Spring 2023

Yashoda Bhagwat is the first business scholar to examine the cost of corporate sociopolitical activism. Those actions, she says, are “either going to really upset your stakeholders or really please your stakeholders.” Photo by Rodger Mallison

High-stakes Stances

 Yashoda Bhagwat analyzes the cost of corporate sociopolitical activism.

After a February 2018 school shooting left 17 people dead in Parkland, Florida, Delta Air Lines CEO Ed Bastian decided to end the carrier’s discounted airfare program for National Rifle Association members. 

“When you make a decision like that, it’s partisan and it’s public,” said Yashoda Bhagwat, an associate professor of marketing at TCU. “It’s either going to really upset your stakeholders or really please your stakeholders.” 

Bastian’s decision satisfied some of the public outcry from people worried about gun ownership and its links to violence. 

But then legislators in Georgia, the home state of Atlanta-based Delta, rescinded the carrier’s estimated $40 million tax break. NRA supporters threatened boycotts. 

“I knew there would be backlash, but I didn’t anticipate the strength of the backlash from the NRA movement,” Bastian told Fortune magazine that August. 

What if Delta’s corporate leaders had been able to predict investor and customer reaction — and its price tag — before making that decision on the discount program? How might Bastian have altered the delivery of his policy if he had known of the imminent fallout? 

Bhagwat answered questions such as those in her award-winning paper “Corporate Sociopolitical Activism and Firm Value.” Her research is the first to examine the financial consequences of corporate sociopolitical activism, which she defines as the public demonstration of support or opposition to a partisan issue. 

Take, for example, Nike’s support in fall 2017 for NFL players who knelt during the national anthem in protest of police brutality. In contrast, John Schnatter, CEO of Papa John’s Pizza, criticized NFL leadership for allowing the kneeling. The pizza chain found itself in the middle of a hot sociopolitical issue. A month later, Schnatter stepped down as chief executive of the company he founded. 

“In the past, companies donated silently to political parties and then publicly participated in nonpartisan activities,” Bhagwat said. “But what’s the overall effect of them now publicly donating and getting involved in partisan issues? Investors, on average, don’t seem to like it.” 

Leading a team of marketing researchers from around the country, Bhagwat analyzed 293 corporate sociopolitical actions initiated by 149 firms across 39 industries. 

The scholars’ resulting Journal of Marketing paper won the 2020 H. Paul Root Award from the American Marketing Association and the Marketing Science Institute. 

Awards are nice, but the research, if heeded, could help companies protect their brands and add shareholder value. 

Off the Fence

Bastian represents a new breed of CEO who is somewhat forced to take a stand. 

“We have found that consumers notice and react to firm silence when other firms in the same industry — competitors — engage in activism,” Bhagwat said. “They also notice when firms are silent on particular issues when they engage in activism on other related issues. In other words, consumers want consistency.” 

Her ongoing research indicates that some consumers were angry at Nike for taking a stand on Black Lives Matter but remaining silent on protests in Hong Kong.

“We have found that consumers notice and react to firm silence when other firms in the same industry — competitors — engage in activism.” – Yashoda Bhagwat | Photo by Rodger Mallison

More than three years after the Parkland shooting, Bastian is reflective but unregretful. “Growing up in the business world, you’re generally taught to keep your head low and make sure you don’t land on the front page,” he said in a 2021 Fast Company article. In the last five years, “the level of the divisiveness in our society has actually elevated corporate leaders to a higher position of credibility in the public’s eye.” 

Ed Stewart, assistant vice president for communications and marketing at DFW International Airport, knows Bastian well. From 2008 to 2010, Stewart was Delta’s managing director of external corporate communications. 

Stewart said today’s CEOs are in a tough position because they’re often left with little choice but to respond to social unrest. Stewart cited examples of how his leadership team responded to airport employees after the disturbing video of George Floyd’s 2020 murder. Those efforts included the leaders holding listening sessions on race relations. 

“It’s hard to tell your eyes you didn’t see what you thought you saw,” Stewart said. “Now you’re in a situation where you have to address the obvious elephant in the room that’s always been there. And you can’t sugarcoat it; you can only call it what it is.” 

Stewart was in a far different climate when he started managing corporate messaging in 1990 as chief spokesperson for Southwest Airlines. Although he dealt with an outspoken CEO, the legendary Herb Kelleher, Stewart said today’s environment is trickier. Kelleher, a product of a bygone era, was known for his love of Wild Turkey whiskey and for lighting up cigarettes in public places, regardless of no smoking signs. 

“Investors today are especially attuned to CEO personalities, but I believe they are becoming more used to big personalities and CEOs using their platforms to comment on social issues,” Bhagwat said. “I think how Kelleher would fare in today’s world would largely depend on how his views aligned with his customers’ views.” 

Inherent Risk

Corporate sociopolitical activism involves potentially offending the personal values of at least some of a company’s customers, employees and lawmakers. On the flip side, Bhagwat said, activism can boost sales and build a brand by reflecting buyers’ core values. 

Bhagwat’s team found that investors generally see corporate sociopolitical activism as risky; investors said outspoken, politically charged stances can jeopardize cash flows and may divert the firm’s efforts from activities that maximize shareholder value.

The researchers also found that it matters if a company’s actions deviate from the values held by customers, employees and lawmakers as well as from the firm’s brand image. 

