In "Board Oversight of Corporate Political Activity and CEO Activism," Sidley's Holly Gregory shares a sound framework management may consider to address whether, when and how CEOs should take a public stance on sensitive and potentially divisive social issues that may generate both positive and negative reactions among the company's multiple constituencies.
Among other things, the column suggests companies establish a management-level committee to:
- Identify political or social issues that the company should consider taking a position on, both in response to current events and proactively
- Determine which issues are directly connected to the company’s interests and in line with the company’s core values
- Assess (via engagement and otherwise) potential benefits & risks associated with taking a position on a certain issue, in consultation with communications and policy experts, as appropriate
- Establish a response team and protocol to:
- Assess and prepare the company’s response to an issue
- Seek broad consensus internally, as appropriate
- Articulate why the issue is important to the company and CEO (or not appropriate for company action if the decision is to not engage)
- Address questions from key constituents about the company’s reasoning
- Assess and manage the impact once a position is taken, including procedures for managing negative reactions from employees, customers, and suppliers
- Consider how the board will be kept informed and under what circumstances input from the board or a designated board committee or director will be sought prior to taking positions on issues that could harm the company’s business or reputation
Boards are advised to consider a number of factors including: (i) the degree of CEO discretion and authority, (ii) any particular issue's nexus with the company's business, (iii) potential opportunities/upsides of taking a position, and (iv) financial impacts and other risks associated with speaking out and not speaking out, and to communicate with the CEO their expectations surrounding the decision-making process in advance of any CEO activist activities.
See Walmart's "McMillon to Associates: Our Next Steps in Response to the Tragedies in El Paso and Southaven"; these prior reports: "Employee Activism: The Next New Normal?", "Employee Activism: State of Play," "CEO Activism: Here's How!," and "Communications/Marketing Execs Favor CEO Activism"; and additional information & resources on our Risk Management & Oversight page. This post first appeared in the weekly Society Alert!