In a recent piece, I argue that corporate leaders should not shy away from making a public statement if they believe it is the right thing to do and consistent with the corporation’s values.
The opportunities to speak are legion – and controversial. In response to increasing COVID cases, for example, Apple is requiring customers – in addition to employees – to wear masks when visiting stores. J.P. Morgan is barring unvaccinated employees from entering its New York office. The NFL is requiring booster shots for staff who work closely with players.
Politicians and even some academics lament activist shareholders and C-suite leadership taking positions on what may be perceived as sensitive or personal issues. Any interference with the core mission of maximizing profit for shareholders is considered almost heretical.
Yet when people work for companies, lead companies, or buy from companies, they don’t leave their ideologies and values behind. And corporations often seek particular values, such as loyalty, conscientiousness, and honesty, from the people they hire. Corporations also set forth guiding values such as innovation, diversity and respect.
In my paper, I concluded that corporate leaders should speak out after I examined public statements made by members of presidential advisory councils in response to three controversial presidential statements or policies in 2017. The three policies or statements included the travel ban on seven predominantly Muslim countries issued in January, the withdrawal from the Paris Climate Agreement in June, and comments made in August on the Unite the Right Rally. I then assessed whether corporate communications about those policies or statements had a financial impact on shareholder price.
In particular, my study examined statements by members of the Strategic & Policy Forum and the Manufacturing Jobs Initiative, including CEOs such as GM’s Mary Barra, BlackRock’s Larry Fink, Walmart’s Doug McMillon, and PepsiCo’s Indra Nooyi, and their responses to the three events mentioned above. To assess whether the corporate communications had a financial impact on shareholder price, I looked at the stock price of each organization on the day of the corporate communication. For purposes of comparison, I also examined the stock price three weeks prior and three weeks following the communication. I then compared this price with, first, an industry average derived from a stock composite and, second, the stock price of two competitors.
Prior to digging into the statements and the numbers, my guess was that, if a corporate leader made a statement consistent with the values set forth by the company, then the company would have a positive gain compared with competitors.
This hypothesis was not supported by the data.
In fact, corporate communications made directly in response to the three presidential policies covered in the study had a minimal impact on shareholder price. The findings suggest that the market absorbs corporate activism – and lack of activism – equally in that there is very little impact.
My first analysis of the data was disappointing – my thoughts were that stock price should increase if a company made a statement consistent with its values. However, the more I examined the data, the more I was intrigued with the lack of impact corporate statements had on market valuation. Research in this area has identified increased patronage when customers viewed corporate statements as favorable. On the flip side, research has also identified a dip in purchases and boycotts when a corporate statement was viewed negatively. This research focuses on public opinion surveys and purchasing – not stock price.
We are again facing issues that are perceived as controversial: vaccine mandates. However, whether companies will voluntarily issue public statements supporting vaccine mandates (arguably consistent with corporate values of safety and wellness) or opposing the mandates (arguably consistent with the corporate values of autonomy and privacy) is questionable. They may fear market reprisal, but my research suggests that these fears are unfounded.
 Impact of Corporate Response to Controversial Presidential Statements or Policies, 18 DePaul Business & Commercial Law Journal 2 (Spring 2021).
 Aaron K. Chatterji and Michael W. Toffel, Assessing the Impact of CEO Activism, 32 Organization & Environment 2, 159-185 (2019).
 See e.g. Lasarov, W., Hoffmann, S. & Orth, U. Vanishing Boycott Impetus: Why and How Consumer Participation in a Boycott Decreases Over Time. J Bus Ethics (2021) (noting that boycott participation dwindles).
This post comes to us from Professor Jehan El-Jourbagy at Georgia College & State University, It is based on her recent paper, “Impact of Corporate Response to Controversial Presidential Statements or Policies on Shareholder Price,” available here.