Under Pressure: How Corporate America Can Address Social Issues

From racial equality to voting rights, US corporations are facing mounting pressure to take stands on a growing list of social issues. A new report by The Conference Board helps companies decide whether and how to address such topics.

As the study details, the stakes have risen: Companies must decide whether to speak out on hot-button social issues at a time of intense polarization, with stakeholder views on all sides of the spectrum and social media fueling extreme divisions. Moreover, the challenges of navigating these complexities and the pressure to take stands show no signs of going away. Many employees and others believe government is not doing enough to address societal problems, and they are increasingly looking to companies for leadership.

The report’s insights come primarily from a roundtable discussion hosted by The Conference Board ESG Center. More than 100 executives participated in a discussion on how their companies decide whether, when, and how to take a stand on social issues. The discussion generated several insights for what’s ahead on corporate social activity:

• A political peril: conflating the CEO’s personal views with those of the company: While CEOs can be the best spokesperson for the company’s position because they can speak credibly to multiple stakeholders, there is a real risk that a company’s positions can be seen, fairly or not, as reflecting the CEO’s personal views. This is particularly problematic when the pressure to take stances on social issues is asymmetrical, with most of the pressure coming from the “progressive” side. Companies should therefore establish an internal group representing multiple functions and views, separate from the CEO, to vet issues.
• Trust in the company is at stake: While employees and others want companies to “reflect their values,” employees’ values vary as widely as those of the population at large. And companies and management can lose trust over time if they become perceived as partisan institutions. While some issues such as racial equality clearly transcend partisanship, many have become political hot-button issues. It is critical for companies to have a consistent approach to social issues to ensure that the company’s stances represent company values.

• Transparency and education can help mitigate the backlash: Companies should be transparent with employees and others about the criteria used to determine which issues to address and who is involved in the process. Doing so can help avoid backlash from those who oppose the company’s position, as well as those who wish the company were doing more.

“How a company phrases its position is critical. Any thoughtful response will need a sense of empathy—a recognition that even though an issue may be making ‘news’ today, it is not at all ‘new’ to those most affected,” said Paul Washington, a co-author of the report and Executive Director of The Conference Board ESG Center. “At the same time, it’s important to avoid polarizing language, and to ground the response in the company’s values and principles, and not in partisan terms.”

• It is critical to coordinate individual brands’ responses to social issues: In many instances, individual brands are on the front lines in being exposed to or affected by social issues. They may wish to respond more quickly and may speak more credibly to customers and other stakeholders than the overall corporation. But a brand may get ahead of the rest of the company in responding, or the brand may not be the most appropriate one to lead the response. It can help for companies to establish internal guidelines on the role that corporate headquarters and the business units play; guardrails for the types of issues and statements brands can make; and a required heads-up to headquarters before taking a stance.
• When deciding whether to respond, a company’s purpose or mission has limitations: A company’s purpose or mission can be an important touchstone, but it alone doesn’t provide the answer to whether to respond. Other factors to consider include: alignment with the company’s core values; relationship between the issue and company’s business; incremental impact the company can have; relationship with the company’s sustainability, CSR, and philanthropic programs; external and internal expectations; and associated risks and opportunities.

• When deciding how to respond, companies should practice what they preach: Key factors to consider include the company’s resources, prior track record in the area, and the ability to follow through. Indeed, companies can come off as inauthentic if, for example, they take a public position on racial equality but do not commit to improving diversity in their boardroom or senior management.

“Employees who are passionate about a cause may be frustrated if the company isn’t working to bring about social change in line with their views. It highlights the need for companies to set realistic expectations, communicating that they will not take a stand on every topic. Shedding light on the process can also help manage expectations. Companies can educate their employees (and other internal stakeholders) about how they approach hot-button social topics,” said Merel Spierings, a co-author of the report and Program Manager of The Conference Board ESG Center.”

• A localized approach can help multinational companies address issues around the globe: Companies do not need to back away from their universal principles, but should involve local management and employees in understanding how best to phrase and implement the company’s position around the globe. In some cases, it may be best to focus a company’s efforts at addressing social issues through its own workforce and operations.
• Companies can better-engage their board in the process: While companies have increasingly engaged their boards in overseeing corporate political activity, boards have generally not been as involved in overseeing a company’s position on social issues. Given the convergence of the political and social topics, and the reputational issues involved, boards can play an effective oversight role. Management should brief directors on the principles, standards, and guidelines the company uses on the decisions of whether, when, and how to take (and defend) a stand. The board should also have a solid grasp of how the company mitigates reputational and other risks.
• To gauge their impact of taking stands, companies can ramp up measurement efforts: While some companies measure how their stakeholders respond to the stances they have taken, many do not have a clear sense of whether taking stands has either benefited or harmed them more than they expected. As companies engage more on social issues, they can use surveys, data-based analyses of sales, employee hiring and retention, etc., to measure the impact they are having. They can not only measure to what extent they are moving the needle on the issue itself (e.g., improving health outcomes in underserved communities), but also on the perceptions of customers, employees, investors, business partners, and the public.