Should CEOs be outspoken about ESG issues?

More and more CEOs start to use their public profile to advocate for social change. The most prominent example is probably BlackRock CEO Larry Fink who in 2019 wrote a “Dear CEO” letter encouraging his fellow corporate leaders to become more outspoken about social issues and the purpose of their corporations.

But is it really a good idea for CEOs to become more outspoken about social issues ranging from social justice (e.g. Black Lives Matter) to environmental concerns? After all, the role of a CEO is to be concerned about the profitability of his or her company, not to be an activist. A group of researchers looked at the perception of CEO statements on broader social issues in the United States by investors and the reaction of investors to these statements. And because the study was done with US investors, they used the most divisive topic they could find: gun rights.

The results to the question of whether CEOs should be more outspoken is an unequivocal “it depends”.

First, and I think most importantly, CEOs should simply shut up about topics that are not relevant to their business. CEOS that commented on gun rights issues in the United States even though the issue was irrelevant to their company came across as inappropriately getting out of line. In essence, most investors thought, CEOs should keep their private views to their private social media feeds and not use their corporate platform to promote personal views.

However, when the issue becomes more relevant to the business of the company, thing change. In this case, keeping silent about an issue may not hurt the company or its share price, but being outspoken about the issue can attract new investors. CEOs who are outspoken about gun rights issues attract a significant amount of new investments from investors who agree with their views. This means that being outspoken about these social issues can have benefits for corporate leaders because it attracts investors that otherwise might not invest in the company and it can help support the share price. And that should be motivation enough for corporate leaders to think about ESG issues and take a clear position where relevant. And of course, that also means that the company then have to follow through on its commitments because taking a stance about an issue and then not following through will quickly put a company in disrepute and brand a CEO as a phoney. So think, before you speak (something not every CEO is able to do).