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Between a Rock and a Hard Place: The Dilemma of CEOs Responding to Social Activists
May 30, 2024 ·
Contributed by: Izabela Shubair, DeGroote Contributor
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Standing in the ice cream aisle, you consider all the options. One brand catches your eye. The company’s CEOs have made their stance on social issues clear, and it aligns with your views. You grab the tub of ice cream without hesitation. You are not alone. According to Sprout Social research, two-thirds (66 per cent) of people surveyed feel it’s important for brands to take a public stance on leading social and political issues.
However, a CEO’s role in shaping societal issue discourse is not just a matter of influence. It’s a matter of consequence. Often, pressure from social activists thrusts CEOs into the public forum. And, as DeGroote researcher François Neville has discovered, the way CEOs respond to activists challenging them over policies and practices they deem detrimental to society can result in potentially conflicting consequences.
“I was intrigued by how strategic leaders manage activists in and around their organizations,” says Neville, an assistant professor of strategic management. “This research is consistent with the interconnectedness between business and society. Now more than before, businesses are expected to respond to societal issues that are not traditionally part of strategic decision-making around competition, markets, who your competitors are and who your customers are.”
Responding to Social Activists
In his research, Neville designed an online lab experiment. Participants played the role of social activists demanding that a fictitious firm cease its offshore drilling operations. They received either a defensive or accommodative response from the firm’s CEO. Two perspectives became clear.
If a CEO issues a defensive public response to a social activist challenge (think denial, defiance and scapegoating), they could risk further heightening tensions with the activists attempting to change a firm’s policies or practices. More generally, however, this response may signal that a CEO is closed off to social activism — translating into collective perceptions and beliefs that the firm is an unattractive target for social activism.
“If you don’t treat certain stakeholders well, they might want to try to punish you for that,” says Neville of social activists’ tactics to inflict damage on a firm, which include starting a petition, disrupting annual shareholder meetings and boycotting. “But activists actually have limited resources, so they have to choose their targets carefully. They’re more inclined to choose companies they think will be receptive to their demands and proposals than those they know would be closed off to that. At least, this is what prior research evidence suggests.”
On the other hand, a CEO may respond to social activist challenges by acknowledging the firm’s responsibility to work on the issues identified by activists, apologizing, expressing sympathy and promising corrective actions. While this accommodative response could curtail immediate pressure, it could simultaneously send a broader signal that the firm is inclined to accommodate future pressures from social activists.
“If you have a CEO that responds to activists in an accommodative way, they could shield the company from having to dedicate potentially significant resources to overhauling policies and practices,” Neville says. “At the same time, they could be setting themselves up to deal with more of these types of demands in the future through, maybe inadvertently, signalling that, ‘Hey, we are open to working with various interest groups as it relates to social issues.’ So, there’s this interesting tension between a single approach and how it can actually have unintended effects in terms of potential future interactions with activists.”
Advice to CEOs Responding to Social Activists
Responding to social activist challenges becomes even more complicated when you consider that stakeholders have different motivations, core beliefs and priorities, says Neville. But it isn’t something CEOs can ignore. While social activists are seen as secondary stakeholders who aren’t essential to a corporation’s survival, they can disrupt firm routines, impose costs and mobilize public opinion against a firm, potentially damaging its reputation.
In some cases, social activists may also present demands that are legitimate strategic opportunities for product and process innovation, accessing key resources and capabilities, improving the firm’s reputational standing with critical audiences and generally creating more favourable nonmarket conditions for the firm.
“We’re increasingly seeing organizations that fit the traditional definition of social movement organizations or special interest groups buying shares in companies so that they can get a seat at the table,” Neville says.
So, what is a CEO to do? Neville makes three suggestions:
- CEOs must recognize that numerous stakeholders and audiences pay attention to what they say in the public forum.
- CEOs must consider the short-term costs and benefits of publicly rebuffing or accommodating social activists against the possible long-term costs and benefits.
- If CEOs intend to accommodate social activist demands without inviting other challenges, they should consider doing so quietly and away from the public eye.
“As a CEO, you’re between a rock and a hard place when managing stakeholders,” he says. “It’s really a balancing act to figure out who you’re going to prioritize and whether you can live with the trade-offs of doing that. We’re starting to rethink not only the nature of the broad relationship between business and society but also, from a strategic standpoint, the fact that values, beliefs, norms, political issues and ideologies can be a basis of competition for companies. This is something that CEOs and businesses will increasingly have to consider.”
