Mickey Mouse has entered the world of corporate governance. Or, rather, Disney has run up against “anti-woke” politics that has led not only to a stand-off with Florida’s governor Ron DeSantis over LGBTQ+ rights, but also the loss of a special administrative status for the land underneath its Disney World theme park.
The episode raises tough questions about the relationship between corporates and politics, but also the campaigning nature of some modern chief executives, otherwise known as “CEO activists”.
The story also highlights a backlash to CEOs motivated by liberal values, which US magazine The Atlantic dubs, “conservative lawmakers flirting with authoritarianism as revenge”.
The clash between Disney and DeSantis began earlier this year with the introduction of the “Don’t Say Gay” bill in the Florida state legislature which prohibits teachers from discussing LGBTQ+-related topics in schools from kindergarten to third grade, when children are 8-9 years old.
There was huge opposition from those who argued the law marginalises LGBTQ+ people. Then in March, Disney chief executive Bob Chapek made statements opposing the law following considerable pressure from employees and the public.
DeSantis reacted sharply. At the end of April the Florida legislature voted to end Disney’s special status that allows the media company to act as an independent government—the Reedy Creek Improvement District—for its Orlando theme parks.
Risks and rewards
The legal battles will no doubt continue, but the action by DeSantis will ripple through boardrooms whose leaders have become part of the CEO activism movement—those taking a stance on issues not core to their business models.
Past examples include CEOs who spoke out against the murder of Saudi Arabian journalist Jamal Khashoggi, among them Joe Kaeser, CEO of Siemens; Nike CEO Mark Parker, who supported campaigning American footballer Colin Kaepernick; Apple’s Tim Cook speaking on LGBTQ+ rights; and Paul Polman, former CEO of Unilever, who campaigned on sustainability issues.
There are many others and they’re not restricted to the US. Researchers have highlighted examples across the world. But speaking out is an activity fraught with implications for a company and its board. As governance expert and York University professor Richard LeBlanc points out, speaking out may “elevate reputation and financial risk”.
“Boards,” he says, “have an affirmative obligation to oversee and mitigate all risk as part of their oversight role, including reputation risk, and take all reasonable steps to ensure that there are internal controls in place to mitigate such risks.”
In LeBlanc’s view, boards would do well to set “guard rails” to ensure CEOs make clear they speak for themselves if not for the company. But they should run checks when proposing to speak for their companies.
“If a CEO desires to speak on behalf of the company on political issues, including advocating for, or criticising, legislation, and a board in its business judgment permits this, there should be a process in place, and internal controls for doing so, that is approved by the board of directors to ensure that the best interests of the company are served and that directors are fulfilling their fiduciary duty.”
Inclusivity and authenticity
Disney’s Chapek might argue that backing LGBTQ+ rights is a legitimate topic on which to go public given the company sees itself as an “inclusive” organisation, reflected both in its employment policies and its content (last year’s animated feature release, Luca, was widely viewed as having gay themes). Inclusivity is at the heart of its business model.
According to Kathy Bloomgarden, chief executive of US PR firm Ruder Finn and an adviser on CEO activism who has written on the topic for the World Economic Forum, Disney’s experience is unlikely to be the end of the road for CEO activism. Expectations of CEOs have changed and that’s a permanent shift, she says. And above all, employees, in particularly Gen Z, “want to work for companies that share their values”.
Besides, says Bloomgarden, Disney’s position over Reedy Creek is no more or less problematic than other highly sensitive issues to hit US society and corporates, including Covid-19, the murder of George Floyd, Asian hate and climate change.
But chief executives may have to take stock. They will have to ensure the issues they amplify have “a large community impact”, are cared about “deeply” by employees and have a connection to the business.
CEOs will also have to consider timing when speaking out on highly charged issues. But CEOs will continue to let their views be known.
“Rather than let Disney’s experience create a bias towards providing a voice in future conflicts,” says Bloomgarden, “I believe this will encourage business leaders to be more diligent about why, when and to whom they are speaking when offering a point of view.
“It’s imperative when leaders share their perspectives that it is in an authentic manner, and that their voice—and actions—can add value to the conversation.”
Public views of CEO activism
Last year CNBC conducted a survey which found 60% of workers approve of their bosses speaking out on political issues. This year’s Edelman’s Trust Barometer found 60% of those polled would choose a place to work based on their “beliefs and values”; 58% said they would “advocate” for brands that reflect those beliefs; a huge 80% said they would “invest” based on their beliefs.
We also know that conservative politicians are beginning to confront big business on their politics. Some have even proposed new laws allowing shareholders to sue boards for pursuing so called “woke” agendas. That places on the front line of the culture wars.
But beliefs and values are now essential elements embedded in employment decisions and boardroom calculations. Things are unlikely to change. Though that doesn’t mean CEOs can sound off on anything. As LeBlanc and Bloomgarden underline, fiduciary duties, internal controls and establishing a rationale behind publicising a view will be critical. That said, it seems likely CEO activism to continue.