Do activist CEOs help or hurt the company?


CEOs are becoming more vocal about issues in the wider world. HRM investigates some of the risks and benefits of being outspoken.

Cricket fans aren’t the only ones unhappy about the recent ball tampering scandal. The heads of several corporate sponsors such as Qantas, Lion KFC and Sanitarium have also voiced their concern and have called for Cricket Australia to take action.

In the wake of the incident, Qantas CEO Alan Joyce, spoke publicly about his disappointment in the team’s actions, telling Cricket Australia officials, “You need to address this and need to address this fast – you need to do the right thing”.

His comments can be seen in the context of the growing trend towards “CEO activism”, a phenomenon where company executives take public stands on political and social issues (and sport scandals) – many of which are unrelated to their organisation’s bottom lines.

And while Qantas is a sponsor of Australia’s cricket team, this isn’t the first time Joyce, in particular, has taken an ethical position. He was also a vocal presence in the same-sex marriage debate, as was Paul Zahra both while he was CEO at David Jones and subsequently after he left. They weren’t alone, according to the Australian Financial Review 131 other businesses publicly supported a “yes” vote.

Other leaders have opted to support different social or environmental causes, such as Atlassian’s Mike Cannon-Brookes throwing his weight behind Elon Musk’s “mega battery”.

It’s clear that activist CEOs are becoming more common. But are they helping or hindering their companies?

In touch with the community

Nicholas Barnett, CEO of research and consulting firm Insync, says it’s imperative that leaders today stay in touch with community expectations and standards. “CEOs and leaders should be weighing into community and social issues that directly impact their brand and their organisation’s purpose, vision and strategy,” he says.

“Issues that have broad community support should also be addressed such as domestic violence and workplace harassment – it’s in the best interest of every single employee to feel protected and supported in the workplace.”

A matter of integrity

Barnett emphasises that while performance is always important, integrity should top the list of organisational focus. “An organisational culture should be a balance between the integrity and performance. Without this balance, scandals occur. If you focus too heavily on performance and the financial aspects, you lose perspective and trust becomes a casualty.”

Barnett says we are seeing a reset in perspective both in Australia and globally, where organisations are being held accountable for their lack of integrity, citing the recent Banking Royal Commission and the Facebook data breach as key examples.

“The massive loss and trust and respect following the Facebook scandal have been financially detrimental – $100b dollars has been wiped from it’s value in one week” (see our previous article about the dangers of leaders not speaking out for more detail).

“The Banking Royal Commission is another current example of the problematic effects of winning at all costs. This is not something we would have seen 10 or even five years ago. It’s actually framed in terms of a loss of trust, misrepresentation and the lack of alignment with community standards and expectations.”

There’s also evidence that the business community is beginning to see things the same way. In January the chief executive of investment firm BlackRock announced that his company will only be investing in companies that “contribute to society”. Considering his firm manages over six trillion US dollars and has sway over a large number of US boards, that’s quite a signal to send.

Risks and rewards

Voicing an opinion about contentious issues isn’t without risk. There’s a lot of stakeholders to be mindful of,” says Barnett. “You have your employees, who are of utmost importance, customers, suppliers, and government and regulators.” But after considering those risks, leaders should speak out about what they think is right and what aligns with their leadership, believes Barnett.

And the benefits can outweigh the risks. “Australia is crying out for stronger leadership, especially about issues that address social and community expectations,” says Barnett.

He cites the weak response of Cricket Australia’s CEO James Sutherland – who said he was disappointed and was sending over two people to investigate the situation – as a prime example of the stance a leader shouldn’t take.

“Sutherland failed to denounce cheating in his first media appearance. He should have been far more bold. He could have suspended the captain and ball tamperer immediately and got on a plane to go and investigate the matter. He also could have rung his counterpart in South Africa to forfeit the match so as to demonstrate his position that cheating by any Australian cricketer is totally unacceptable, then offer a full refund to those who had paid to attend the match after it was forfeited.”

This, says Barnett, would have sent the right message and ensured that no one doubted Cricket Australia’s views on cheating. Instead, we are still discussing it almost two weeks later.

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Phillip McDonald
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Phillip McDonald

CEO’s voicing an opinion on social issues is an interesting question, and certainly becoming more prevalent. Alan Joyce is an excellent example. In my view, he was correct, as the representative of a sponsor, to voice a concern about the cheating by the Australian cricket team. His business’ reputation is linked to the cricket team. I took the counter view about Joyce (and other CEO’s) expressing support for same sex marriage (for the record, I voted “yes”). I could not see the business benefit, and that, in my view, is the CEO’s role. Supporting CEO’s being vocal on social issues… Read more »

David Matthews
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David Matthews

Whilst I support CEO’s voicing opinions on social issues, but why is it only the issues that the media are putting forward? There are many social issues in the world where CEO’s could step up and be a leader for a better community. Yet we fail to see them embrace causes outside the mainstream media alarmist approaches to reporting, this is an alarm bell that we all are running to the broader media agendas and not our own. Everyone has an important cause or issue to bring forward it just concerns me that we blindly follow the mainstream media agenda… Read more »

David
Guest
David

Perhaps in the back of the CEO’s mind there is a thought that if they voice the populist view or the trending view put forward by the media, will be good for business. I think the Qantas CEO wading into the SSM debate did not fit into this category (for the record I voted No – and businesses putting their support behind this issue didn’t help sway me at all.) I agree with the sentiment regarding shareholders views being considered and I expect this would reduce the amount of activism by CEO’s. Interestingly, the article omits the place of employees,… Read more »

More on HRM

Do activist CEOs help or hurt the company?


