But how effective are these activists at getting companies to change? And what are the best ways for companies to respond to activist demands while keeping the interests of their organizations front and center?
“You only have to turn on the news to recognize that the public is interested in these movements, and increasingly, in these movements [corporate] Targets also deal with them,” he says Brayden Kingprofessor of management and organizations at the Kellogg School.
King has spent much of his career researching the impact of activists on corporations. He shared some of his findings during a recent The Insightful Leader Live webinar.
For starters, class action against companies often works. In a study looking at boycotts, King and colleagues found that if a boycott received national media attention, activists got some kind of concession from the target company 25 percent of the time.
So what differentiates a successful campaign from the rest? On the surface, it may seem that the power of a boycott lies in getting customers to abandon a particular product. But that turns out to be wrong.
“There is very little evidence that consumers change their behavior, even when they vocally support a boycott,” says King.
Instead, activists’ power comes from shining a spotlight on a particular company’s actions (or inactions) in ways that create liability.
“Protests are a kind of informational signal that makes people pay attention to an issue or maybe rethink an issue,” King explains. “It forces investors, policy makers, executives and the general public to look at this organization in a different way.”
This background can make investors wary of potential problems and long-term risks within a company. In one study, King and colleagues examined the impact of protests on a company’s stock price. They found, on average, a 1 percent drop in share price over a 26-day period following a protest targeting that company.
However, there was wide variation in results and media coverage appeared to be the key factor. Companies that had received a lot of coverage before a protest didn’t see as much of a drop. Researchers believe this is because protests are not as effective at generating information if there is already a lot of information about the company out there for the public to see.
Protests also pose a threat to a company’s wider reputation, potentially jeopardizing the company’s relationships with both its customers and employees.
Given that protests are indeed a risk for companies, how should they respond if they find themselves the target of an activist campaign?
King describes a range of responses, ranging from issuing a public statement of support to engaging activists in discussions with the company. Each comes with its own set of potential risks and rewards.
For example, issuing a statement is easy and cheap. And it may end up being the first step to more meaningful work. But a company also runs the risk of being labeled a hypocrite if it publicly states that it supports a cause and then its actions later undermine it.
“We’ve seen many examples in our research where companies make a commitment, do nothing, and end up becoming more the focus of a movement in the future rather than less,” he says.
King is interested in the growing trend of CEOs speaking out on issues unrelated to their core business, such as Georgia’s new election law or North Carolina’s transgender bathroom bill.
“It’s not that CEOs are political thugs and use the company’s platform as a way to advance their own ends,” King says. Some of his recent research shows that “the main reason for this kind of activism is that companies feel that this is something their employees want.” He suspects this trend will only increase as the workforce is made up of Millennial and Gen Z employees who tend to be more politically active and more willing to quit jobs that don’t align with their values than their older colleagues.
He also sees more of what he calls infrastructural change within companies in response to activists.
For example, corporate social responsibility (CSR) committees have grown in both number and remit over the past 15-20 years. More than creating an annual CSR report, these committees offer regular opportunities to reflect on various reforms and for the company to take responsibility. Along the way, many committee members become internal champions. “They often take the activist view and become allies of those activists in the future,” King says.
The most important action a company can take is to welcome activists into corporate conversations. Nike is a prime example of this. In the 1990s, activists targeted the company for its use of labor. Eventually, Nike began to see activists not as adversaries but as partners who could help the company improve its operations and reputation.
“Not only did they listen to the activists, but they started bringing the activists in and giving them a real seat at the table,” Kings says. “We now think of Nike as a company that is proactive and engaged in social issues. It became part of their brand, so when they put up the Colin Kaepernick billboard… nobody was surprised because they thought, “well, of course Nike is going to do this because Nike is a company that cares about racial justice, about human rights rights.”
King believes more and more organizations see activists this way.
“I think activists increasingly have a seat at the table,” he says. “We see them as voices that matter, and companies and governments around the world are increasingly willing to let them in and help define better practices.”