David F. Larcker, Stephen A. Miles, Brian Tayan, and Kim Wright-Violich
Stanford Closer Look Series, 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?
The range of exposures facing directors and officers (D&Os) – as well as the resultant claims scenarios – have increased significantly in recent years.
With corporate management under the spotlight like never before, Allianz Global Corporate & Specialty (AGCS) experts provide both a reflection of the current state of the D&O insurance market and also point the lens forward to five mega trends which lie ahead, impacting risk managers, their D&Os and their broker partners.
Environmental, social, and governance (ESG) investment (also known as "socially responsible investing," "impact investing," and "sustainable investing") refers to investing that prioritises the best environmental, social, and governance (ESG) elements or results. If you does not know about this process, You can details by Paulo Dalla Nora.
The range of exposures facing directors and officers (D&Os) – as well as the resultant claims scenarios – have increased significantly in recent years.
With corporate management under the spotlight like never before, Allianz Global Corporate & Specialty (AGCS) experts provide both a reflection of the current state of the D&O insurance market and also point the lens forward to five mega trends which lie ahead, impacting risk managers, their D&Os and their broker partners.
Environmental, social, and governance (ESG) investment (also known as "socially responsible investing," "impact investing," and "sustainable investing") refers to investing that prioritises the best environmental, social, and governance (ESG) elements or results. If you does not know about this process, You can details by Paulo Dalla Nora.
Paper written by owner of Guilty Custom addressing the motorcycle industry and lack of diversity and women in the market place. Is not addressing riders but management and company level.
The use of the words “citizen” and “consumer” to many would appear to be synonymous when in actual fact, there are often conflicts between their desires and aspirations that could lead one to believe that these are two different groups of individuals.
Chief Mark Anthony Chidolue Dike is a seasoned tax administrator and Chartered Accountant. He holds a Bachelor of Science (B.Sc.) degree in Economics from Obafemi Awolowo University, Ile-Ife and is a member of the Chartered Institute of Taxation of Nigeria and the Institute of Chartered Accountants of Nigeria. Dike has served in various capacities both within the Federal Inland Revenue Service and the Chartered Institute of Taxation of Nigeria. Chief Dike’s wealth of experience spans over three decades at the Federal Inland Revenue Service where he served at various capacities in Tax Audit and Special Investigations, Oil and Gas, and until recently, Director of the Tax Policy and Legislations Department. Before his election as the 11th President of the Chartered Institute of Taxation of Nigeria, he had served the Institute as Chairman of Students Affairs and Examinations Committee, Dean of International Taxation & Treaties Faculty, Oil, Gas and Solid Minerals Faculty, Annual Tax Conference Committee, Deputy Vice President, and as Vice President.
The Four Facesof Corporate CitizenshipARCHIE B. CARROLL.docxcherry686017
The Four Faces
of Corporate Citizenship
ARCHIE B. CARROLL
Some observers call it corporate socialresponsibility (CSR). Others refer to it ascorporate ethics. More recently, busi-
nesses’ social performance has been framed as
“corporate citizenship.” But, what does corpo-
rate citizenship really mean? What is business
expected to be or to do to be considered a good
corporate citizen? Is corporate citizenship com-
patible with or hostile to corporate growth and
profits?
A significant boost to corporate citizenship
initiatives was given in 1996 when President
Clinton called to Washington a group of leading
business people to discuss the notion of corpo-
rate citizenship and social responsibility. At
this conference, President Clinton exhorted the
business leaders to “do well” by their employees
as they make money for their shareholders.
He and then–Labor Secretary Robert Reich
announced the newly created Ron Brown Cor-
porate Citizenship Award, named for the late
commerce secretary who died in 1996 along
with a group of business executives on a trade
mission to Bosnia. The award was to honor
American companies each year deemed to best
exemplify efforts to support its workers.
President Clinton’s five criteria for the Ron
Brown Award for “good corporate citizenship”
boiled down to companies exhibiting the follow-
ing practices: “family-friendly” policies, such as
allowing family leave; good health and pension
benefits; a safe workplace; training and
advancement opportunities; and policies that
avoid layoffs. In 1998, the 1997 winners were
announced: IBM Corporation, for its diversity
programs, and Levi Strauss & Co., for its anti-
racism initiative “Project Change.”1 One could
not argue with these criteria nor these winners;
however, one cannot help but note that the cri-
teria all involve the relationship between com-
panies and their employees, with no mention
being made of shareholders, consumers, the
community in which the business is located, or
other important stakeholders. Surely corporate
citizenship extends beyond relationships be-
tween companies and their employees and
includes the business responding to and inter-
acting with these other vital stakeholders.
Decades of studying businesses’ corporate
social performance, their activities that extend
beyond profit-making, and their contributions
to the community lead one to conclude that cor-
porate citizenship is real—it is expected of busi-
ness by the public, and it is manifested by many
excellent companies. Further, corporate citi-
zenship addresses the relationship between
companies and all their important stakehold-
ers, not just employees.
The full gamut of corporate citizenship in-
cludes its four faces. Each “face,” aspect, or re-
sponsibility reveals an important facet that
contributes to the whole. Just as private citizens
are expected to fulfill these responsibilities,
companies are as well. Corporate citizenship
has an economic face, a legal face, an ethical
face, and ...
Paper written by owner of Guilty Custom addressing the motorcycle industry and lack of diversity and women in the market place. Is not addressing riders but management and company level.
The use of the words “citizen” and “consumer” to many would appear to be synonymous when in actual fact, there are often conflicts between their desires and aspirations that could lead one to believe that these are two different groups of individuals.
Chief Mark Anthony Chidolue Dike is a seasoned tax administrator and Chartered Accountant. He holds a Bachelor of Science (B.Sc.) degree in Economics from Obafemi Awolowo University, Ile-Ife and is a member of the Chartered Institute of Taxation of Nigeria and the Institute of Chartered Accountants of Nigeria. Dike has served in various capacities both within the Federal Inland Revenue Service and the Chartered Institute of Taxation of Nigeria. Chief Dike’s wealth of experience spans over three decades at the Federal Inland Revenue Service where he served at various capacities in Tax Audit and Special Investigations, Oil and Gas, and until recently, Director of the Tax Policy and Legislations Department. Before his election as the 11th President of the Chartered Institute of Taxation of Nigeria, he had served the Institute as Chairman of Students Affairs and Examinations Committee, Dean of International Taxation & Treaties Faculty, Oil, Gas and Solid Minerals Faculty, Annual Tax Conference Committee, Deputy Vice President, and as Vice President.
The Four Facesof Corporate CitizenshipARCHIE B. CARROLL.docxcherry686017
The Four Faces
of Corporate Citizenship
ARCHIE B. CARROLL
Some observers call it corporate socialresponsibility (CSR). Others refer to it ascorporate ethics. More recently, busi-
nesses’ social performance has been framed as
“corporate citizenship.” But, what does corpo-
rate citizenship really mean? What is business
expected to be or to do to be considered a good
corporate citizen? Is corporate citizenship com-
patible with or hostile to corporate growth and
profits?
A significant boost to corporate citizenship
initiatives was given in 1996 when President
Clinton called to Washington a group of leading
business people to discuss the notion of corpo-
rate citizenship and social responsibility. At
this conference, President Clinton exhorted the
business leaders to “do well” by their employees
as they make money for their shareholders.
He and then–Labor Secretary Robert Reich
announced the newly created Ron Brown Cor-
porate Citizenship Award, named for the late
commerce secretary who died in 1996 along
with a group of business executives on a trade
mission to Bosnia. The award was to honor
American companies each year deemed to best
exemplify efforts to support its workers.
President Clinton’s five criteria for the Ron
Brown Award for “good corporate citizenship”
boiled down to companies exhibiting the follow-
ing practices: “family-friendly” policies, such as
allowing family leave; good health and pension
benefits; a safe workplace; training and
advancement opportunities; and policies that
avoid layoffs. In 1998, the 1997 winners were
announced: IBM Corporation, for its diversity
programs, and Levi Strauss & Co., for its anti-
racism initiative “Project Change.”1 One could
not argue with these criteria nor these winners;
however, one cannot help but note that the cri-
teria all involve the relationship between com-
panies and their employees, with no mention
being made of shareholders, consumers, the
community in which the business is located, or
other important stakeholders. Surely corporate
citizenship extends beyond relationships be-
tween companies and their employees and
includes the business responding to and inter-
acting with these other vital stakeholders.