For example, Starbucks tends to attract customers on the progressive side, whereas Chick-fil-A customers lean toward the conservative. If those corporate leaders take a stand that goes against brand image, customers likely will penalize them. 

Consider the backlash that Target Corp. faced when the retail giant announced an inclusive restroom policy for its 1,800 stores in support of transgender individuals. Target’s decision was spurred by a North Carolina law requiring people to use the restroom corresponding to their gender assigned at birth. Target announced in April 2016 that it would be sympathetic to transgender concerns. 

Within months, the American Family Association, a conservative Christian advocacy group, collected over 1 million online signatures in a pledge to boycott Target. 

Target faced an immediate dip in sales revenue in second quarter 2016. 

Cathy Smith, Target’s chief financial officer, hit the media circuit to assuage investors’ fears. “Some of our guests clearly are uncomfortable with our policy, and some are supportive,” Smith said in an August 2016 National Public Radio story. 

In response, Target announced it would spend $20 million to build more single-stall restrooms that can be locked for privacy. 

Commitment Level

Bhagwat’s research found that investors watch a company’s commitment of time, capital and attention devoted to speaking out on politically charged issues, such as racial injustice, gun rights and gender identity. 

After former President Donald Trump placed a hold on allowing refugees from Syria and six other Muslim-majority countries into the United States, Starbucks CEO Howard Schultz announced that the company would hire 10,000 refugees within five years. 

While most corporate bosses stayed silent on the issue, Starbucks’ sociopolitical activism went beyond a statement to an actual hiring commitment. The world’s largest coffee chain quickly faced a firestorm on social media. In response, Schultz said the company would speed up a previous commitment to hire more veterans and military spouses. 

Bhagwat’s team found that investors also notice who announces an activist stance, whether it’s an outspoken CEO or a lower-level spokesperson. 

Investors also watch whether the stance promotes a business interest and whether the company is going it alone versus joining a chorus of other businesses. 

If a company is the lone voice on an issue, offended customers are more likely to switch to competitors. But there is safety in numbers. 

Competing Interest

Some corporate activism events proved harder to classify, Bhagwat’s research revealed. Overlapping factors sometimes create a public relations quagmire. For example, a manager of a company such as Whole Foods might feel pressured to engage in liberal-oriented activism to appease a liberal-leaning customer base but also fear retaliation from a conservative legislature like Texas’. 

Daniel Pullin, TCU President

Bhagwat’s team found that investor reaction is generally adverse when a sociopolitical action offends at least two key stakeholder groups. Her research could be used for predictive modeling to determine whether a proposed sociopolitical action is worth the likely fallout. 

Bhagwat’s team singled out J.C. Penney’s 2011 hiring of CEO Ron Johnson from Apple, known for a highly progressive corporate culture. Johnson’s approach clashed with the conservative values of J.C. Penney’s stakeholders. 

“Under Johnson, J.C. Penney invested in same-sex partner advertisements for Mother’s and Father’s Day in 2012,” Bhagwat’s research paper reported. “In April 2013, J.C. Penney finally accepted its ‘strategic mistakes’ after the free fall of its stock value and fired Ron Johnson.” 

Bhagwat said the tension between shareholder value maximization and social responsibility is not new. Investors want to make money. Any deviation from a plan to get them the most return — no matter how noble the cause — raises eyebrows. However, because of its partisan nature, activism increases the risk for investors beyond the traditional corporate social responsibility role. 

Building a Compass

Sociopolitical issues exist at the intersections of time, politics and culture, and the controversy surrounding them can evolve or resolve over time. Put another way, today’s sociopolitical issues might very well become tomorrow’s noncontroversial social responsibility efforts. To illustrate, the idea of universal women’s suffrage was contentious 100 years ago but became widely accepted in the United States. 

Julie O’Neil, professor and associate dean for graduate studies and administration in the Bob Schieffer College of Communication, has spent years studying the impact of corporate social responsibility efforts. Over the last 10 years, she said, customers have increasingly demanded that brands do more than just make profits. 

“People expect companies to get involved,” O’Neil said. “They’re saying that it’s not just the role of government to solve some of our big societal issues and problems, but the companies have a responsibility as well because they have big pocketbooks and deep areas of expertise. That expectation has shifted.” 

Before engaging in a social project seemingly unrelated to the core business, companies should conduct an accountability and authenticity gut check, she said. “The CEO or someone in the company needs to ask, ‘Does this issue — whether it’s racism, the environment or women’s rights — does it align with the mission, purpose or values?’ ” 

She cited Patagonia, the designer of outdoor clothing and related gear, as an example of a brand whose environmental activism matches its mission, purpose and values. Patagonia sponsored an online petition opposing the Dakota Access Pipeline, pointing to climate concerns and harm to working-class communities near the pipeline. 

Daniel Pullin, TCU’s president and the former John V. Roach Dean of the Neeley School of Business, said the topic of corporate sociopolitical action is motivating students. Today’s business students are in a position to shape how corporate leaders respond to social issues, he said. 

“As a society, we haven’t seen this type of enthusiasm among students since probably the late 1960s,” Pullin said. “Students are coming to classes believing they can make a difference beyond themselves and be a force for good.” 

Those business students soon will be at the helm, navigating tomorrow’s complicated seas of moral obligations, societal pressures and fiduciary responsibilities. Bhagwat’s research is an award-winning guide to creating those capable leaders. 

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