(Illustration by Rob Dobi)
CEOs who take public political stances risk the reputation of their companies with stakeholders. When exactly does such activism pay off? A new study finds that company reputations can benefit when the CEO’s statement is matched by corporate social responsibility (CSR) activities.
“Using a national survey and an experiment, we find that CEO activism improves corporate reputation through perceived moral authenticity,” write authors Lambert Zixin Li, assistant professor of management and organization at the National University of Singapore Business School, and Sarah A. Soule, professor of organization behavior and dean at the Stanford Graduate School of Business.
The pair began working on the subject when Li studied under Soule for his PhD, uniting his interest in corporate social responsibility with his advisor’s work on social movements, he says. When he was writing his dissertation, the Black Lives Matter movement was sweeping the United States, sparking protests against racial discrimination after the 2020 Minneapolis police killing of George Floyd.
The mechanism that the researchers found to explain the positive link between CEO activism and corporate reputation was authenticity. “What you speak has to align with your values and internal actions,” Li says.
For the national survey, the researchers first examined how CEO statements on the Black Lives Matter movement and outside certification of CSR related to survey participants’ feelings about corporate reputation. They looked at all Fortune500 companies as well as US-based companies that held a B Corp certification in 2020, and identified 525 businesses with CEOs who had made a public comment about Black Lives Matter.
An online survey asked a representative sample of respondents what they thought about the CEO’s statement as well as the company’s reputation. The authors found that participants rated companies based on two factors: whether the participant agreed politically with the stance and whether the company engaged in CSR activities. Survey participants who held conservative political views that conflicted with Black Lives Matter’s orientation were less likely to score a company high on reputation. However, this potential backlash was negated if the firm had a CSR certification: Similar percentages of liberal and conservative participants rated its reputation positively.
The separate experiment involved giving online-survey participants information about a fictionalized company active in CSR with a CEO who made a statement about Black Lives Matter, and asking questions to determine how they viewed the company’s reputation. The results again showed that participants viewed the company as more authentic if it participated in CSR, whether or not their own politics accorded with the CEO’s statement about Black Lives Matter.
The study highlights the importance of authenticity in corporate signaling, especially in a time of political polarization. “Empirically, people wouldn’t give someone credit just because it’s a good company, but because it’s doing well in CSR,” Li says.
“The paper is important to our understanding of the effects of CEO and corporate activism because it explicitly links it to organizational reputation, an important asset of any company,” says Kate Odziemkowska, an assistant professor of strategic management at the University of Toronto’s Rotman School of Management. The research shows that audiences look at both what CEOs say and what charitable or social actions their company takes, with the combination “helping activism look more authentic,” she says.
One interesting aspect of the research is that the combination of CEO statements and CSR has a larger effect on a company’s reputation than either factor does individually, says Anna McKean, an assistant professor of business administration at the University of Virginia’s Darden School of Business. “These findings will help further research in this field, especially as scholars seek to make sense of why some firms have chosen to backtrack their sociopolitical efforts while others stay the course,” she says.
Odziemkowska found it particularly compelling that
audience members who don’t agree philosophically with the CEO’s
stances—conservatives who find them too liberal, for instance—still feel
positively about the company’s reputation if it has a CSR record. “Not only do
they show that CSR changes how audiences interpret the activism itself, but it
can weaken the ideological backlash when it is paired with CSR because
regardless of a stakeholder’s ideology, they place value on authenticity,” she
says.
Find the full study: Lambert Zixin Li and Sarah A. Soule, “CEO Activism and Corporate Reputation: How Authenticity and CSR Mitigate Stakeholder Misalignment.” Journal of Management Studies, forthcoming.
Read more stories by Chana R. Schoenberger.