Decades of studying businesses’ corporate
social performance, their activities that extend
beyond profit-making, and their contributions
to the community lead one to conclude that cor-
porate citizenship is real—it is expected of busi-
ness by the public, and it is manifested by many
excellent companies. Further, corporate citi-
zenship addresses the relationship between
companies and all their important stakehold-
ers, not just employees.
The full gamut of corporate citizenship in-
cludes its four faces. Each “face,” aspect, or re-
sponsibility reveals an important facet that
contributes to the whole. Just as private citizens
are expected to fulfill these responsibilities,
companies are as well. Corporate citizenship
has an economic face, a legal face, an ethical
face, and ...
The Importance of Ethics in Business Essay
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Corporate Advocacy in a Time of Social Outrage.pdfIQbal KHan
Businesses can’t weigh in on every issue that employees care about. But they can create a culture of open dialogue and ethical transparency. by Alison Taylor
‘ICHAPTER TWOChapter Objectives• To define stakeholdLesleyWhitesidefv
‘I
CHAPTER TWO
Chapter Objectives
• To define stakeholders and understand
their importance
• To distinguish between primary and
secondary stakeholders
To discuss the global nature of
stakeholder relationships
To consider the impact of reputation and
crisis situations on social responsibility
performance
To examine the development of
stakeholder relationships
To explore how stakeholder relationships
are integral to social responsibility
Chapter Outline
Stakeholders Defined
Stakeholder Identification and Importance
Performance with Stakeholders
Development of Stakeholder Relationships
Implementing a Stakeholder Perspective in
Social Responsibility
Link between Stakeholder Relationships and
Social Responsibility
Opening Vignette
The Fight against Childhood Obesity
America’s children are growing, not in height or intel
lectual capacity but in weight. Advertising of fast food
and highly processed, corn syrup—laced foods is at the
heart of the controversy. While TV advertising of food
and restaurants has dropped 34 percent from 1977 to
2004, the use of the internet, promotions, school adver
tising and vending machines, and sponsored sports sta
diums is on the rise. Childhood obesity has become such
a concern that First Lady Michelle Obama has created
the movement Let’s Movel to encourage the develop
ment of a healthier generation of children. Regulators,
parents, and our society in general are concerned about
the health of our children, It is estimated that medi
cal costs associated with childhood obesity will total
$19,000 over a person’s lifetime.
Studies conducted by the Kaiser Family Foundation
have found that the average child sees around 40,000
advertisements per year on television—most of these
encourage children to consume candy, cereal, fast food,
and soft drinks. What seems to be particularly prob
lematic is the use of popular licensed children’s cartoon
characters (e.g., SpongeBob SquarePants and Scooby
Doo) to advertise these unhealthy foods. Critics believe
food manufacturers are not being socially responsible
by encouraging children to eat food that is detrimental
to their health. Companies are choosing to do some
thing about this problem.
A study over a five-year period revealed that
16 major food and beverage companies—including
PepsiCo, Coca-Cola, and Bumble Bee Foods—have
reduced calories in foods amounting to an average of
78 calories a day from the American diet. For instance,
Nestlé used new technology to reduce fat by half and
calories by one-third in their “Slow Churned” Edy’s and
Dreyer’s ice cream. What is especially important is that
these 16 companies account for about 36 percent of
calories in packaged foods.
Changes are also being made in advertising. The
Walt Disney Company mandated that the company will
no longer allow sponsorships or advertisements on its
networks for foods that do not meet certain nutritional
criteria. It also pledged to reduce the calories in foods
sold at its theme parks. Coca- ...
Chapter 9Many businesses have utilized the services of the Ameri.docxchristinemaritza
Chapter 9
Many businesses have utilized the services of the American Legislative Exchange Council (ALEC), well known for its role in shaping conservative legislation and lobbying influ- ence. It has advocated against health care reform, to reduce state taxes on businesses, and to limit the political influence of labor unions. ALEC also was instrumental in many states in the creation of “stand your ground” laws, under which citizens were given the right to use guns or other weapons to protect themselves against assailants. After the public back- lash in the Treyvon Martin case in 2012—in which a black teenager was shot to death in Florida and his assailant defended his actions by claiming protection under Florida’s “stand your ground” law—many businesses began to distance themselves from ALEC. In 2012 Walmart joined other firms, such as Amazon.com, Coca-Cola, Kraft Foods, McDonald’s, General Electric, Sprint Nextel, and a dozen more, bending to pressure from civil rights groups. Walmart was the largest seller of firearms in the country and the largest employer of black workers and thus particularly vulnerable to protests surrounding the Treyvon Martin case. Walmart’s public affairs vice president explained the company’s action by saying, “ALEC had strayed from its core mission to advance the Jeffersonian principles of free markets.”
One industry that has been active in the political arena is solar power. Because solar energy has historically been more expensive to produce than fossil fuel energy, the indus- try has relied heavily on government incentives and subsidies to level the playing field. Although some major energy companies have entered the solar business, most of the 3,400 solar companies in the United States are small, such as Namasté Solar, a Boulder, Colorado, firm of 60 employees that installs solar energy systems for commercial and residential customers. The solar industry’s trade association, the Solar Energy Industries Association, has been very active in government affairs and advocacy, winning a number of policy victories. The federal stimulus bills of 2008 and 2009 provided tax credits, grants, and loans for solar installations and companies that made solar equipment (one of which, Solyndra, later failed). States—such as Hawaii, which required all new construc- tion to have solar water heaters by 2010—and cities—such as Berkeley, California, which loans money to residents to install solar panels—have also helped the industry with friendly policies.1
As the examples above demonstrate, many businesses—big and small—have become active participants in the political process to promote a variety of goals, from supporting organizations charged with developing legislation to support economic development and job growth to lobbying government regulators through a trade association to receive tax credits and grants. They are not always successful, however, as seen in the political part- nership of businesses with ALEC, which took on a ...
Corporate citizenship and socialresponsibility policies in tAlleneMcclendon878
Corporate citizenship and social
responsibility policies in the
United States of America
Mark Anthony Camilleri
Department of Corporate Communication, University of Malta, Msida, Malta
and Business School, University of Edinburgh, Edinburgh, UK
Abstract
Purpose – The aim of this case study is to outline relevant regulatory guidelines on environmental, social
and governance issues in the USA. This contribution includes a thorough analysis of several institutional
frameworks and guiding principles that have been purposely developed to foster corporate citizenship
behaviours.
Design/methodology/approach – A case study methodology involved a broad analysis of US
regulatory policies, voluntary instruments and soft laws that have stimulated organisations to implement and
report their responsible behaviours.
Findings – This contribution ties the corporate citizenship behaviours with the institutional and
stakeholder theories. The case study evaluated the US’s federal government, bureaus and its agencies’ policies
on human rights, health and social welfare, responsible supply chain and procurement of resources,
anticorruption, bribery and fraudulent behaviours, energy and water conservation practices as well as
environmental protection, among other issues.
Research limitations/implications – Past research may have not sufficiently linked corporate
citizenship with the corporate social responsibility (CSR) paradigm. This research reports how different US
regulatory institutions and non-governmental organisations are pushing forward the social responsibility,
environmental sustainability as well as the responsible corporate governance agenda.
Originality/value – This research critically analyses US policy and regulatory instruments including
relevant legislation and executive orders that are primarily intended to unlock corporate citizenship practices
from business and industry. It has also provided a conceptual framework for the corporate citizenship notion.
In conclusion, it implies that there are business and political cases for corporate citizenship.
Keywords Sustainability, Social responsibility, Environmental responsibility,
Corporate citizenship, Stakeholder engagement, USA CSR policy
Paper type Case study
Introduction
The US markets for labour and capital are fairly unregulated as there are low levels of
welfare state provisions (Kalleberg, 2013; Beaman, 2012). Consequently, many social issues
such as education, health care or community investment have traditionally been at the core
of corporate social responsibility (CSR) in the USA (Camilleri, 2016; Crane et al., 2013;
Welford, 2005). The CSR initiatives and the communicating activities within the areas of
philanthropy, stewardship, volunteerism and environmental affairs may not be treated as a
regulatory compliance issue in the US context. CSR is often characterised by the businesses’
voluntary societal engagements, as they are not obliged to undertake social and
environmental responsi ...
