How CEOs respond to external activists, community pressures

Secondary stakeholders can include a whole range of possible pressure creators from advocacy groups and social movements to religious organisations and community activists.

Such stakeholders would typically not transact directly with the company in question but still be able to exert influence with effects, including firm reputation, legitimacy, and long-term performance.

The new research study argues that CEO responses to the secondary stakeholder pressure rarely arise only from strategy, financial capacity, or industry competition perspectives but instead can originate from the personal values and emotional commitment of the CEO, which play decisive roles in determining how organisations interpret and react to such pressures.

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This study is the first to focus on the CEO-specific reaction to the pressure, which is why it is garnering such attention this week.

First, the researchers noted that every worker in every firm has a specific lens, like a pair of glasses, through which they view the world and their work role.

The type of lens that influences how a CEO interprets secondary pressure reaction involves their executive values. Doctoral student researchers in Kenya would call this a mediating variable that influences the power of the cause-and-effect relationship.

Inasmuch, executives who prioritise social welfare values may perceive a community’s concerns as urgent and immediate opportunities for engagement.

However, leaders who instead prioritise control, their own importance, efficiency, or market dominance may instead interpret the same community demands as distractions from the core business operations of the firm.

Second, a leader’s passion then determines how strongly they react to their core values. Executives with weaker emotional commitments can typically put forward a symbolic response that is limited to only public communication rather than any real operational changes internally. But when executive passion intensifies, then those leaders do move towards substantive actions that can alter organisational policies, investments, partnerships, and even commitments.

Third, taken a step further, the study introduces an even deeper layer by providing a distinction between harmonious passion and that of obsessive passion.

While a leader with harmonious passion would be more likely to encourage balanced decisions that incorporate stakeholder concerns alongside the firm’s business priorities, which would then typically produce both thoughtful and sustainable organisational responses to the secondary stakeholder pressure.

However, obsessive passion can push leaders to react more impulsively or excessively, thus pushing initiatives that can disrupt the firm’s strategy, alienate existing and potential investors, or put strains on the organisation’s internal systems.

So, identical secondary stakeholder pressure from activists can create careful collaboration and community engagement in one firm, but in another, those same demands can provoke aggressive confrontations and overreactions depending on the CEO’s respective motivational orientation.

An example can include former White House disruptor Elon Musk and his takeover of Twitter in 2022. The chaotic takeover and wanton disregard for stakeholder opinions arguably led to complete strategy disarray and the falling apart of internal systems.

Twitter’s messy transformation to X felt to many like stakeholder engagement purely existed as a communications exercise that still invites public scepticism to this very day.

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So, it remains important for boards of directors to remember that temperament and values matter in the CEOs they recruit and hire.

Boards that over-emphasise operational expertise and financial results while sadly underestimating the key influence of executive belief systems commensurate with their accompanying motivational drivers can see unexpected sliding of the organisation’s direction.

Governance systems must specifically and intentionally encourage executive reflection with stakeholder community co-creation dialogue for solutions.

Firms do not need personal impulses alone to shape high-consequence company responses.

Ultimately, we must keep in mind that organisations succeed not merely through responding to stakeholder voices, but rather through ensuring that leadership values and passions translate into thoughtful, proportionate, and strategically integrated action that strengthens both enterprise performance and societal trust together and not one despite the other.

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