When CEOs Become Activists
Why more business leaders are putting Purpose first. There was a time when no CEO in their right mind would dare make a statement that risked customer alienation. Back in 1990, when Michael Jordan was asked why he failed to endorse a local black candidate running against an openly racist incumbent, he was infamously attributed as saying “Republicans buy shoes too”. Even though it’s never been categorically proven that Jordan said this, the quote stuck. For years it was upheld as an exemplar for business leaders to heed. But times have changed. As the most progressive global organisations become increasingly purpose-driven, their leaders are also taking a more public stand on the issues that align with their companies’ values. Topics such as gender, race, sexual orientation, religion, immigration and the environment are no longer off-limits. Start With Why The primary driver for CEO’s becoming increasingly vocal on controversial topics is the evolution towards purpose-led business strategy . This business approach acknowledges that the corporation has a responsibility not just to shareholders, but to a broader group of stakeholders. These stakeholders include customers, employees, suppliers, local communities and the environment. This empowers the CEO to advocate on behalf of a larger group of stakeholders, and as a result to address a broader group of topics that affect them. There is also the fact that CEO’s understand that the general public expect more of them, and the businesses they represent, than ever before. The 2019 Edelman Trust Barometer demonstrates that trust in business sits at 56%, higher than trust in government or media which are at 47% each. This makes it clear to CEO’s that there is an expectation that they deliver on the trust invested in their organisations. This sentiment is particularly strong with influential millennials. 47% of them say that CEO’s have a responsibility to speak out on social issues. And 56% say that the imperative to be vocal is much greater now than in the past. Millennials are also more likely to buy from brands helmed by CEO activists and to stay as loyal employees with CEO activist bosses. And there is the growing frustration that governments do not make fast enough progress on key issues. Political gridlock, slow bureaucracy and failure to represent constituents are amongst the reasons business leaders are stepping up to lead public discourse. CEOs are using their positions to raise awareness for the causes requiring attention. And they’re wielding their economic power to influence policies and legislation. When CEOs Become Activists 3 Activist CEO’s Advocating with Purpose and Impact Marc Benioff – Salesforce Benioff has made headlines over the last few years, weighing in on topics ranging from taxes assisting the homeless in San Francisco to gun laws. But his most high-profile foray has been in support of the LGBTQI community. When the state of Indiana passed a controversial law allowing businesses to deny services to same-sex couples, he acted decisively. Benioff threatened that Salesforce would boycott the state completely. Other business leaders joined him and the bill was soon overturned. Benioff acknowledges he represents a broader group of stakeholders, saying, “CEOs need to stand up not just for their shareholders, but their employees, their customers, their partners, the community, the environment, schools, everybody.” His position on activism is that he only advocates for what is important to his people. He says, “My job as CEO is to listen deeply to my employees and customers and to respond to them effectively.” Rose Marcario – Patagonia Rose Marcario has tripled the company’s profits since stepping into the CEO role in 2009. She has also exponentially elevated the brand’s profile through relentless activism. As a certified B Corporation, Patagonia commits to countless courageous initiatives doing good for people and planet. But Marcario’s gutsiest move was to sue the Trump administration for its decision to reduce Utah’s Bears Ears National Monument by 85%. A company statement read: ‘This is not about politics; it’s about protecting the places we love and keeping the great promise of this country for our children and grandchildren. We won’t let President Trump tear down our heritage and sell it to the highest bidder’. When recently asked how the drawn-out legal proceedings have affected the company Marcario replied, “[The lawsuit] has been great for business. We’re going to have the best year ever.” Mark Parker – Nike Outgoing Nike chief Mark Parker is no stranger to divisive social issues. When Nike aired their Dream Crazy ad featuring Colin Kaepernick in 2018, both the media and the public were quick to react. Kaepernick had lost his job as a quarterback at the San Francisco 49’ers and had been deemed ‘unemployable’ by other NFL teams. He had deeply divided Americans by taking the knee during the national anthem to show his allegiance to the ‘Black Lives Matter’ movement. Nike’s decision to support Kaepernick ensured Americans clearly understood on which side of the divide the company stood. The ad ends with the line “Believe in something. Even if it means sacrificing everything”. And in creating the ad Nike was willing to walk the talk. The stock price initially took a hit, and the media fanned the flames of controversy by showing enraged conservatives burning their Nike shoes. But within days the stock climbed to an all-time high. By the end of the quarter, the sportswear giant reported a 10% jump in income , driven primarily by an increase in revenue. Nike’s results proved that taking a strong position can be very good for business. Parker, who approved the ad, defended the sportswear giant’s position. He commented, “There are values that are important to the brand and the company that we’re not going to shy away from. We support the views of our employees, our athletes. And yeah, we will put a stake in the ground and take a stand.” 3 Take-Outs For CEO’s who have embraced purpose and are exploring broader stakeholder advocacy, there are a host of considerations to ponder. Here are three they
CSR is Dead
