Activism: ethical business leaders face a gear change

gear change for activism

Activism, or business leaders speaking out on ethical issues keeps happening,. Not enough of course. Yet there are signs that many business leaders are starting to do more than just urge their people to “Do the right thing”. Still, it’s rare to find a CEO embracing an ethical stance with obvious enthusiasm. That is, being visionary, promoting integrity or confronting social concerns. One exception is Julian Richer boss of Richer Sounds:

“Life is tough for many people, both in work and out of it. Inequality at the moment is the worst I’ve known it in my lifetime.”
Julian Richer, CEO Richer Sounds

activist CEO: Julian Richer
Richer plays a blinder

In 2019 this maverick CEO handed ownership of his successful chain of hi fi shops to his employees. Another pace setter, ex-Unilever boss Paul Polman, also took a much publicised public stance on ethical grounds. On appointment as the new CEO, he announced new priorities for his global firm. He rejected the traditional short-term focus on quarterly financial and sales returns . Instead he embraced a more visionary stance of the longer term.

In essence Polman’s activism helped kick start the current movement challenging  the core purpose of companies.  This included giving ethics a higher profile. For instance, he directed his firm to install clean toilets across Africa. To reduce the spread of disease he also encouraged Asian schoolchildren to wash their hands. Using of course, the company’s Lifebuoy soap,

Exceptions such as Julian Richer or Polman of Unilever act as exemplars. Many contemporaries remain unconvinced, remaining reluctant to take a public position on ethical issues, such as social justice or even good governance. The UK National Boardroom regulator summed it up: many companies “pay lip service” to corporate governance. “Many fail to implement a “clear purpose” or effective corporate culture. Instead, they prefer slogans or marketing lines.”

Reluctance to talk ethics in public

Some of the resistance to taking a public stance on ethics stems from confusion.

One of the best examples is Richard Desmond’s notorious response at the 2012 Leveson media enquiry.

The one-time pornographer and briefly owner of the Daily Express, met aggressive questioning on his company’s ethics. In an unforgettable moment he claimed that ethics could not be his concern:

“Because everybody’s ethics are different”.

This evasive answer landed with a deafening thud. Yet the response was typical. Long-term investor Warren Buffet, for example, dismisses any idea that he should embrace any kind of activism for doing good. Companies, he argues should not Impose their views on society because:

Buffet eschews any kind of activism
The so-called Sage of Omaha, Warren Buffet

“It’s very hard to do. If you give me the 20 largest companies I don’t know which of the 20 behaves the best, really.”

Not much ethical responsibility then from Mr Buffet. Just old style capitalism, raw in tooth and claw. Buffet echoes the notorious Chicago academic Milton Friedman. The latter peddled the now discredited idea about the purpose of business: the only aim for business should be to make money for shareholders. 

This myopic view faces rising global opposition. The latter insists on a far wider perspective. This includes activism to embrace ESG—or environment, social and governance factors.

Such has been the impact of this movement that smart investment fund managers around the world keep pumping huge amounts of money into it. The result is ESG is now a respectable and profitable sector. Yet despite the wider view, too many business leaders still dismiss it as a form of heresy. For example, Robert Shillman, Chairman of Cognex claims  

anti activist business leader
Head of Cognex, Robert Shillman

“If you asked fund investors do you want the board of directors to spend time and energy on ESG issues or do you want them to spend all their time on increasing the value of their shares? I am rather sure that an overwhelming number of them would choose the latter.”

Some fund investors might indeed react that way. Yet it’s a false choice. Apart from being the right thing to do ethically, there’s powerful evidence showing that companies investing in ESG activities do better for shareholders than those failing to pursue such investments.

Activism and the Fear Factor

fear of being activist

Fear also explains the reluctance of some business leaders to adopt a strong activist stance on ethical or social issues. They fear retribution from shareholders, the market, or some kind of public humiliation. A strong position on ethical matters does indeed require a degree of courage. Not every leader has it.

Australian pm doesn't like activist CEO's
Australian PM condemns outspoken CEOs
Photograph: Mike Bowers/The Guardian

For instance, the Australian Prime Minister recently attacked CEO’s for having the audacity to speak up about climate change. He urged them not to get “distracted” by it. Shutting down critics proved easier than taking responsibility for tackling the important issue. However, apocalyptic fires may have induced an adjustment in his outmoded stance.

Values underpin an activist stance

Core values

Being activist about values re-enforces a leader’s ethical position. It also supports employees and sharpens company purpose and culture. Critics though, often dismiss this as a cheap way to appear virtuous.

