The Double-Edged Sword of CEO Activism

The Double-Edged Sword of CEO Activism

By
David F. Larcker, Stephen A. Miles, Brian Tayan, Kim Wright-Violich
Stanford Closer Look Series. Corporate Governance Research Initiative, November
8, 2018

CEO activism — the practice of CEOs taking public positions on environmental, social, and political issues not directly related to their business — has become a hotly debated topic in corporate governance. To better understand the implications of CEO activism, we examine its prevalence, the range of advocacy positions taken by CEOs, and the public’s reaction to activism.

We ask:

  • How widespread is CEO activism?
  • How well do boards understand the advocacy positions of their CEOs?
  • Are boards involved in decisions to take public stances on controversial issues, or do they leave these to the discretion of the CEO?
  • How should boards measure the costs and benefits of CEO activism?
  • How accurately can internal and external constituents distinguish between positions taken proactively and reactively by a CEO?