CEOs are becoming more vocal about issues in the wider world. HRM investigates some of the risks and benefits of being outspoken.

Cricket fans aren’t the only ones unhappy about the recent ball tampering scandal. The heads of several corporate sponsors such as Qantas, Lion KFC and Sanitarium have also voiced their concern and have called for Cricket Australia to take action.

In the wake of the incident, Qantas CEO Alan Joyce, spoke publicly about his disappointment in the team’s actions, telling Cricket Australia officials, “You need to address this and need to address this fast – you need to do the right thing”.

His comments can be seen in the context of the growing trend towards “CEO activism”, a phenomenon where company executives take public stands on political and social issues (and sport scandals) – many of which are unrelated to their organisation’s bottom lines.

And while Qantas is a sponsor of Australia’s cricket team, this isn’t the first time Joyce, in particular, has taken an ethical position. He was also a vocal presence in the same-sex marriage debate, as was Paul Zahra both while he was CEO at David Jones and subsequently after he left. They weren’t alone, according to the Australian Financial Review 131 other businesses publicly supported a “yes” vote.

Other leaders have opted to support different social or environmental causes, such as Atlassian’s Mike Cannon-Brookes throwing his weight behind Elon Musk’s “mega battery”.

It’s clear that activist CEOs are becoming more common. But are they helping or hindering their companies?

In touch with the community

Nicholas Barnett, CEO of research and consulting firm Insync, says it’s imperative that leaders today stay in touch with community expectations and standards. “CEOs and leaders should be weighing into community and social issues that directly impact their brand and their organisation’s purpose, vision and strategy,” he says.

“Issues that have broad community support should also be addressed such as domestic violence and workplace harassment – it’s in the best interest of every single employee to feel protected and supported in the workplace.”

A matter of integrity

Barnett emphasises that while performance is always important, integrity should top the list of organisational focus. “An organisational culture should be a balance between the integrity and performance. Without this balance, scandals occur. If you focus too heavily on performance and the financial aspects, you lose perspective and trust becomes a casualty.”

Barnett says we are seeing a reset in perspective both in Australia and globally, where organisations are being held accountable for their lack of integrity, citing the recent Banking Royal Commission and the Facebook data breach as key examples.

“The massive loss and trust and respect following the Facebook scandal have been financially detrimental – $100b dollars has been wiped from it’s value in one week” (see our previous article about the dangers of leaders not speaking out for more detail).

“The Banking Royal Commission is another current example of the problematic effects of winning at all costs. This is not something we would have seen 10 or even five years ago. It’s actually framed in terms of a loss of trust, misrepresentation and the lack of alignment with community standards and expectations.”

There’s also evidence that the business community is beginning to see things the same way. In January the chief executive of investment firm BlackRock announced that his company will only be investing in companies that “contribute to society”. Considering his firm manages over six trillion US dollars and has sway over a large number of US boards, that’s quite a signal to send.

Risks and rewards

Voicing an opinion about contentious issues isn’t without risk. There’s a lot of stakeholders to be mindful of,” says Barnett. “You have your employees, who are of utmost importance, customers, suppliers, and government and regulators.” But after considering those risks, leaders should speak out about what they think is right and what aligns with their leadership, believes Barnett.

And the benefits can outweigh the risks. “Australia is crying out for stronger leadership, especially about issues that address social and community expectations,” says Barnett.

He cites the weak response of Cricket Australia’s CEO James Sutherland – who said he was disappointed and was sending over two people to investigate the situation – as a prime example of the stance a leader shouldn’t take.

“Sutherland failed to denounce cheating in his first media appearance. He should have been far more bold. He could have suspended the captain and ball tamperer immediately and got on a plane to go and investigate the matter. He also could have rung his counterpart in South Africa to forfeit the match so as to demonstrate his position that cheating by any Australian cricketer is totally unacceptable, then offer a full refund to those who had paid to attend the match after it was forfeited.”

This, says Barnett, would have sent the right message and ensured that no one doubted Cricket Australia’s views on cheating. Instead, we are still discussing it almost two weeks later.

3
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Phillip McDonald
Guest
Phillip McDonald

CEO’s voicing an opinion on social issues is an interesting question, and certainly becoming more prevalent. Alan Joyce is an excellent example. In my view, he was correct, as the representative of a sponsor, to voice a concern about the cheating by the Australian cricket team. His business’ reputation is linked to the cricket team. I took the counter view about Joyce (and other CEO’s) expressing support for same sex marriage (for the record, I voted “yes”). I could not see the business benefit, and that, in my view, is the CEO’s role. Supporting CEO’s being vocal on social issues… Read more »

David Matthews
Guest
David Matthews

Whilst I support CEO’s voicing opinions on social issues, but why is it only the issues that the media are putting forward? There are many social issues in the world where CEO’s could step up and be a leader for a better community. Yet we fail to see them embrace causes outside the mainstream media alarmist approaches to reporting, this is an alarm bell that we all are running to the broader media agendas and not our own. Everyone has an important cause or issue to bring forward it just concerns me that we blindly follow the mainstream media agenda… Read more »

David
Guest
David

Perhaps in the back of the CEO’s mind there is a thought that if they voice the populist view or the trending view put forward by the media, will be good for business. I think the Qantas CEO wading into the SSM debate did not fit into this category (for the record I voted No – and businesses putting their support behind this issue didn’t help sway me at all.) I agree with the sentiment regarding shareholders views being considered and I expect this would reduce the amount of activism by CEO’s. Interestingly, the article omits the place of employees,… Read more »

More on HRM