An activist stance on values brings into focus the firm’s moral compass. The latter may point the way to:

  • Diversity
  • Openness
  • Transparency
  • Respect for individuals
  • Tolerance of differences

Yet even the best business leaders may feel unsupported, and unsure about how to express their concerns in an acceptable public way. Speaking out can therefore trigger intense feelings, including ones of confusion, uncertainty, anxiety, or even anger. So, like the rest of their employees, CEO’s and the top level team may benefit from access to formal ethical training to help them change gear. This includes learning to listen more attentively about the best way to handle ethical concerns.

Start with a conversation

Despite efforts to ensure an ethical supply chain, ASOS, Marks & Spencer and Uniqlo fell foul of child labour and unsafe workplace scandals. Tesco’s too suffered a corporate shock at the end of 2019. It seems that its supply of Xmas cards may have been made by slave labour, better known as Chinese political prisoners.

By starting conversations about ethical concerns senior leaders can uncover hidden or unexpected dilemmas that might create company vulnerabilities. They might ask:

  • “What concerns should we have about this decision or situation?”
  • “Could our intended actions damage our reputation?”
  • “In this risk situation, what seems the right thing to do?”
  • “How can we reduce the ethical risks we might be running?”

CEO activism

“When we first started studying CEO activism, three years ago, we never imagined how significant this phenomenon would become.”
Harvard Business Review researchers

Speaking out on sensitive social and political issues is the “new normal.” Corporations have long tried to affect public policy. However, CEO activism is newer and less understood. Some CEO’s such as Nike’s boss Mark Parker avoid being activists themselves, preferring instead to provide a platform for others with strong views to speak out.

athlete featuring in Nike ads
Activist athlete Colin Kaepernick features
in Nike’s advertisements.
(Image: Reuters/Brendan McDermid)

When silence becomes conspicuous

Asked whether they want CEOs to take the lead on social policy changes nearly two-thirds of respondents say they do. Even so, does CEO activism cross the line between business and social issues? Is it a step too far in “doing what’s right.”

Tking a stand with a letter

Behind the scenes many executives feel helpless about ethics and what it takes to show integrity. They wonder how best to respond to moral questions posed by mounting pressures from the public, investors, and from their employees. That’s especially so when there’s strong public support for engagement on issues such as sexual harassment and equal pay.

Some CEO’s though feel so strongly about certain social issues that they feel compelled to speak out such as:

  • The White House’s withdrawal from the Paris climate accord
  • The clash between white supremacists and counter protesters in Charlottesville, Virginia
  • The decision to rescind Deferred Action for Childhood Arrivals
  • Gun control and school shootings and massacres

They prodded business leaders like Tim Cook of Apple, Howard Schultz of Starbucks, and Marc Benioff of Salesforce—among many others, to passionately and publicly advocate for a range of causes. Bank of America’s CEO, Brian Moynihan, told the Wall Street Journal in 2018:

“Our jobs as CEOs now include driving what we think is right. It’s not exactly political activism, but it is action on issues beyond business.”

CEO activism continues to attract media attention, everywhere.  The more often top business executives pronounce on social and political issues, the more they’re expected to gear up to do more of it. In the Twitter age, silence becomes conspicuous.

Public Expectations—in the UK

Although in the UK public trust in business ranks highest since 2003, there are warning signs that public perceptions about business leaders are changing:  

“Overall, trust in British business to behave ethically has declined in the last year, and businesses need to ask why. What we are seeing is that it is younger people who are losing confidence in business operating ethically.”
Philippa Foster Back CBE, IBE’s Director, 2019

Public Expectations—in the US

In the US, many people also consider corporate America to be out of touch, and not doing enough for society, including showing activism. A global survey of over 40,000 people from 26 countries found that US responders were the most sceptical of the role of big business.  

Seven out ten Americans (69%) for instance, believe that US business leaders don’t understand the challenges they face in their life.

Implications of activism for business leadership

Today’s activist CEO’s stand for more than just their shareholders. They’re now expected to change up a gear and start to represent their employees, customers, partners, the community, the environment, schools, everybody. Many millennials, now in leadership positions, consider that CEO’s have a moral responsibility to be activist and speak out on political and social issues.

Still, an activist CEO who takes a high profile public stand on issues not directly related to businesses, remains the exception rather than the rule. Nor is there strong evidence that doing so makes a positive impact on the bottom line. Although there is anecdotal evidence that perhaps it can shape public policy.

Yet the role of ethical business leader seems destined to embrace activism. This demands a gear change by those leading companies to:

  • Take a moral stance
  • Be outspoken
  • Reframe company purpose to be more inclusive
  • Respond to technology advances
  • Focus on ESG
  • Combine with others to speak on ethical concerns
  • Respond better to public expectations
changing role of ethical business leaderss

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3 Comments

  1. Great content! Super high-quality! Keep it up! :)