How world's companies act on corporate social responsibilityGrant Thornton LLP
Business as usual doesn’t cut it anymore for many companies around the world. They are becoming environmentally and socially responsible citizens, and demand the same from their vendors. Data from the Grant Thornton International Business Report reveals what’s driving this change and how it’s playing out across the globe.
Based on more than 2,500 interviews with business leaders, this infographic shows how the U.S. and 33 other countries stack up in their race for claiming responsible corporate citizenship.
See more at: http://gt-us.co/ZLFN4u
25law43665_ch02_025-046.indd 25 111618 1108 AMC H .docxstandfordabbot
25
law43665_ch02_025-046.indd 25 11/16/18 11:08 AM
C H A P T E R T W O
Managing Public
Issues and Stakeholder
Relationships
Businesses today operate in an ever-changing external environment, where effective management
requires anticipating emerging public issues and engaging positively with a wide range of stake-
holders. Whether the issue is growing concerns about climate change, health care, safety at work
or in our schools, social equality, or consumer safety, managers must respond to the opportunities
and risks it presents. To do so effectively often requires building relationships across organizational
boundaries, learning from external stakeholders, and altering practices in response. Effective man-
agement of public issues and stakeholder relationships builds value for the firm.
This Chapter Focuses on These Key Learning Objectives:
LO 2-1 Identifying public issues and analyzing gaps between corporate performance and stakeholder
expectations.
LO 2-2 Applying available tools or techniques to scan an organization’s multiple environments and assess-
ing stakeholder materiality.
LO 2-3 Describing the steps in the issue management process and determining how to make the process
most effective.
LO 2-4 Identifying the managerial skills required to respond to emerging issues effectively.
LO 2-5 Understanding the various stages through which businesses can engage with stakeholders, what
drives this engagement, and the role social media can play.
LO 2-6 Recognizing the value of creating stakeholder dialogue and networks.
Final PDF to printer
26 Part One Business in Society
law43665_ch02_025-046.indd 26 11/16/18 11:08 AM
A 2016 study from the Public Affairs Council found that many major corporations are
feeling increased pressure to speak out on social issues, ranging from discrimination and
human rights to environmental sustainability and quality education. Among companies
with more than $15 billion in annual revenue, more than three in four said expectations for
engagement had risen. Most of the pressure to engage in social issues, said the companies,
has come from their own employees.1
Legislative battles in North Carolina, Tennessee, Mississippi, and Georgia prompted
business leaders to take a stand favoring rights for transgender individuals. Dow Chemical,
Alcoa, and Northrup Grumman lobbied elected officials and publicly condemned measures
seen as discriminatory. Monsanto lead the fight in Missouri against a bill that would allow
businesses to deny certain services to same-sex couples as a matter of religious freedom. In
response to North Carolina’s state legislature passing a law that blocked antidiscriminatory
protections at the local level, Deutsche Bank, the German financial institution with signifi-
cant business in the United States, said it would freeze its plans to add jobs in North Caro-
lina. PayPal announced it would halt its plans to open a new global operations center there.
While .
The FixHow Citizens Unitedchanged politics, in 7charts.docxoreo10
The Fix
How Citizens United
changed politics, in 7
charts
By Chris Cillizza January 22, 2014
Four years ago today, the Supreme Court issued the Citizens United ruling, a case that has drastically re-shaped the political landscape in its relatively short life span.
President Obama condemned it in his 2010 state of the union address, Democrats tried, unsuccessfully, to make the 2010 midterms about it, and it played no small
part in making the 2012 presidential election by far the most expensive in American history.
So, what hath Citizens United -- which, in short, allowed corporations and labor unions to spend unlimited funds on direct advocacy for or against candidates -
actually wrought? Here are six charts -- many thanks to WaPo's Matea Gold for her help -- that tell the story. Got a favorite chart that details the impact of Citizens
United? Send it my way at [email protected] and I will add it to the post.
1. This chart details all spending by outside groups from 1990-2014. The surge in 2012 is obvious but compare outside spending in the 2006 midterms (pre Citizens
United) vs outside spending in the 2010 midterms (post Citizens United). Big difference.
2. Here's a look at all outside group spending through Jan. 21 (aka today) of an election year. Spending at this point in the 2014 cycle is already almost three times as
much as it was at this time in the 2010 election. And it's 25 times more than at this point in the 2006 election.
3. Conservatives have a far better organized and financed outside operation than do liberals. It's also worth noting that Republicans had a contested presidential
primary in 2012 with vast sums spent by a handful of individuals to elect their preferred candidate, skewing the numbers below a bit.
http://www.washingtonpost.com/news/the-fix/
https://www.washingtonpost.com/people/chris-cillizza/
http://www.scotusblog.com/case-files/cases/citizens-united-v-federal-election-commission/
http://www.publicintegrity.org/2012/10/18/11527/citizens-united-decision-and-why-it-matters
4. That GOP organization/fundraising advantage translates into more TV ads when it matters. The chart below -- courtesy of CMAG/Kantar Media -- tracks the raw
number of ads run by candidates, party committees and outside groups beginning 130 days before the 2010 and 2006 elections. It's no mistake that the red
(Republican) line soared between 2006 and 2010 while the blue (Democratic) one stayed largely steady.
5. While the soaring spending on elections -- by unions, corporations and individuals -- is well known by this point, what is less well understood is how Citizens
United drove massive amounts of cash into the non-profit political world, a world where disclosure is not required. This chart details the over $300 million spent by
outside groups with no disclosure of donors.
6. And this one shows the rapid drop in the amount of donor disclosure by outside groups.
7. This chart, courtesy of Brendan Doherty, a political ...
Similar to The Double-Edged Sword of CEO Activism (20)
Authored by: David F. Larcker, Bradford Lynch, Brian Tayan, and Daniel J. Taylor, June 29, 2020
Investors rely on corporate disclosure to make informed decisions about the value of companies they invest in. The COVID-19 pandemic provides a unique opportunity to examine disclosure practices of companies relative to peers in real time about a somewhat unprecedented shock that impacted practically every publicly listed company in the U.S. We examine how companies respond to such a situation, the choices they make, and how disclosure varies across industries and companies.
We ask:
• What motivates some companies to be forthcoming about what they are experiencing, while others remain silent?
• Do differences in disclosure reflect different degrees of certitude about how the virus would impact businesses, or differences in management perception of its obligations to shareholders?
• What insights will companies learn to prepare for future outlier events?
Authored by: avid F. Larcker, Brian Tayan, CGRI Research Spotlight Series. Corporate Governance Research Initiative (CGRI), April 2020
This Research Spotlight provides a summary of the academic literature on board composition, quality, and turnover. It reviews the evidence of:
The appointment of outside CEOs as directors
The importance of industry expertise to performance
The relation between director skills and performance
The stock market reaction to director resignations
Whether directors are penalized for poor oversight
This Research Spotlight expands upon issues introduced in the Quick Guide Board of Directors: Selection, Compensation, and Removal.
David F. Larcker and Brian Tayan, April 21, 2020, Stanford Closer Look Series
Little is known about the process by which pre-IPO companies select independent, outside board members—directors unaffiliated with the company or its investors. Private companies are not required to disclose their selection criteria or process, and are not required to satisfy the regulatory requirements for board members set out by public listing exchanges. In this Closer Look, we look at when, why, and how private companies add their first independent, outside director to the board.
We ask:
• Why do pre-IPO companies rely on very different criteria and processes to recruit outside directors than public companies do?
• What does this teach us about governance quality?
• How important are industry knowledge and managerial experience to board oversight?
• How important are independence and monitoring?
• Does a tradeoff exist between engagement and fit on the one hand and independence on the other?
Authored by David F. Larcker and Brian Tayan, April 1, 2020, Stanford Closer Look Series
We examine the size, structure, and demographic makeup of the C-suite (the CEO and the direct reports to the CEO) in each of the Fortune 100 companies as of February 2020. We find that women (and, to a lesser extent, racially diverse executives) are underrepresented in C-suite positions that directly feed into future CEO and board roles. What accounts for this distribution?
