OWP liVe REPORT

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Business is political: Here’s what it means for you

L E A D E R S H I P

CEOs have to be ready to weigh in on divisive political, social and economic issues in a way that is consistent with their own values while meeting the expectations of key stakeholders. CEO activism is on the rise. Whether it’s climate change, Black Lives Matter, LGBTQ rights or gender equality, we’re seeing a growing trend of CEOs speaking out on political and social issues. Today, CEOs are expected to be politicians and diplomats. The emergence of the “Political CEO” raises all sorts of questions. What is the role of business in solving social problems? Should CEOs use their influence to drive societal change? Are CEOs hijacking political issues merely "The expectations of employees and customers are changing, particularly among millennials who expect organizations to take societal stances."

for business goals? Which issues should CEOs speak out on? Is this momentary or part of a broader trend? Political economy expert Professor David Bach sheds light on these questions. CEO political activism is a business leader’s personal and deliberately public expression of a stance on some matter of current social or political debate, directed at the public at large. CEO activism is not about core business or operational performance, such as the CEO of an oil company taking a position on climate change, and is different from corporate social responsibility or nonmarket strategy. What is CEO political activism?

Externally, we are facing major societal challenges such as the COVID-19 pandemic, climate change and race relations. Yet, growing political polarization and gridlock have rendered governments ineffective in many areas, focusing attention on the role business can play instead. And, of course, the instantaneity of social media makes it particularly easy for people to apply pressure on business and for CEOs to respond. At a business level, we’ve seen a shift in the last few years to values-based branding that raises expectations for CEOs to speak out, as well as growing stakeholder orientation from just shareholders to communities at large. “The expectations of employees and customers are changing, particularly among millennials who expect organizations to take societal stances,” said Professor Bach. “This is leading CEOs to weigh in on disputed issues to affirm company values and influence debate on critical

DAVID BACH IMD Professor of Strategy and Political Economy

Why is CEO activism on the rise?

Both changes in the external environment and within business are behind the rise of CEO activism.