular social or political views or threatening retaliation for not following the company line in these controversial debates. Even making these activities voluntary, as Schultz seems to have done when he launched his initiative, treads very close to this boundary because of the inevitable risk that baristas who’d prefer to opt out might fear or face sanctions.
As professors, we teach at business schools that encourage our students to transform not just the organizations they lead but also the broader societies in which they operate. Schultz and his fellow CEO activists embody that ideal. But as corporate leaders — whether through activism or channeling money into politics — increasingly seek to exert their influence, their engagement must be both transparent and delimited. Otherwise, they risk corrupting the very democracy that invites their participation.
Aaron Chatterji is an Associate Professor at Duke University and a Visiting Associate Professor at Harvard Business School.
Michael Toffel is an Associate Professor of Business Administration at Harvard Business School.
This content was originally published by the Harvard Business Review: https://hbr.org/2015/03/starbucks-race-together-campaign-and-the-upside-of-ceo-activism