Social Impact Apr 28, 2021
Why Companies Should Engage with Activists
As calls for social change grow louder, corporations that stay silent risk alienating both customers and employees.
Activists have long set their sights on corporations in an effort to bring about social change. Think of the lunch-counter boycotts of the Civil Rights movement, for example. Today that pressure from activists is only growing, whether it’s focused on racial justice or labor reforms or the environment.
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But just how effective are these activists in convincing companies to change? And what are the best ways for companies to react to activists’ demands while still keeping the interests of their own organizations front and center?
“You only have to turn on the news to recognize that the public cares about these movements, and increasingly, their [corporate] targets are engaged with them as well,” says Brayden King, a professor of management and organizations at the Kellogg School.
King has spent much of his career researching activists’ impact on corporations. He shared some of his findings during a recent The Insightful Leader Live webinar.
For starters, collective action against corporations often works. In one study that looks at boycotts, King and his coauthors found that if a boycott received national media attention, activists got some sort of concession from the targeted company 25 percent of the time.
So what differentiates a successful campaign from the rest? On the surface, it may seem that the power of a boycott is in getting customers to abandon a particular product. But this turns out to be wrong.
“There’s very little evidence that consumers change their behavior, even when they vocally support a boycott,” King says.
Instead, activists’ power comes from shining a spotlight on a particular company’s actions (or inactions) in ways that create liabilities.
“Protests are a kind of information signal that cause people to pay attention to an issue, or maybe rethink an issue,” King explains. “It causes investors, policymakers, executives and the general public to look at that organization in a different way.”
That spotlight can make investors wary of potential problems and long-term risks within a company. In one study, King and coauthors looked at the impact of protests on a company’s stock price. They found, on average, a 1 percent drop in stock price within a 26-day period of a protest targeting that company.
There was a lot of variation in the results, though, and media coverage appeared to be the key factor. Companies that had received a lot of coverage prior to a protest did not see as big of a decline. The researchers believe this is because protests aren’t as effective in generating information if there’s already a lot of information about the company out there for the public to see.
Protests also create a threat to a company’s broader reputation, potentially jeopardizing the company’s relationships with both customers and its own employees.
Given that protests do present a risk for corporations, how should they respond if they find themselves the target of an activist campaign?
King describes a spectrum of responses, ranging from issuing a public statement of support to bringing activists into company discussions. Each comes with its own set of potential risks and rewards.
For example, issuing a statement is easy and cheap. And it may end up being the first step in more meaningful work. But a company also runs the risk of being labeled a hypocrite if it publicly pronounces support for a cause and then its actions later undermine that.
“We’ve seen many examples in our research where companies make a commitment, don’t do anything, and end up becoming more of a focus of a movement in the future rather than less,” he says.
King is interested in the growing trend of CEOs speaking out on issues that don’t relate to their core business, such as Georgia’s new voting law or North Carolina’s transgender bathroom bill.
“It’s not that CEOs are political mavericks and are using the company platform as a way to promote their own causes,” King says. Some of his recent research shows that “the main reason for this kind of activism is that companies feel like this is something their employees want.” He suspects that this trend will only increase as more of the workforce is made up of Millennial and Gen Z employees who tend to be both more politically active and more willing to leave jobs that don’t align with their values than their older coworkers.
He’s also seeing more of what he terms infrastructural change within companies in response to activists.
For example, corporate social responsibility (CSR) committees have grown in both number and responsibility over the past 15–20 years. More than simply creating an annual CSR report, these committees bring regular opportunities to reflect on, and hold the company accountable to, various reforms. In the process, many committee members become internal champions. They “often take on the activist point of view and become allies of these activists in the future,” King says.
The most significant action a company can take is to welcome activists into company discussions. Nike is a textbook example of this. In the 1990s, activists targeted the company for its use of sweatshop labor. Eventually, Nike started seeing the activists not as adversaries but as partners who could help the company improve its operations and reputation.
“They not only listened to the activists, but they began to bring the activists in and give them a real seat at the table,” Kings says. “Now we think of Nike as a company that is proactive and engaging on social issues. It’s become part of their brand, such that when it put up that billboard of Colin Kaepernick … nobody was surprised because they thought, ‘well, of course, Nike will do this because Nike is a company that cares about racial justice, about human rights.’”
King believes that more and more organizations are viewing activists in this way.
“I think that activists increasingly do have a place at the table,” he says. “We see them as voices that matter, and companies and governments throughout the world are increasingly willing to let them in and have them help set better practices.”
Emily Stone is the senior editor at Kellogg Insight.
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