First published in Corporate Board Member.
Increasingly, employees –especially Millennials and members of Generation Z– are speaking up about their employers’ actions (or lack thereof) on environmental and social issues. Dubbed “activist employees” by some, they say they want their employers to operate both sustainably and morally, and they want their corporate cultures to reflect their beliefs. They’re also doing more than just talk – organized walkouts, formal shareholder proposals, and other means of visible, public protest have already impacted both corporate reputations and actual business decisions.
Growing up in a “sharing economy” where they were armed with social media, online publishing platforms and petition tools, many younger employees are used to being heard and insisting on being heard by their employers. They expect to conduct a two-way conversation with the C-suite on big issues related to corporate citizenship, including climate change, LGBTQ bias and discrimination, immigration, sexual harassment and censorship. Importantly, assuming the economy continues along without a major recession, we do not anticipate the activist employee trend to abate in the near-term at both public and private companies across sectors.
Why should CEOs and Boards care about their employees’ views on environmental and social issues? First, the number of employees focused on these issues may be more than they realize. A recent study by EY found that “71% of employees globally believe it’s critically important for their CEO to respond to global challenges, with 76% of the general population agreeing that they want CEOs to take the lead on change instead of waiting for governments to act.” Second, it may impact those employees’ work product and overall support for the organization. A 2017 Povaddo study on corporate activism and employee engagement in Fortune 1000 companies found that a decisive majority of employees would like to see their employer “use its influence to [take] a public stand and/or be more vocal” on a broad array of issues. When asked how they would respond if their company and/or CEO made a real effort to meaningfully influence an important societal issue, 59% of respondents said they would be more likely to recommend their company’s products/services and 53% said they would be more likely to increase their overall level of engagement in their work each day.
One notable example of employee advocacy of social causes was the decision by global consulting firm McKinsey & Co. to exit its contract with the U.S. Immigration and Customs Enforcement Agency (ICE)— a relationship that had brought McKinsey millions of dollars in revenue– under pressure by employees. Another took place at Amazon’s annual shareholder meeting in May, when more than 8,000 Amazon employees joined together to sign a petition published on Medium urging the company to adopt a detailed company-wide climate change plan. Since many of the employees are shareholders and receive compensation in the form of stock, they took their activism a step further and submitted a non-binding shareholder proposal demanding that the company report publicly on how it plans to reduce its reliance on fossil fuels and manage the risks posed by climate change. The two most prominent shareholder advisory firms, ISS and Glass Lewis, supported the employees’ proposal, noting that Amazon disclosed less sustainability information than its peers. While their formal proposal failed, the employees’ effort received significant media coverage and the attention of institutional investors, who have been pushing corporates for more action on climate change.
Employees like these are following the lead of powerful investment chiefs, influencers and thought leaders. According to Larry Fink, influential chairman of investment manager BlackRock, “society is increasingly looking to companies, both public and private, to address pressing social and economic issues.” Similarly, New York Times columnist David Brooks proclaimed we need a “remoralization of the market,” where “capitalism needs to be embedded in moral norms and it needs to serve a larger social good.” At the Cannes Lions advertising conference in June, new Unilever chief executive Alan Jope took purpose marketing a big step further, announcing Unilever will “dispose” of any brands that lack purposeful messaging and that don’t back up that messaging with real action.
We have previously warned clients that in a fraught political climate, both in the United States and many other nations, politicians are looking for issues that further their platforms and political agendas. An employee protest or other instance of activism could suddenly thrust your company into the national news –and make it a political football– when someone like Donald Trump, Alexandra Ocasio-Cortez or Elizabeth Warren tweets about it. Stories on employee activism are bait for politicians and the viral nature of the internet should not be underestimated. A simple tweet or Facebook post by your employee can gain the attention of the most powerful political forces in a matter of hours.
Dealing with socially focused employee dissent in the current environment presents a dual challenge for CEOs and Boards: How do you continue to make business decisions that satisfy investors, while also recognizing that these decisions are being viewed through a moral or political lens by many employees, some of whom also are shareholders who expect to be heard and may take steps to publicly demand a change in business practices? While every situation is unique, we find that the most effective companies articulate their own vision effectively and also listen attentively to employees to take their perspective into account as they make business decisions. That means communications need to run both ways, should be done on an ongoing basis (not just at a particular flashpoint), and need to be conducted as much as possible in person, rather than through dueling letters or other formal means.
