By David F. Larcker and Brian Tayan *

(exechange) — June 1, 2021 — Employee activism is on the rise. Increasingly, workers are demanding their bosses take stances on social, political, or environmental issues even when unrelated to their business. One study finds a tripling of such events between 2019 and 2020 (1).

Employee activism puts pressure on companies, and CEOs, to make difficult decisions. Should they satisfy employees by supporting their views, or keep quiet and “stick to business?”

Either way, activism presents a new avenue of risk. The divisiveness of social and political issues means that taking a stance — or taking the “wrong” stance — risks alienating core constituents on one side, while keeping silent risks alienating those on the other side.

With stakeholder capital taking center stage, the scrutiny of CEO behavior in this area will increase. We have already seen activism campaigns and media articles dissecting CEO responses at Google, Wayfair, WalMart, and Microsoft.

At Amazon, CEO Jeff Bezos terminated employees who had engaged in activism, although claimed the firings were unrelated to their activism. At Coinbase, the CEO stood off against employees; 5% ended up leaving, but the CEO remained. It is hard to believe the outcomes won’t be reversed for other companies in the future.

Look to see CEO turnover increase around these events, as boards and employees try to correct the missteps of their chiefs. PR departments will spin the situation, but the Push-out Score will provide a more accurate read of how many CEOs were forced out for the good of the company.

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(1) Miles, Stephen and Larcker, David F. and Tayan, Brian, Protests from Within: Engaging with Employee Activists (March 8, 2021). Rock Center for Corporate Governance at Stanford University Working Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3801120

* The authors are a professor and researcher at the Rock Center for Corporate Governance, Stanford University.

Editor’s note: This is a guest post.