The case for the outspoken CEOFebruary 15, 2012: 12:02 PM ET
Should the chief executives of Goldman Sachs and Starbucks really be speaking out on hot button issues?
FORTUNE -- Rarely do you see a CEO with a picket sign. High-level executives aren't the kind of leaders who man the bullhorns at protests rallies or captain dinghies to save the whales. Political issues are polarizing, and companies that take sides risk turning off customers.
Yet some CEOs are stepping into the limelight on hot-button issues. On February 5, the Human Rights Campaign released a video featuring Goldman Sachs (GS) CEO Lloyd Blankfein advocating same-sex marriage. Blankfein wasn't alone. Nike (NKE), Amazon (AMZN), Microsoft (MSFT), and Starbucks (SBUX) have all issued statements in favor of same-sex marriage in Washington State. Starbucks CEO Howard Shultz has been outspoken on other issues as well. On November 1, 2011, he launched a program to help create jobs in America. To date, the company says it has raised around $7 million for the Create Jobs for USA Fund.
Corporate leaders have always been involved in issues that could be seen as political activism. Some have even turned away potential customers for the sake of their own values. Retired Coscto CEO Jim Sinegal, for example, had a policy that no customers were allowed to carry firearms in stores -- even in states where concealed carry is legal.
But in general, most companies steer clear of controversial issues to sidestep risk, says Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania. "You pick up a little gain from customers that like what you're doing, but you could also conjure up calls to abandon your products." Since the late 80s and early 90s, Useem says, corporate shareholders have grown increasingly powerful. That has pushed CEOs to focus more and more on returning value for shareholders every quarter.
That's their job, argues Adam Galinsky, a professor of ethics and management at Northwestern's Kellogg School of Management. "They weren't hired by companies to serve a political purpose," he says, "now they're conflating the business purpose and the political purpose." It's not surprising that CEOs are speaking out though, Galinsky says, because, "the balance of power has tipped more in favor of CEOs versus the board of directors." Because of that, he says, CEOs face less risk when they speak out on controversial issues, even though it could potentially harm shareholders.
Perhaps some CEOs have begun to question the prioritization of shareholder value over the company's defining values. They may even be advocating for social progress when no one else will, Useem says. "Given the fact that government is extremely deadlocked and politics very partisan, CEOs may be stepping forward to say, 'if the government can't lead in these issues, we have an obligation to do that ourselves in a way that transcends the normal parameters of quarterly earnings,'" he adds.
Starbucks seems to be headed that way. "Delivering long-term shareholder value is essential, but companies can and should hold themselves to higher standards of achievement," the company told Fortune in a statement. "We believe companies that do so will also see a positive increase in the bottom line -- customers want to support companies that have values similar to their own."
For Goldman, advocating same-sex marriage is also an issue of attracting the best talent. Competition for great employees in the financial sector is especially fierce. And a company will have an edge if it can get the best people, regardless of who shares their bedroom. In a statement Goldman said, "Our success depends on our ability to attract and retain the best talent around the world and to foster a culture where our people can reach their full potential. This is attainable only if every person feels comfortable bringing his or her whole self to work."
In the future, other corporate leaders could follow suit, Useem says, speaking out for social change if it could help them attract the talent they want, or line up with customer values, thus boosting their bottom line long-term.
Still, one false move could very well lead to other business leaders choosing caution over activism, Galinsky warns. "All it takes is one or two high-profile cases in which a CEO of a major company makes a very strong political statement that leads to true discernable costs for that organization."
It all depends on how employees and consumers respond to outspoken CEOs -- these CEOs could be a good sign for people worried about leadership of the country, Useem argues. "I think these moves should help other company executives appreciate that they've got a role to play in the country more broadly. Hopefully it's not going to damage their bottom line to do so."