Face North

CEOs as global statesmen? CEOs as moral compasses?  That appeared to be the implication of a New York Times Deal Book article (October 16, 2018, Sorkin) about the decision of several very prominent U.S. CEOs to not attend Saudi Arabia’s Future Investment Initiative (aka Davos in the Desert) in October 2018.

All the withdrawing CEOs had important, ongoing business relationships with Saudi Arabia that a company wouldn’t normally jeopardize.  But the decision to withdraw stemmed from a decidedly non-business reason:  unresolved questions about possible Saudi government involvement in the disappearance of journalist Jamal Khoshoggi.

Now, when these decisions were made there were a lot of unknowns (there still are), but in making their decision each CEO was forced to face their true north – how to best act in accordance with their values.  Some might call this CEO activism.

Admittedly, this is may be an extreme interpretation. Some would say it’s not an example of CEO activism at all but reflects a basic moral decision.  But isn’t that what CEO activism is all about:  CEOs leading, communicating and making decisions based on a set of core values?

Today, there is vigorous debate about the theory of shareholder primacy, how to best create long-term value, the role and purpose of business in society and what is real leadership.  The fact of the matter is expectations of CEOs and their companies have changed as has the business, social and political climate in which we all operate.

The general public and institutional investors increasingly look to companies and their CEOs to take a stand on social or political issues relevant to fostering a healthy business environment according to the Edelman Trust Barometer.  At the same time, leading institutional investors like Larry Fink, Chairman & CEO of BlackRock, are encouraging managements and boards to have very fundamental and thoughtful discussions about a company’s purpose, values and cultures and to communicate such to investors.

Most CEOs (likely the vast majority) have no desire to be an activist. Still, smart CEOs choose their issues and don’t want to be caught flat-footed when the vortex of a social or political issue hurls their way.  Knowing whether and how to step in requires a deep understanding of a CEO’s and company’s purpose, values and culture. CEOs, their management teams and boards should identify their true north via disciplined analysis that:

  • Identifies relevant issues that may affect the company’s ability to serve customers, source materials, attract and motivate employees or operate effectively;
  • Evaluates the implications of an issue in view of stakeholder perceptions and potential business or reputational impact.

Based on this analysis, develop a framework to guide your approach and vet it with the board.  There are several paths available. For example:

  • When a quiet or behind the scenes approach is preferred, consider tactics such as lobbying, affiliating with appropriate trade or industry coalitions, or making targeted charitable or political contributions.
  • If visible leadership is important, think about options to weigh-in via social media, public statements or op-ed pieces. Of course, slowing or halting a planned expansion or relocating certain business activities are forceful signals of commitment that should be carefully vetted before using.

Some may say the business of business is business, but real leadership often requires something more.  If, or when, a CEO or company decides to express a view, here’s some thoughts on how to do so in a manner that supports understanding and acceptance:

  • Be Transparent: Stakeholders typically accept a company’s position if they believe a CEO or company are open and forthright and will walk the talk.
  • Be Consistent: Companies should be true to what they stand for and predictable in their actions.  Surprises weaken trust, leading stakeholders to doubt a company’s real intent.
  • Materiality: Stakeholders understand and expect CEOs and companies to take positions on issues relevant to its business, employees, customers or communities, just be transparent when expressing a perspective.
  • Leadership: By being transparent, consistent and presenting a forthright business case for its perspectives, a company will more likely be respected even if stakeholders don’t agree.


Lisa Ciota
Lead-IR Advisors, Inc.


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