On November 9, 2023, presenter Jason Sandvik discussed “CEO Activism”. The lecture was moderated by Matthew Josefy.
Jason’s slides from the lecture can be found here and the Q&A can be found below.
 Can’t the CEO Activism classified as indirect lobbying? As a result of their activities there is an impact on society. By achieving a little government body involvement, those companies are represented by activists (CEO) gain some kind competitive advantage.
I think some instances of CEO activism could be viewed as a type of lobbying activity. For example, many CEOs spoke out against the decision to rescind DACA, calling upon congress to act on behalf of those affected. With lobbying being defined as seeking to influence politicians or public officials on an issue, these statements related to DACA could be considered a type of lobbying activity, albeit they are a much lighter touch (and less costly) form of lobbying compared to traditional lobbying activities that require a meaningful outlay of resources (e.g., sending representatives to attend legislative sessions to advocate for policies that benefit the company). On the other hand, I do believe there are plenty of instances of CEO activism that are not meant to influence the decisions of politicians or public officials, so I wouldn’t necessarily classify all instances of CEO activism as lobbying (direct or indirect).
 I understand that such CEOs activism must be supported by the Board of Directors. Are they actually getting the green light from their respective Boards? At the end of the day the Non Executive Directors are liable to what the CEOs are publicly stating.
This is a great point, and it’s something we discuss in “CEO Activism and Firm Value,” which was recently published in Management Science. In one test, we specifically used directors’ prior exposure to CEO activism as an instrumental variable, under the belief that directors who have overseen CEOs engaging in CEO activism (specifically, that which engenders either a positive or neutral market response) while serving on the boards of other firms may be more receptive of such behavior. In line with this notion, we find that a board’s prior exposure to CEO activism is a strong predictor of activism behavior in the focal firm. Furthermore, we find that CEOs who engage in activism are less likely to be involuntarily terminated, suggesting that directors (on average) have a favorable view of the activism events captured in our sample.
 Why do you think the stock price falls following CEO activism despite higher sales/ROA. I assume the stock price is the present value of future cash flows. Perhaps the ROA result could be endogenous (more powerful CEOs with more sales slack or market power are more likely to engage in CEO activism). Thoughts?
The way I (quickly) presented this information may have made it look like a single study found evidence of both a negative market response and a positive relation with ROA. This is not quite right. Those findings are from different studies. Bhagwat, Warren, Beck, & Watson (2020) consider a sample of 293 sociopolitical events from 2011-2016 (many of which are marketing/advertising decisions or changes to business practices/firm policies), and they estimate a negative investor response to these events. In contrast, our paper, “CEO Activism and Firm Value,” documents positive market reactions to CEO activism. Part of this difference in findings is likely due to some differences in the sample of events (e.g., we include CSR-type activism behaviors, which Bhagwat et al. (2020) exclude. Also, our sample covers 2017-2019, during which time CEO activism became more prevalent and, potentially, more acceptable). Like us, Gangopadhyay and Homroy (2020) document a positive investor response to CEO activism, and they attribute this to increased profitability (ROA) due to increase sales turnover. We provide more details about these differences in findings between papers in Section 2 of “CEO Activism and Firm Value.”
 Hello, I would like to ask the presenter if did they find in their 2023 MS paper any significative differences in investors responses to CEO Activism stances depending on CEOs tenure and stock ownership. Thank you.
We did not estimate the cumulative abnormal returns within subsets of the data based on CEO tenure or stock ownership. We did, however, control for CEO tenure in our estimations of the determinants of CEO activism. We did not find evidence of a significant relation. While we did not control for CEO stock ownership, we did control for CEO/Chair duality, and we found that CEOs who are also the chair of the board (i.e., more powerful) are more likely to engage in activism. In addition, we controlled for CEO tenure and CEO/Chair duality in our estimations of the relationship between CEO activism and Tobin’s Q. It would be interesting to explore the moderating role of CEO stock ownership on both the causes and consequences of activism.
 the CEOs annual letter: does it count as activism.. or only what is communicated through CEOs social media..