By John D. Kepler, David F. Larcker, Brian Tayan, and Daniel J. Taylor, January 28, 2020
Corporate executives receive a considerable portion of their compensation in the form of equity and, from time to time, sell a portion of their holdings in the open market. Executives nearly always have access to nonpublic information about the company, and routinely have an information advantage over public shareholders. Federal securities laws prohibit executives from trading on material nonpublic information about their company, and companies develop an Insider Trading Policy (ITP) to ensure executives comply with applicable rules. In this Closer Look we examine the potential shortcomings of existing governance practices as illustrated by four examples that suggest significant room for improvement.
We ask:
• Should an ITP go beyond legal requirements to minimize the risk of negative public perception from trades that might otherwise appear suspicious?
• Why don’t all companies make the terms of their ITP public?
• Why don’t more companies require the strictest standards, such as pre-approval by the general counsel and mandatory use of 10b5-1 plans?
• Does the board review trades by insiders on a regular basis? What conversation, if any, takes place between executives and the board around large, single-event sales?
Short summary
We identify potential shortcomings in existing governance practices around the approval of executive equity sales. Why don’t more companies require stricter standards to lessen suspicion around insider equity sales activity? Do boards review trades by insiders on a regular basis?
By David F. Larcker, Brian Tayan
Core Concepts Series. Corporate Governance Research Initiative,
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide takes an in-depth look at the Principles of Corporate Governance.
Authors: David F. Larcker and Brian Tayan, Stanford Closer Look Series, November 25, 2019
Among the controversies in corporate governance, perhaps none is more heated or widely debated across society than that of CEO pay. The views that American citizens have on CEO pay is centrally important because public opinion influences political decisions that shape tax, economic, and regulatory policy, and ultimately determine the standard of living of average Americans. This Closer Look reviews survey data of the American public to understand their views on compensation. We ask:
• How can society’s understanding of pay and value creation be improved and the controversy over CEO pay resolved?
• How should the level of CEO pay rise with complexity and profitability, particularly among America’s largest corporations?
• Should pay be reformed in the boardroom, or should high pay be addressed solely through the tax code?
• Are negative views of CEO pay driven by broad skepticism and lack of esteem for CEOs? Or do high pay levels themselves contribute to low regard for CEOs?
By David F. Larcker and Brian Tayan
CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, November 2019.
In fall 2019, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of In October 2019, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 3,062 individuals—representative by age, race, political affiliation, household income, and state residence—to understand the American population’s views on current and proposed tax policies.
Key findings include:
--Tax rates for high-income earners are about right
--Majority favor a wealth tax … but not if it harms the economy
--Americans do not want to set limits on personal wealth
--Americans do not believe in a right to universal basic income
--Trust in the ability of the U.S. government to spend tax dollars effectively is low
--Americans believe in higher taxes for corporations who pay their CEO large dollar amounts
--Little appetite exists to break up “big tech”
By David F. Larcker, Brian Tayan, Dottie Schindlinger and Anne Kors, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance and the Diligent Institute, November 2019
New research from the Rock Center for Corporate Governance at Stanford University and the Diligent Institute finds that corporate directors are not as shareholder-centric as commonly believed and that companies do not put the needs of shareholders significantly above the needs of their employees or society at large. Instead, directors pay considerable attention to important stakeholders—particularly their workforce—and take the interests of these groups into account as part of their long-term business planning.
• While directors are largely satisfied with their ESG-related efforts, they do not believe the outside world understands or appreciates the work they do.
• Directors recognize that tensions exist between shareholder and stakeholder interests. That said,
most believe their companies successfully balance this tension.
• In general, directors reject the view that their companies have a short-term investment horizon in
running their businesses.
In the summer of 2019, the Diligent Institute and the Rock Center for Corporate Governance at Stanford University surveyed nearly 200 directors of public and private corporations globally to better understand how they balance shareholder and stakeholder needs.
by David F. Larcker and Brian Tayan, Stanford Closer Look Series, October 7, 2019
A reliable system of corporate governance is considered to be an important requirement for the long-term success of a company. Unfortunately, after decades of research, we still do not have a clear understanding of the factors that make a governance system effective. Our understanding of governance suffers from 1) a tendency to overgeneralize across companies and 2) a tendency to refer to central concepts without first defining them. In this Closer Look, we examine four central concepts that are widely discussed but poorly understood.
We ask:
• Would the caliber of discussion improve, and consensus on solutions be realized, if the debate on corporate governance were less loosey-goosey?
• Why can we still not answer the question of what makes good governance?
• How can our understanding of board quality improve without betraying the confidential information that a board discusses?
• Why is it difficult to answer the question of how much a CEO should be paid?
• Are U.S. executives really short-term oriented in managing their companies?
David F. Larcker, Brian Tayan, Vinay Trivedi, and Owen Wurzbacher, Stanford Closer Look Series, July 2, 2019
Currently, there is much debate about the role that non-investor stakeholder interests play in the governance of public companies. Critics argue that greater attention should be paid to the interest of stakeholders and that by investing in initiatives and programs to promote their interests, companies will create long-term value that is greater, more sustainable, and more equitably shared among investors and society. However, advocacy for a more stakeholder-centric governance model is based on assumptions about managerial behavior that are relatively untested. In this Closer Look, we examine survey data of the CEOs and CFOs of companies in the S&P 1500 Index to understand the extent to which they incorporate stakeholder needs into the business planning and long-term strategy, and their view of the costs and benefits of ESG-related programs.
We ask:
• What are the real costs and benefits of ESG?
• How do companies signal to constituents that they take ESG activities seriously?
• How accurate are the ratings of third-party providers that rate companies on ESG factors?
• Do boards understand the short- and long-term impact of ESG activities?
• Do boards believe this investment is beneficial for the company?
By David F. Larcker, Brian Tayan, Vinay Trivedi and Owen Wurzbacher, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, July 2019
In spring 2019, the Rock Center for Corporate Governance at Stanford University surveyed 209 CEOs and CFOs of companies included in the S&P 1500 Index to understand the role that stakeholder interests play in long-term corporate planning.
Key Findings
• CEOs Are Divided On Whether Stakeholder Initiatives Are A Cost or Benefit to the Company
• Companies Tout Their Efforts But Believe the Public Doesn’t Understand Them
• Blackrock Advocates … But Has Little Impact
By David F. Larcker, Brian Tayan
Core Concepts Series. Corporate Governance Research Initiative, June 2019
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide will take an in-depth look at Shareholders and Activism.
By Brandon Boze, Margarita Krivitski, David F. Larcker, Brian Tayan, and Eva Zlotnicka
Stanford Closer Look Series
May 23, 2019
Recently, there has been debate among corporate managers, board of directors, and institutional investors around how best to incorporate ESG (environmental, social, and governance) factors into strategic and investment decision-making processes. In this Closer Look, we examine a framework informed by the experience of ValueAct Capital and include case examples.
We ask:
• What is the investment horizon prevalent among most companies today?
• Do companies miss long-term opportunities because of a focus on short-term costs?
• How many companies have an opportunity to profitably invest in ESG solutions?
• What factors determine whether a company can profitably invest in ESG solutions?
• Can investors earn competitive risk-adjusted returns through ESG investments?
• If so, how widespread is this opportunity?
This Research Spotlight provides a summary of the academic literature on environmental, social, and governance (ESG) activities including:
• The relation between ESG activities and firm value
• The impact of environmental and social engagements on firm performance
• The market reaction to ESG events
• The relation between ESG and agency problems
• The performance of socially responsible investment (SRI) funds
This Research Spotlight expands upon issues introduced in the Quick Guide “Investors and Activism”.
This Research Spotlight provides a summary of the academic literature on how dual-class share structures influence firm value and corporate governance quality. It reviews the evidence of:
• The relation between dual-class shares and governance quality
• The relation between dual-class shares and tax avoidance
• The relation between dual-class shares and firm value and performance
This Research Spotlight expands upon issues introduced in the Quick Guide “The Market for Corporate Control.”
