The Rising Price of Taking a Stand

Say nothing about a major issue, and antagonize customers, politicians, and employees.

Speak out on a major issue, and antagonize different customers, politicians, and employees.

It’s a bind in which many CEOs are finding themselves. In the last few weeks, US politicians have threatened companies that publicly oppose their agenda with the loss of tax incentives, the curtailment of government business, or both. It’s not just politicians either: companies that won’t address certain issues have faced consumer boycotts and investor sell-offs.

Experts say that while some hot-button topics can be ignored, others can’t. Many corporate chiefs may have to get used to taking positions—and dealing with their consequences. “CEOs don’t want their companies or their personal brands to be political footballs,” says Richard Marshall, global managing director of Korn Ferry’s Corporate Affairs Center of Expertise. “But CEOs are increasingly drawn—sometimes unwillingly—into a wide range of issues.” He adds that executives can be more strategic and disciplined when they do speak, however.

Stakeholders—both inside and outside—increasingly want companies and their executive teams to have a sense of purpose beyond the profit motive. In 2019, more than 180 CEOs of America’s largest corporations signed the Business Roundtable’s Statement of Purpose, rejecting the long-held idea that a corporation’s principal purpose is maximizing shareholder return. Investors are also driving a push toward purpose. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” said Larry Fink, CEO of BlackRock, which has more than $10 trillion in assets under management.

Along with adopting a purpose—be it improving the environment, making people happier, or another high-minded endeavor—many stakeholders expect companies to take a stand when that purpose is opposed by something in the ethos. In fact, CEOs should take a stand as much as possible, says Kate Shattuck, co-leader of Korn Ferry’s Impact Investing practice. “CEOs should talk about purpose, and not worry about politicians,” she says.

To do that, experts say, CEOs and their executive teams should have a strategy before speaking out on issues. Speaking out can go wrong in many ways: for instance, the CEO could insult a group of stakeholders, or say one thing while the company is doing something else. Not every issue needs to be talked about either, Marshall says. “CEOs need to be especially deliberate gathering input from stakeholders and then messaging the position they take, both internally and externally, to mitigate downside risk,” he says.

Regardless of what they say, CEOs need to be prepared for the consequences. The position they take may energize some stakeholders but anger others. A statement could lead to more sales from one group while lowering sales from another group. That’s why it’s important to game out the consequences of a CEO’s public statement. “Reap the upside but live through the downside,” Shattuck says.

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