Why Purpose is moving from the sideline to the core of business strategy When the Royal Commission into Banking, Superannuation and Financial Services published its final report in February 2019, the death knell sounded loudly for Corporate Social Responsibility (CSR). Kenneth Hayne’s report implicated Australia’s largest financial institutions as having engaged in conduct that fell well below community standards. It illustrated systemic issues of misconduct and serious lapses in moral judgement. Hayne was scathing in his assessment of our Big 4 banks, but he reserved his most damning comments for NAB’s since de-throned Chairman and CEO. In the same week they were due to testify to the commission, their staff had been pressuring brokers to sell 5 mortgages each before Christmas. Hayne stated, “My fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains”. DISCONNECTED ACCOUNTABILITY And this is where the CSR problem lies – in the paradox between the cultivated public perception of societal commitment, and in the day-to-day behaviour in core business activity. This is further underscored by the fact that Australia’s biggest financial institutions are also some of the country’s most visible corporate philanthropists. For many organisations, Corporate Social Responsibility, has been used as a bolt-on – a well-intentioned but distinctly separate activity to core business. And not only in the financial services industry, which is just the easiest to pick on right now. When uncomfortable truths around ethical failings in core business come to light, CSR appears almost as a mea culpa. It comes across as a kind of atonement to help balance out the indiscretions committed. It’s clearer than ever that this disconnected model has serious flaws. The time has come for a new, more integrated approach – one that connects core business activity with commitment to a broader stakeholder framework. Corporate Social Responsibility is Being Replaced by Business Purpose A BRIEF HISTORY OF CSR So how did we get here? Company founders began to understand that stakeholders extended beyond the boardroom at the end of the 19th century. Wealthy philanthropists like Andrew Carnegie and John D Rockefeller believed that healthy, happy customers and communities were essential for business success. But it wasn’t until the 1940’s that laws were changed so that businesses, and not just their owners, could support charities, and with this shift corporate foundations were born. In 1953, Howard Bowen published The Social Responsibilities of the Businessman. He suggested that businesses have a social obligation “to follow those lines of action which are desirable in terms of the objectives and values of our society”. But it was Peter Drucker who took the concept further, and laid down the thinking that would lead CSR to becoming a formalised business principle. In 1974 he wrote, “The business enterprise is a creature of a society and an economy, and society or economy can put any business out of existence overnight…The enterprise exists on sufferance and exists only as long as the society and the economy believe that it does a necessary, useful, and productive job.” Drucker’s seminal thinking led organisations to consider their impact on society and by the 1980’s business and social interests were more linked than ever. At the 1992 Earth Summit in Rio heads of state committed to sustainable development that would not compromise the planet for future generations. This led to businesses developing environmental policies to flank their community initiatives. By the new millennium Corporate Social Responsibility became a strategic imperative for leading businesses. In 2010 the International Organisation for Standardisation (ISO) published a set of voluntary standards intended to help organisations implement CSR. Its aim was to assist them to enhance society and the environment instead of contributing negatively to them. And so, for a while, CSR served us well. SOCIETY EXPECTS MORE But what we are currently experiencing is a fundamental shift in societal demands. There are many converging forces driving the evolution towards broader stakeholder integration. There is the democratisation and accessibility of information driven by the digital revolution. Once voiceless stakeholders now command a new level of power – customers, employees, shareholders, community members and even suppliers can be activists or disruptors. There is the growing economic influence of millennials, who need to ‘believe in’ the organisations they work for and the brands they buy from. And there is the growing remorse of retiring baby-boomers who are looking back and realising that perhaps they’d been led astray by Milton Friedman’s narrow definition of the responsibility of the corporation. They are now thinking about their legacies and righting some wrongs. There are many more drivers of change, all pointing to one irrefutable truth – in 2019 we all expect much more of businesses than ever before. GOODBYE CSR, HELLO PURPOSE So what does it take to evolve towards a more holistic approach? The first step is to start with organisational purpose. In 2017, when Blackrock Capital’s CEO, Larry Fink, published his annual Letter to CEO’s, it had a seismic effect on the global business community. He wrote, “Without a purpose, no company can fulfil its full potential. It will ultimately lose the licence to operate from its key stakeholders.” This instigation to the leaders helming companies in Blackrock’s USD$6.3 trillion portfolio, was an unequivocal call to action. He challenged them to understand their stakeholders and articulate a broader societal purpose. He saw it as an imperative for long-term value creation. Fink in no way gave them a hall pass on required shareholder returns. He asked them to balance competing priorities whilst taking a longer-term view to value growth. Whilst organisations like Unilever and Patagonia had embraced purpose-led strategy long before Fink’s missive, the effect was to escalate Purpose to a much broader audience of business leaders. A bigger movement, to transition purpose from a sideline activity to the core of business strategy, had begun. STAKEHOLDER INTEGRATION SUPERCHARGES GROWTH One of the biggest differences between this contemporary approach where purpose is at the centre of business strategy and