By Courtney Hamilton, David F. Larcker, Stephen A. Miles, and Brian Tayan, Stanford Closer Look Series, February 15, 2019
Two decades ago, McKinsey advanced the idea that large U.S. companies are engaged in a “war for talent” and that to remain competitive they need to make a strategic effort to attract, retain, and develop the highest-performing executives. To understand the contribution of the human resources department to company strategy, we surveyed 85 CEOs and chief human resources officers at Fortune 1000 companies. In this Closer Look, we examine what these senior executives say about the contribution of HR to the strategic efforts and financial performance of their companies.
We ask:
• What role does HR play in the development of corporate strategy?
• Does HR have an equal voice or is it junior to other members of the senior management team?
• Do boards see HR and human capital as critical to corporate performance?
• How do boards ascertain whether management has the right HR strategy?
• How adept are companies at using data from HR systems to learn what programs work and why?
By David F. Larcker and Brian Tayan, Stanford Closer Look Series, December 3, 2018
Companies are required to have a reliable system of corporate governance in place at the time of IPO in order to protect the interests of public company investors and stakeholders. Yet, relatively little is known about the process by which they implement one. This Closer Look, based on detailed data from a sample of pre-IPO companies, examines the process by which companies go from essentially having no governance in place at the time of their founding to the fully established systems of governance required of public companies by the Securities and Exchange Commission. We examine the vastly different choices that companies make in deciding when and how to implement these standards.
We ask:
• What factors do CEOs and founders take into account in determining how to implement governance systems?
• Should regulators allow companies greater flexibility to tailor their governance systems to their specific needs?
• Which elements of governance add to business performance and which are done only for regulatory purposes?
• How much value does good governance add to a company’s overall valuation?
• When should small or medium sized companies that intend to remain private implement a governance system?
By David F. Larcker, Brian Tayan, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, November 2018
In summer and fall 2018, the Rock Center for Corporate Governance at Stanford University surveyed 53 founders and CEOs of 47 companies that completed an Initial Public Offering in the U.S. between 2010 and 2018 to understand how corporate governance practices evolve from startup through IPO.
By David F. Larcker, Brian Tayan, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, October 2018
In summer and fall 2018, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 3,544 individuals — representative by gender, race, age, household income, and state residence — to understand how the American public views CEOs who take public positions on environmental, social, and political issues.
“We find that the public is highly divided about CEOs who take vocal positions on social, environmental, or political issues,” says Professor David F. Larcker, Stanford Graduate School of Business. “While some applaud CEOs who speak up, others strongly disapprove. The divergence in opinions is striking. CEOs who take public positions on specific issues might build loyalty with their employees or customers, but these same positions can inadvertently alienate important segments of those populations. The cost of CEO activism might be higher than many CEOs, companies, or boards realize.”
“Hot-button issues are hot for a reason,” adds Brian Tayan, researcher at Stanford Graduate School of Business. “Interestingly, people are much more likely to think of products they have stopped using than products they have started using because of a position the CEO took on a public issue. When consumers don’t like what they hear, they react the best way they know how to: by closing their wallets.”
More from Stanford GSB Corporate Governance Research Initiative (20)
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A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
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Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
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Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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The Double-Edged Sword of CEO Activism
1. Stanford Closer LOOK series
Stanford Closer LOOK series 1
By David F. Larcker, Stephen A. Miles, Brian Tayan, and Kim wright-violich
november 8, 2018
The Double-Edged Sword of
CEO Activism
introduction
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. According to the New York Times, “Chief executives
across the business world are increasingly wading into political
issues that were once considered off limit.”1
The article cites gun
control and climate change as examples of advocacy positions
taken by CEOs in recent years, and references a study by Edelman
as evidence that this trend is viewed positively by the public.
According to that study, 64 percent of global consumers believe
that CEOs “should take the lead on change rather than waiting
for government to impose it,” and 56 percent say they have “no
respect for CEOs that remain silent on important issues.”2
A
separate survey by Weber Shandwick and KRC Research arrives
at a similar conclusion, finding that “more Americans are aware of
CEO activism, view it favorably, and see its potential to influence
public policy.”3
This viewpoint, however, is far from universal. Others believe
that CEOs should not use their position as leaders of public
companies to promote personal beliefs, and that the CEO’s
obligation is to advance the performance of the corporation
without offending customers, employees, or constituents who
hold opposing views or do not wish to hear advocacy views from
companies. A Wall Street Journal article with the provocative title,
“You’re a CEO. Stop Talking Like a Political Activist,” laments:
Business leaders who feel reluctant to join the fray, or worry
that discussing divisive issues will only alienate customers, find
themselves in a perilous spot. The endless, real-time conversation
taking place on social media, combined with the rising tide of
advocacy bubbling up from their own employees, customers and
investors, make their silence increasingly conspicuous.4
The impact of CEO activism on corporate performance is
essentially unknown.5
Chatterji and Toffel (2018) find that
CEO activism can “increase consumers’ intentions to purchase
the company’s products” but only to the degree that there is
“alignment between the CEO’s message and individuals’ policy
preferences.”6
Korschun, Aggarwal, Rafieian, and Swain (2016)
find that CEO activism is viewed positively by consumers if
the company is considered “values-oriented” but negatively
otherwise. The authors argue that the impact of CEO activism on
purchase behavior is driven by the degree of “perceived corporate
hypocrisy.”7
The bifurcated impact of CEO activism is exemplified by
a recent Nike advertising campaign that includes former NFL
quarterback and national-anthem protest leader Colin Kaepernick
with the statement: “Believe in something, even if it means
sacrificing everything.” The weekend following the campaign,
the company reportedly experienced a temporary spike in online
sales.8
At the same time, market-research firm Morning Consult
found that Nike brand’s favorability and purchase-consideration
ratings fell sharply across all demographic groups, even when
segmented by age, race, and political affiliation.9
Underscoring
the market’s uncertain view of CEO activism, Nike stock price
fell 3 percent on the news of the ad campaign and subsequently
recovered.
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.
CEO Activism in the Media
We started our analysis by examining all public statements in
national media and corporate transcripts made by the current
CEOs of all companies listed in the S&P 1500 Index.10
From these,
we removed advocacy statements related to corporate matters,
including statements about corporate tax rates, federal and
state regulations, and political issues with widespread economic
implications, such as the fiscal cliff, the debt ceiling, budget
sequestration, NAFTA, and tariffs. These statements are common
across a large number of CEOs in response to questions about
policy impacts on their business. Next, we categorized remaining
statements into five subject groups: the environment, diversity
2. CEO Activism
2Stanford Closer LOOK series
and inclusion, immigration and human rights, other social issues,
and politics (see Exhibit 1). We included both statements that are
a clear expression of the CEO’s personal beliefs and statements
that are ambiguous as to whether they are a personal belief or
corporate position.
The most immediate observation is that significant discretion
exists about whether a statement qualifies as activism. Some
statements on social or environmental matters are phrased as
personalpreferencesorexpressionsofopinionwithoutadvocating
that corporations or society take action. Many align with the
company’s core line of business and appear potentially beneficial
in terms of customer or employee retention, or addressing
external critics. The motivations behind these statements can be
ambiguous.11
Examples of commercially beneficial CEO statements are
plentiful:
• In 2018, The Coca-Cola Company announced a global
recycling initiative, pledging to collect and recycle an
equivalent volume of the packaging it sells each year, by 2030.
CEO James Quincey made the statement: “If left unchecked,
plastic waste will slowly choke our oceans and waterways.
We’re using up our earth as if there’s another one on the shelf
just waiting to be opened…. Companies have to do their part
by making sure packaging is actually recyclable.”12
• Gerry Anderson, the CEO of Michigan-based utility DTE
Energy, called climate change “the defining policy issue of
our era,” and said that his company has “a responsibility to
address it…. There is no sucker’s choice between a healthy
environment and a healthy economy…. We can have both so
long as we do it in a smart way.”13
• Darren Wood, the CEO of ExxonMobil, advocated that the
United States remain in the international Paris Agreement to
reduce climate change: “I believe, and my company believes,
that climate risks warrant action and it’s going to take all
of us—business, government, and consumers—to make
meaningful progress.”14
• In 2014, CVS announced that the company would no longer
sell tobacco products in its 7,600 U.S. pharmacies. According to
CEO Larry Merlo, “Cigarettes have no place in an environment
where healthcare is being delivered. This is the right decision at
the right time as we evolve from a drugstore into a healthcare
company.”15
The company had recently purchased Caremark,
a pharmacy benefits manager that administers prescriptions
for insurers and large employers.
