Companies must take precautions as more CEOs step into the public spotlight
Public commentary can disturb relationships with the board, confuse members of the management team and undermine corporate relationships,
In a subtle shift from historical practice, CEOs across industry sectors have, in the last year, demonstrated a greater willingness to take public positions on public policy issues and related concerns. This has especially been the case with respect to developments impacting social justice, systemic racism, immigration, gun control, diversity, gender equality, homelessness and similar hot button topics.
Yet such public positioning is not without significant reputational, performance and perhaps legal risk to the CEO and to the company. Such comments can disturb relationships with the board, confuse other members of the management team, undermine corporate relationships with legislators, and affect consumer preferences.
More recently, many leading CEOs have expressed public positions on such controversial issues as the validity of the presidential election and the need to respect the transition process. Some have done so in individual, “one off” comments; others have done so in a group process organized by the New York state Attorney General, and others have done so through discrete forums sponsored by groups such as the Yale School of Management.
In addition, CEOs are also beginning to speak out on current public health issues, including the seriousness of the COVID-19 pandemic; the national debate on the value of mask-wearing; and looming conflicts over the social equities of vaccine distribution, and its underlying safety. CEOs have also been willing to participate in external forums on controversial topics, such as Harvard University’s recent private meeting for executives to discuss the pandemic’s impact on business.
Another example is how CEOs are leading their companies to be more aggressive in their support of social responsibility initiatives, such as the recent efforts of 40 major corporations to encourage Congress to work closely with President-elect Biden to address the threat of climate change and to rejoin the Paris climate accord. In addition, the National Association of Corporate Directors has published several member advisories on corporate messaging on social responsibility topics.
Historically, these kinds of public positions have been more a reflection of what is in the best interests of the company, than an exercise of hubris by the CEO. And there is an increasing sense that public positions on certain leading issues of the day can have a positive impact on the company’s reputation, its relationship with consumers and with its own workforce.
Sometimes the prompt for comment will be external, such as a public development of significance to the company’s customer base, pressure from corporate stakeholders or criticism from the media. Other times the pressure can be internal, such as a response to an organizational justice initiative or other expressions of workforce concern. In either case, the CEO’s response should be expressed as an extension of the corporate culture.
In some instances, CEOs are using social media platforms such as LinkedIn, Twitter and Facebook to discuss the social responsibility perspectives of their companies. This is in large part due to a recognition that social media can help companies cultivate brand perception, enhance customer relationships, increase rapport with employees, recruit and retain millennial-generation talent and demonstrate currency with cultural trends.
The New York Times has described all this as “part of a broad recasting of the voice of business in the nation’s political and social dialogue, a transformation that has gained momentum in recent years as the country has engaged in fraught debates over everything from climate change to health care.”
Use of social media as a vehicle for public expression carries its own risks, such as unfamiliarity with social media protocols, distraction from more traditional duties, employee or consumer misinterpretation of postings as offensive or controversial, and increased potential for cybersecurity breaches. Social media also raises distinctly legal risks, particularly with respect to securities law and antitrust regulation and concerns with libel.
In a worst-case scenario, unauthorized or particularly controversial public comments can lead to a CEO’s termination or accelerated retirement. But, as The Wall Street Journal recently noted, these and similar risks are unlikely to deter CEOs from public articulation of socially responsible business positions: “The heightened threat of backlash hasn’t stopped some from doubling down on commitments to the social causes of their choice”. More significantly, the Journal suggests that the trend toward more socially responsible businesses isn’t likely to go away in the aftermath of the election.
As one of the key guardians of the corporate reputation, the CLO has an important role to play, advising the CEO on how best to balance the risks and rewards of public commentary. In this role, the CLO should be advising the CEO in the broadest possible context. The CLO should supplement technical legal analysis with consideration of applicable moral, ethical, political, economic, and environmental factors. The CLO should then offer advice not only on whether the proposed commentary is legal, but also whether it is the right thing to do, from the perspective of the corporation, its stakeholders, the public and sound policy.
Furthermore, the CLO should work to facilitate board approval for any communication plan. As the board’s chief governance advisor, the CLO should brief the board on the possible issues surrounding the CEO taking a higher public profile on specific social issues. As part of this conversation the CLO should identify the related advantages and disadvantages of any commentary, and facilitate an understanding on the topics the CEO can or should speak to on the CEO’s own initiative, and those for which she must obtain prior board approval. In this effort the CLO can coordinate with the compliance officer and corporate communications officers to assure clarity of internal and external messaging.
As the daily headlines suggest, Biden Administration initiatives are likely to insert into public discourse new and potentially controversial social policy issues. The focus on socially responsible, values-oriented corporate purposes will also likely increase. As a result, the CLO should expect to devote an increasing amount of her time supporting the CEO in the development of his/her public voice.
Michael W. Peregrine, a partner at the law firm of McDermott Will & Emery, advises corporations, officers and directors on matters relating to corporate governance, fiduciary duties, and officer and director liability issues. His views do not necessarily reflect the views of the firm or its clients.