What Every Board Member Should Know About Employee and Stakeholder Activism: From the Inside Out and from Outside In

Between rising inflation, continued supply chain woes, concerns about business continuity, and the many uncertainties of the financial markets, public company directors face a mountain of challenges.  But our conversations with dozens of directors this year confirm that few issues are more top-of-mind than rising demands from employees, outside advocates and politicians for companies to engage on matters beyond the traditional scope of business.

Between walkouts, leaks, protests at corporate headquarters or retail locations, and complaints from whistleblowers, no company is immune to employee or stakeholder disruption.  Protests can go viral, with journalists and politicians piling on.  Internal and external activism can create headline woes, business disruption and strain relationships with key stakeholders for globally recognized brands and early-stage companies alike.

What’s Driving This?

Three key drivers are a changing workforce, digital and social media, and virulently partisan national politics.

Reams of research capture major changes in both iGen and Millennial entrants to the workforce: many tend to be skeptical of capitalism and believe business should have a strong voice on issues from diversity to environmental sustainability to #MeToo.  And, in many cases, these younger generations of workers are influencing their older colleagues to adopt similar views. Although 60% of all Americans prefer that CEOs simply focus on running their companies, a sizeable percentage of those polled thinks otherwise.

In turn, digital media make every employee a potential self-publisher and organizer, with the tools to make common cause with those who share their perspective  and to promote those perspectives widely, both inside and outside the company. These new tools can expose tensions and divisions within the company, with mainstream news media, external advocacy groups and partisan politicians at both ends of the spectrum more than ready to amplify the noise from within.

What to Do—and What Not Do

These trends are too widespread, and the potential for reputational damage too great, for directors either to ignore or to assume that management will simply handle it all. At the same time, boards have to let management run the business.   Of course, the Board must engage, but engaged boards must maintain a balancing act between oversight that is too loose and too tight.

Here are four preventive “to dos” for directors to help ward off potential problems:

  1. Ensure management is planning actively for a variety of scenarios and that it regularly reports on this work to the board. When would the company simply monitor a visible external issue? When would it choose to remain silent? When would it go public?
  2. Confirm management’s plans credibly align with the corporate mission, vision and values. What your company says internally or externally is more than ever subject to a hypocrisy test. Would silence seem hypocritical? Can the company back up its words with action?  Should it?
  3. Establish that your company is tracking emerging employee attitudes as well as external political risk. Neither management nor the board should fall prey to the illusion that “it can’t happen here.”  It can.
  4. Ensure workforce culture is addressed as part of Human Capital Management in the proxy statement, a subject of rising priority for the SEC and major index investors.

But what if protest erupts?  Four principles can help boards help management achieve better outcomes:

  1. Management should listen whenever it can. Listening is not surrender. Work to take viral chatter offline and back in person. But be sure management can deploy an effective listener.
  2. Ensure internal or external statements are supported by substance. That said, substance consistent with the broad interests of all relevant stakeholders, not just the noisiest.
  3. Avoid feeding news media coverage, which thrives on conflict. As board members, don’t publicly contradict management.  If you feel you must, the board has a bigger problem.
  4. Ensure there is a clear plan and protocol for how and when your company engages on social issues – ideally one that that ensures your company stays within its lane. People feel passionately about many hot button issues. Most are complex.  Many involve competing “goods.”  If your company doesn’t have an expertise or a material stake in a socio-political issue, think hard before jumping in.

Finally, boards should encourage management to set clear parameters with employees and others. How will the company approach issues? What does it expect of workplace civility (and how well have those expectations been communicated internally)? Where will it deploy its unique expertise to help communities?  The more clearly you define how the business will and won’t engage, the better the board can protect the interests of shareholders and preserve your company’s crucial relationships with employees, customers and other key stakeholders.

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Ian Campbell is Vice Chairman of the firm and founded Abernathy MacGregor’s offices in the West. He focuses on crisis communications, mergers and acquisitions, investor relations, financial PR and issues management across a broad range of industries.

 

Matt Reid is a Managing Director at the firm and head of the Los Angeles office.

His expertise spans managing high profile cybersecurity and ransomware attacks to counseling clients on patent issues and litigation. Matt has provided activist defense counsel to numerous publicly traded companies and managed major reputational crises for leading corporations and public and private universities. Additionally, he has overseen communications for countless corporate acquisitions, mergers and SPAC transactions. 

 

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