Similarly, Newmont Mining maintains “sustainability targets to
uphold human rights and lower water use and greenhouse gas
emissions” in the developing nations where it operates;16
Philip
Morris International touts its ongoing effort “to continuously
improve working and living conditions” for the 450,000 tobacco
farmers that supply its product;17
and the CEO of Wynn Resorts
expressed his commitment “to lead our company and this industry
in diversity and gender equality” in statements made following the
termination of his predecessor for alleged sexual harassment.18
Our approach was to retain statements such as these, taking the
standpoint that outside observers are not in a position to reliably
assess the motivation behind personal statements. Similarly, we
retained statements made by CEOs touting awards their company
has received for meeting environmental, social, or diversity-
related goals, or their score on indices that measure companies
along these dimensions.
Even with this wide criteria, we found that very few CEOs
take activist positions in the national media. Among S&P
500 companies, we observed 138 (28 percent) making public
statements about social, environmental, or political issues either
personally or on behalf of the company; only 48 (10 percent)
clearly made these statements on a personal basis. Among S&P
1500 companies, the incident rate of CEO activism falls more
precipitously. Only 175 (12 percent) made statements personally
or on behalf of the company; and only 63 (4 percent) clearly made
these statements on a personal basis.19
Of these, diversity is the most frequently advocated issue, with
50 percent of activist CEOs promoting an increase in gender,
racial, or sexual-orientation diversity or equality. Environmental
issues are advocated by 41 percent of activist CEOs, immigration
and human rights 23 percent, other social issues 19 percent, and
political issues 17 percent (see Exhibit 2). Examples include the
following:
• American Airlines CEO Doug Parker, regarding a proposed
Arizona religious freedom law: “There is genuine concern
throughout the business community that this bill, if signed
into law, would jeopardize all that has been accomplished so
far. Wholly apart from the stated intent of this legislation, the
reality is that it has the very real potential of slowing down
the momentum we have achieved by reducing the desire of
businesses to locate in Arizona and depressing the travel and
tourism component of the economy if both convention traffic
and individual tourists decide to go elsewhere.”20
• Apple CEO Tim Cook, regarding violence in Charlottesville,
Virginia: “I disagree with the president and others who believe
that there is a moral equivalence between white supremacists
and Nazis, and those who oppose them by standing up for
human rights. Equating the two runs counter to our ideals as
3. CEO Activism
3Stanford Closer LOOK series
Americans.”21
• Chubb CEO Evan Greenberg, regarding the 2017 travel
ban from select countries: “We are a country of immigrants.
Our country’s openness to immigration is fundamental to
our identity and history as a nation, and vital to our future
prosperity. I am 100 percent for the security of our citizens.
But at the same time, America is the land of the free, and we
are a beacon and place of refuge for those seeking a better and
safer life for themselves and their families. Shutting our doors
to immigration is a mistake.”22
• Mylan CEO Heather Bresch, regarding diversity in the
workplace: “My experiences with gender bias are probably
the norm. What I found was that expectations of women
were simply lower, and this resulted in being overlooked for
certain opportunities. Now as a leader, I strive to create an
environment different than the one I faced, an environment
where good ideas can come from anyone—young, old, men,
women, assistant, executive—and opportunities are open to
everyone.”23
• Salesforce CEO Marc Benioff, regarding social equality:
“Equality’s really important to Salesforce, to me and to
Salesforce, in that equality is about gay rights. Equality’s also
about women’s rights. As the CEO of Salesforce, I’m going to
fight for that, as it relates to my company.”24
• CMS Energy CEO Patricia Kessler Poppe, regarding
environmental sustainability: “When we talk about our
commitment to the planet, we’re talking about reducing our
environmental impact, including reductions in water, land
use, emissions and carbon. We’ve self-imposed improvement
targets that go beyond environmental compliance, and we’re
ahead of our plan in all of these areas. There was a time when
this would have implied higher costs for customers but not at
CMS. We find a way to deliver it clean and lean.”25
Any perception of widespread CEO activism might be driven
by a few vocal outliers. Most CEOs who take positions do so
narrowly regarding one or two issues. Only a few are repeat
activists, expressing their opinions on multiple issues. Examples
of repeat CEO activists include Mark Benioff (Salesforce), Lloyd
Blankfein (Goldman Sachs), Tim Cook (Apple), Michael Corbat
(Citigroup), Robert Iger (Disney), Howard Schultz (Starbucks),
and Mark Zuckerberg (Facebook). These tend to be the CEOs of
large, prominent corporations whose statements attract media
attention.
In a recent article, Walmart CEO Doug McMillon conveys an
ambivalent view of CEO activism:
Society expects things of leading companies and sometimes we
should take a stance on something.” Some public statements are
“easier for us,” … such as supporting environmental sustainability
and military veterans, but “on social issues it gets tougher. Ideally
we wouldn’t lead on very many things.26
CEO Activism on Twitter
We then examined CEO activism on Twitter.27
Because Twitter
is a visible forum for companies and individuals to interact with
the public, we would expect CEO activism to be higher on Twitter
than in national publications and corporate transcripts. We found
this modestly to be the case. Although CEOs comment on public
issues more frequently on Twitter than in the national media, the
incident rate is still fairly low.
Among the S&P 1500, only 166 CEOs (11 percent) have active
personal Twitter feeds.28
Of these, 53 (23 percent) do not tweet
at all on social, environmental, or political issues. The remaining
113 (68 percent) tweet at least once advocating an issue; 22 (13
percent) dedicate 10 percent or more of their Twitter activity
to advocacy. In aggregate, 4.6 percent of CEO tweets can be
considered activist. Considering that the number of CEOs who
maintain personal Twitter feeds is only 11 percent of the CEO
population, CEO activism through Twitter is very small (656
tweets over the course of 1 to 3 years across 1500 total CEOs).
The distribution of tweets across subject categories is broad:
60 percent are related to diversity, 42 percent to the environment,
20 percent immigration and human rights, 56 percent other
social issues, and 16 percent political (see Exhibit 3). Other social
issues include increasing investment in education, combatting
poverty and homelessness, support for the military and veterans,
combatting diseases such as Alzheimer’s, and prison reform,
among others. Among the most controversial issues is gun control,
advocated by 11 executives.
The tone of CEO tweets varies broadly. While many take
a benign approach—promoting participation in a conference
or event, championing the work of company employees, or
retweeting others’ comments—some are strongly worded and
sharp in tone. Examples include the following:
• #BloombergEquality focusing on Closing the Gender Pay
Gap with transparent discussion! Companies need to address
structural gaps and dig in to know their numbers.
– Susan Salka, CEO AMN Healthcare
• Retweet of: Proud to be part of a company that supports the
LGBTQIA+ community and proud of our employees who
are sharing their experiences!#UnumCares @unumnews
#Pride2018
– Rick McKenney, CEO Unum Group
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4Stanford Closer LOOK series
• Today @AdvanceBizWomen shared our recommendation:
“Increasing the Number of Women in STEM.” Improving
access to #STEM education is crucial to innovation and it
helps communities attract and keep good jobs that will drive
the future. #IWD2018 advancingwomeninbusiness.com/
pillar-two/
– Mary Barra, CEO General Motors
• The women standing up to say #MeToo are brave and inspiring.
We must strive to ensure all women are safe at work.
– Indra Nooyi, CEO Pepsico
• I stand with @AMarch4OurLives & the students leading the
way to gun reform! Join the march! Our schools and our
children must be safe! #MarchForOurLives @Emma4Change
@davidhogg111 @cameron_kasky @al3xw1nd @JaclynCorin
#EnoughIsEnough #NeverAgain #Vote2018
– Joe Kiani, CEO Masimo
• The stories and images of families being separated at the
border are gut-wrenching. Urging our government to work
together to find a better, more humane way that is reflective of
our value as a nation. #keepfamilestogether
– Sundar Pinchai, CEO Google
• Retweet on refugee policy: Another new low from the Trump
administration. Unconscionable. Remember this cruelty when
you vote. Not just in the next election but in every election.