Here are some other actions a company can start taking now to avoid becoming a target of its own employees:
- Evaluate your company’s culture, social purpose, and stance on big issues. Can your Board members and management team describe your company’s culture? Have you considered having a third party evaluate your company’s culture? While employees often cite the importance of culture, increasingly large institutional investors are focused on culture, too.
Has your company drafted a social purpose? Have the Board and management team openly discussed –and agreed upon– the company’s views and goals on issues that impact its business….whether climate change, immigration, diversity and equal pay, or others? Depending on which of these items are most relevant to your business and depending on where there are weaknesses, consider drafting a statement on each of them if you are confronted by concerned employees. Consider pre-emptively forming a committee to address these issues at the Board level.
- Amplify to employees the good work you are already doing. Historically, some companies have done a poor job telling their own story internally, which means employees may misunderstand their employer’s goals and accomplishments. That must change. Internal communications set the tone for a company’s culture, often also impact its external reputation, and should be used to inform employees on all the positive things a company is doing, including on the social and environmental fronts. Do your employees know about management’s plans to address climate change in the future, or the targets they have set on emissions? Have you considered doing a sustainability training workshop for employees? Internal communications provide an opportunity to educate your employees on the important steps your company is taking and to motivate your workforce to be proud of the organization for which they work.
- Promote the good work you are doing externally. Everyone from employees to investors to consumers should know about the good work your company is doing. Does your organization have a 12- to 18-month plan for its external sustainability communications? What is the public’s perception of your social purpose and the work you are doing to help stakeholders and the communities in which you operate? Consider publishing an annual sustainability/ESG/corporate social responsibility report if you don’t already. Also consider including information in your proxy statement that speaks to your existing social and environmental efforts.
- Check the employee pulse. The best way to know what your employees think is to ask them. Treat employee surveys seriously. Require that all employees complete them. Consider including questions on social purpose and environmental issues and ask employees what topics they feel most strongly about. Include open-ended questions so that responses aren’t hemmed in by your own expectations.
And as appropriate, make efforts in person, too. Some options include setting “executive office hours” once a month when employees can walk in and address topics that are bothering them with their managers and other senior executives, or consider addressing these topics in town hall meetings. Perhaps you can hold a live Q&A session with employees. Make sure your company has reporting mechanisms for employees like ombudsmen or an anonymous hotline, so they can freely communicate their views without fear of punishment or termination. For some companies, it might even be appropriate to consider putting an employee representative on the board or on a relevant committee composed of senior leaders.
- Know your base – and your bylaws. Know how many employees at your company are paid in stock and what voting power they have collectively. Check to see if the environmental and social issues highlighted by employees in employee surveys and otherwise align with subjects raised in recent shareholder proposals. In doing so, ask yourself whether employees will leverage internal information they are privy to and use it to coordinate with other organizations or institutional investors with greater voting power to push through a shareholder proposal? Is there a future scenario where employees may try to vote to block a merger that would result in job losses and factories closing?
In addition, review your company’s bylaws with an eye towards employee concerns and the possible actions they might take. Are there areas you can reference to protect the company in defending its stance on certain issues? Does your company have a Code of Ethics? Should it be revisited in light of current events? Being equipped in advance with facts will help down the line.
- Know what to do in a crisis, and what not to do. In a social media world, employee protests can go viral within literally minutes, so advance planning is a must. Have a crisis communications plan in place that incorporates employee activism as a possibility. Work with your communications, legal and other advisors to conduct crisis preparedness drills. Evaluate risk areas for your company and potential political repercussions in the current environment. Imagine if things were to play out on the front page of The Wall Street Journal or a politician’s widely followed Twitter account. Have a plan in place.
Recent events show that some companies will be hearing their employees’ views on big issues going forward, regardless of if they want to or not. Whether or not your company is targeted by “activist employees,” being prepared on the communications front will help your company retain the confidence of its key stakeholders.