Not a single republican official has condemned this. The
“moderates” and “centrists” are just as cruel
– Stephen Kaufer, CEO TripAdvisor.
In addition, we tested whether companies with activist CEOs are
more likely to promote advocacy positionsthrough their corporate
twitter feeds than companies without activist CEOs. To do so, we
identified 14 companies led by activist CEOs and compared their
corporate twitter activity with a set of matched-pair companies
who do not have an activist CEO.29
We found no difference in
their frequency of tweets regarding social and environmental
issues: both sets of companies dedicate approximately 8 percent of
their tweets to these issues. The vast majority of these promote the
work the company does in areas such as diversity, environmental
sustainability, workforce education, and local community
investment and are not statements that some would strictly
consider “activist” (see Exhibit 4).
Public View of CEO Activism
Finally, we study the public reaction to CEO activism. While
survey data shows that a majority of the public supports CEO
activism as a generalized concept, viewpoints vary considerably
across issues: a positive reaction among some respondents is often
counterbalanced by a negative reaction among others.
In a survey of 3,544 individuals, the Rock Center for Corporate
Governance at Stanford University found that two-thirds (65
percent) of the public believe that the CEOs of large companies
should use their position and potential influence to advocate on
behalf of social, environmental, or political issues they care about
personally, while one-third (35 percent) do not.30
Members of the public are most in favor of CEO activism
about environmental issues, such as clean air or water (78 percent),
renewable energy (68 percent), sustainability (65 percent), and
climate change (65 percent). They are also generally positive
about widespread social issues, such as healthcare (69 percent),
income inequality (66 percent), poverty (65 percent), and taxes (58
percent).
The public reaction is much more mixed about issues of
diversity and equality. Fifty-four percent of Americans support
CEO activism about racial issues, while 29 percent do not; 43
percent support activism about LGBTQ rights, while 32 percent
do not; and only 40 percent support activism about gender issues,
while 37 percent do not.
Contentious social issues—such as gun control and abortion—
and politics and religion garner the least favorable reactions. Of
these issues, CEOs speaking up about gun control is the only one
with a net-favorable position (45 percent favorable versus 35
percent unfavorable). Abortion (37 percent versus 39 percent),
politics (33 percent versus 43 percent), and religion (31 percent
versus 45 percent) all elicit net-unfavorable reactions (see Exhibit 5).31
The most surprising result of the survey is that, while
Americans claim to change their purchasing behavior depending
on their agreement with an activist CEO’s position, respondents
are significantly more likely to remember products they stopped
using or use less because of the position the CEO took than
products they started using or use more. Specifically, 35 percent of
the public could think of a product or service they use less, while
only 20 percent could think of a product they use more.
While self-reported purchase behavior is often an unreliable
gauge, the high degree of public sensitivity to CEO activism
suggests that CEO activism is a double-edged sword: CEOs
who take public positions might build loyalty with employees,
customers, or constituents, but these same positions can
inadvertently alienate important segments of those populations.
Why This Matters
1. Common perception is that CEO activism has increased
in recent years, with executives more willing to take public
positions on controversial issues. Empirical evidence, however,
suggests that CEO activism is actually a fairly limited practice,
often uncontroversial in topic and tone, and dominated by
5. CEO Activism
5Stanford Closer LOOK series
a few vocal outliers. Just how widespread is CEO activism?
Are CEOs really taking risky positions to advance social,
environmental, and political change?
2. Survey data shows that the cost of CEO activism might be
higher than many CEOs, companies, or boards realize. How
well do boards understand the advocacy positions of their
CEO? How well do they understand the advocacy positions
adopted by their company (such as through Twitter)? Are they
involved in decisions to take public stances on controversial
issues, or do they leave these decisions to the discretion of
the CEO? Should boards be more engaged in these decisions,
particularly when a public stance has the potential to impact
positively or negatively the commercial performance of the
organization?
3. How should boards measure the costs and benefits of CEO
activism? How does the commercial impact (net change in
customer purchase behavior) weigh against the impact on
employee engagement and relations with external constituents,
regulators, or shareholders? If the board determines the net
impact of CEO activism to be negative, should it prevent the
CEO from being an activist?
4. Not all activism is alike. Some activism is proactive, in that
the CEO takes a stance that reflects a personally held belief,
while other activism is defensive, in that the CEO’s position
is made in response to external criticism or pressures. How
accurately can employees, customers, and members of the
public distinguish between these two types of activism? Do
they react differently to them? Should this distinction matter
from a board perspective?
1
Andrew Ross Sorkin, “C.E.O.s Should Lead on Addressing Social Issues,
Poll Finds,” The New York Times (May 1, 2018).
2
Sample includes 32,200 respondents in 28 countries. See Edelman,
“2018 Edelman Trust Barometer: Expectations for CEOs,” (2018).
3
Sample includes 1,006 respondents in the United States. Weber
Shadwick and KRC Research, “CEO Activism in 2018: The Purposeful
CEO,” (2018).
4
Sam Walker, “You’re a CEO—Stop Talking Like a Political Activist,” The
Wall Street Journal (July 27, 2018).
5
Activism has been studied in many other settings including which
companies are likely potential targets of consumer or stakeholder activist
campaigns and their responses. See Mary-Hunter McDonnell, Sarah
A. Soule, and Brayden G. King, “Taking Aim: Corporate Opportunity
Structures and Activists’ Selection of Corporate Targets,” Stanford
Graduate School of Business Working Paper (May 2017), available
at: https://www.gsb.stanford.edu/faculty-research/working-
papers/taking-aim-corporate-opportunity-structures-activists-
selection.
6
Aaron K. Chatterji and Michael W. Toffel, “Assessing the Impact of CEO
Activism,” Social Science Research Network (October 2018), available at:
https://ssrn.com/abstract=2742209.
7
They cite Patagonia, the outdoor apparel company, as an example of a
values-oriented company because it associates itself with conservation
and environmental issues. They contrast this example with Footlocker
which does not associate itself with particular issues. See Daniel
Korschun, Anubhav Aggarwal, Hoori Rafieian, and Scott Swain,
“Taking a Stand: Consumer Response When Companies Get (or Don’t
Get) Involved,” Social Science Research Network (July 2016), available at:
https://ssrn.com/abstract=2806476.
8
Khadeeja Safdar, “Nike Shows Boycotts Just Don’t Do It,” The Wall Street
Journal (September 17, 2018).
9
Morning Consult, “Nike’s Favorability Drops Double Digits Following
New ‘Just Do It” Campaign with Colin Kaepernick,” (September 10,
2018).
10
This comprised two Factiva searches: First, a review of all articles that
include the company and CEO name in Reuters News and The Wall Street
Journal between January 1, 2000 and July 31, 2018. Second, a search
of all articles that include the company and CEO name and a set of
key words in The Wall Street Journal, The New York Times, The Financial
Times, Reuters News, and Associated Press, and all earnings conference
calls, investor conference transcripts, and annual meeting transcripts
on CQ FD Disclosure during this same time period. The key words used
in the search were: advocate, abortion, pollution, environmentalism,
environmental impact, impact on the environment, climate change,
global warming, Paris accord, tariffs, NAFTA, sanctions, Brexit,
government shutdown, fiscal cliff, debt ceiling, sexual harassment,
gender equality, equal pay, pay gap, glass ceiling, inclusion, gun control,
universal healthcare, Obamacare, same-sex marriage, transgender,
homosexual, lesbian, gay, immigration, dreamers, travel ban, income
inequality, racial equality, racism, Charlottesville, terrorism, refugee,
and human rights. The two-pronged search allowed us to find national
stories that do not include these key words, but at the same time capture
important social, environmental, and political statements in a broader
set of outlets, including transcripts. A wider set of search terms and the
addition of more periodicals (including industry specific periods) would
likely increase the number of incidents identified.
11
That is, it is difficult to determine whether an activist statement reflects
a proactive stance that is personally initiated by the CEO or a defensive
position that the CEO feels compelled to take because of external factors.
12
Anna Nicolaou, “Coca-Cola Joins Push to Cut Plastic Waste,” The
Financial Times (January 20, 2018).
13
Ed White, “DTE: Our Future is Sun, Wind, Natural Gas, and Nuclear,”
Associated Press (May 16, 2017).
14
“Trump Seeks Input from U.S. Energy Companies on Paris Climate
Pact,” Reuters News (March 15, 2017).
15
Timothy W. Martin and Mike Esterl, “CVS to Kick Cigarette Habit,” The
Wall Street Journal (February 6, 2014).
16
CEO Gary Goldberg, cited in: “Q1 2018 Newmont Mining Corp
Earnings Call,” CQ FD Disclosure (April 26, 2018).
17
CEO André Calantzopoulos, cited in: “Philip Morris International Inc.
Annual Shareholders Meeting,” CQ FD Disclosure (May 4, 2016).
18
CEO Matthew Maddox, cited in: “Q1 2018 Wynn Resorts Ltd Earnings
Call,” CQ FD Disclosure (April 24, 2018).
19
It is likely the case that the CEOs of smaller companies are less likely to
be cited in the national media, although their statements still should be
observed in corporate transcripts.
19
Cited in: Bob Christie, “Pressure Mounts over Arizona Bill Opposed by
Gays,” Associated Press (February 25, 2014).
21
“Apple’s Cook Says He Disagrees with Trump, Vows Donations to Rights
Groups,” Reuters News (August 17, 2017).
22
CEO Evan Greenberg, cited in: Q4 2016 Chubb Ltd Earnings Call,” CQ
7. CEO Activism
7Stanford Closer LOOK series
Exhibit 1 — Criteria for Determining CEO activism
* Note: It is very difficult to assess the motivation behind statements on immigration. Most CEOs taking stances on immigration stand to benefit directly in
terms of improved labor supply (such as technology or hospitality workers) or customer demand for their products (such as home builders).
Source: research by the authors.
Environment
Includes CEOs who advocate that their company or other companies reduce their environmental impact or improve the
sustainability of their operations or supply chain. Does not include CEOs whose companies sell products or services to improve
sustainability or efficiency. Includes CEOs who tout awards their company has received for meeting environmental goals, or
their score on indices that measure environmental sustainability.
Also includes CEOs who advocate that their company, other companies, or the United States government take steps to mitigate
the effects of climate change, including advocating that the U.S. adopt a carbon tax, cap-and-trade legislation, or stay in the Paris
Climate Accord.
Diversity and Inclusion
Includes CEOs who advocate for an increase in diversity or inclusion in their workplace in terms of gender, ethnicity, or
sexual orientation. Also includes CEOs who advocate for gender equality or advancement, denounce racism or racist behavior,
discrimination or discriminatory behavior, advocate on behalf of same-sex marriage, LGBTQ rights, or advocate against
religious freedom laws that are perceived to restrict LGBTQ rights. Includes CEOs who tout awards their company has received
for diversity or inclusion.
Immigration and Human Rights
Includes CEOs who advocate for changes to U.S. immigration laws, possibly for humanitarian purposes and not explicitly to
improve the supply of high- or low-skill workers that benefit their business.*
Also includes CEOs who advocate for changes
to U.S. or international policy on behalf of migrants, migrant workers, refugees, indigenous people, or the improvement of
working conditions for workers in underdeveloped nations.
Other Social Issues
Includes CEOs who advocate on a wide range of issues, such as gun control, healthcare reform, food health and safety, the
treatment of animals, education reform, worker retraining, income inequality, or changes to individual tax rates. Does not
include CEOs whose businesses would directly benefit or be harmed from changes to policies or regulations that impact these
issues.
Politics
Includes CEOs who advocate for the election of specific individuals to political office. Also includes CEOs who advocate for
or against Brexit. Does not include positive or negative comments about general political parties, members of Congress, the
president, or comments about political issues with significant economic implications such as the fiscal cliff, the debt ceiling,
budget sequestration, NAFTA, or tariffs.
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Exhibit 2 — Prevalence of CEO Activism
Excludes corporate issues such as corporate taxes at the federal, state, or local level, and federal or state regulations. Some CEOs advocate on more
than one issue.
Source: research by the authors.
CEO Activism Among S&P 500 Companies
CEOs making public statements about social, environmental, or political issues
- personally or on behalf of the company 28% 138
- personally 10% 48
Breakdown of issues
- Environmental 44% 61
- Diversity 57% 78
- Immigration and human rights 27% 37
- Other social issues 19% 26
- Politics 15% 21
CEO Activism Among S&P 1500 Companies
CEOs making public statements about social, environmental, or political issues
- personally or on behalf of the company 12% 175
- personally 4% 63
Breakdown of issues
- Environmental 41% 71
- Diversity 50% 88
- Immigration and human rights 23% 41
- Other social issues 19% 34
- Politics 17% 30
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Exhibit 3 — CEO Personal Twitter Feeds
Sample includes 14,218 tweets across 166 CEOs with active personal Twitter feeds. The most recent 100 tweets were included in the sample for each
executive, or all tweets if the executive has tweeted fewer than 100 times.
Source: research by the authors.
CEO Activism on Twitter Among S&P 1500 Companies
CEOs with personal Twitter feeds 166 11%
Breakdown of activist activity (most recent 100 tweets)
- CEOs with no tweets advocating an issue 53 32%
- CEOs with at least 1 tweet advocating an issue 113 68%
- CEOs with 10%+ tweets advocating issues 22 13%
Percent of tweets advocating issues
- all CEOs with Twitter feeds 4.6%
- only CEOs who tweet advocating an issue 6.2%
Breakdown of activist tweets by issues
- Environmental 42%
- Diversity 60%
- Immigration and human rights 20%
- Other social issues 56%
- Politics 16%
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Exhibit 4 — Corporate Twitter Feeds of Activist CEO Companies versus Nonactivist Matched Pairs
Sample includes the Twitter feeds of 14 companies led by CEOs who have made multiple public statements advocating social, environmental, or
political issues and the Twitter feeds of 14 matched-pair companies led by CEOs who have not made advocacy statements on these issues. The most
100 recent tweets were reviewed for each company (2,628 total). Apple, Facebook, and Berkshire Hathaway were not included because they do not
maintain active Twitter feeds.
Source: research by the authors.
Activism on Corporate Twitter Feeds
Activist CEO Company % Activist Tweets Nonactivist CEO Company % Activist Tweets
- Accenture 7% - PricewaterhouseCoopers 16%
- Aetna 4% - UnitedHealthGroup 7%
- AT&T 14% - Verizon 8%
- Blackrock 0% - Vanguard 0%
- Campbell Soup 4% - Kellogg 35%
- Cisco 15% - Juniper Networks 0%
- eBay 0% - Overstock 1%
- Goldman Sachs 5% - Morgan Stanley 24%
- JP Morgan 15% - US Bancorp 5%
- Nike 1% - Adidas 0%
- Pepsico 23% - Dr Pepper Snapple 1%
- Salesforce 19% - Oracle 1%
- Starbucks 8% - Dunkin Brands 14%
- Walt Disney 0% - Viacom 3%
Total % Activist Tweets 8% Total % Activist Tweets 8%
Breakdown of issues Breakdown of issues
- Environmental 36% - Environmental 36%
- Diversity 79% - Diversity 64%
- Immigration and rights 7% - Immigration and rights 14%
- Other social issues 50% - Other social issues 36%
- Politics 14% - Politics 0%
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Exhibit 5 — continued
Net favorability calculated as the percent of respondents who select “thank you for speaking up” minus the percent of respondents who select “keep your mouth
shut.” Excludes respondents who select “no opinion.”
* Responses vary significantly when respondents are segmented by race. White respondents reply 49% “thank you for speaking up.” Nonwhite respondents reply
66% “thank you for speaking up.”
** LGBTQ means lesbian, gay, bisexual, transgender, or queer/questioning
*** Reponses vary only modestly when respondents are segmented by gender. Female respondents reply 42% “thank you for speaking up.” Male respondents
reply 37% “thank you for speaking up.”
Source: Rock Center for Corporate Governance at Stanford University, “2018 CEO Activism Survey,” (2018).