We did not scrape the content in the CEO’s annual letter (or any of the other financial reports of the firm), so I am not sure how common it is for CEOs to take activist stances on issues through these mediums. But it is definitely possible that CEOs could engage in activism through other outlets beyond social media or the traditional media. For instance, CEOs could use the annual shareholder meeting, proxy statements, 10Ks, or conference calls to take a stance on social, environmental, and political issues.
 Can I ask for those papers studying customer response to CEO activism, what is the source of the data to measure customer response? survey or aggregated sale data? Thanks!
Some papers used experiments, wherein they asked participants to report their hypothetical future purchasing behavior (e.g., Chatterji & Toffel, 2019; Korschun, Rafieian, Aggarwal, & Swain, 2019). Other papers have considered measures from firm financial statements, like Revenue or Sales (e.g., Gangopadhyay & Homroy, 2020). And some papers have used geolocation data to track the foot-traffic in retail store locations (e.g., Hou & Poliquin, 2022; Jin, Merkley, Sharma, & Ton, 2023).
 I suggest you pay attention and test effects of current anti-DEI litigation, which can effectively thwart / end corporate diversity programs across the nation. (It’s the corporate parallel to litigation against Harvard / NC that put an end to affirmative action admission as we knew it.)
This is a great idea. Whereas many firms have hired Chief DEI officers over the last decade—in response to the push for increased attention towards DEI matters—it seems the pendulum is starting to swing back in the other direction, as some organizations are worried about legal backlash that could stem from their DEI efforts. I have some personal anecdotes to share regarding this that I would be happy to speak with you more about offline (feel free to email me).
 Have you found similar events to what happened to Bud light where the stock price jumped as much upward as the bud light stock price fell – following CEO activism?
We could certainly look in the data to see which events in our sample were met with the largest positive short-run returns. The 75th percentile of the 3-day CARs reported in “CEO Activism and Firm Value” are 1.52%. In this sample, we find no general evidence of longer-term drift in the CARs (nor evidence of reversals), so it could be the case that Bud Light’s experience is an outlier. A related thought would be to consider the possibility of customer product substitution in response to CEO activism. The results of the two retail foot-traffic papers (Hou & Poliquin, 2022; Jin, Merkley, Sharma, & Ton, 2023) suggest that the decrease in foot-traffic experienced by firms with activist CEOs may be a short-lived consequence. But those events did not garner nearly as much attention as did the Bud Light episode.
 Wonderful lecture! I’m interested in knowing whether the literature has investigated how CEO Activism affects their supply chain relationships and, consequently, the operational efficiency of the firm.
Thank you! I have not seen this yet, but it is something we’ve discussed as a research team. Given that our sample only focusses on S&P 500 firms, we have very limited scope to be able to consider the alignment/misalignment in activism behavior between companies and their suppliers/business-to-business customers. But I believe a meaningful contribution could be made in studying whether or not these relationships can be impacted by CEO activism. Anecdotally, some leaders have taken stances that suggest they won’t work with supply chain partners who don’t adhere to certain standards/values (e.g., honoring basic human rights, having no gender pay gap, etc.). In our working paper, “Employee Responses to CEO Activism,” we mention that supply-chain partners may also be relevant stakeholders to study in the context of CEO activism, but we have not yet pursued this course of study.
 Are customers or employees really expect CEOs to speak out? The survey by Larcker reviewed before seems to signal this is not necessarily the case.
Survey response data reported by Agility PR Solutions suggests that many customers and employees (especially those from younger generations) do expect and encourage their business leaders to speak out (see https://www.agilitypr.com/pr-news/public-relations/ceo-activism-in-2018-americans-think-ceos-must-speak-out-to-defend-company-values/). The original survey/report was compiled by Weber Shandwick and KRC Research (see https://cms.webershandwick.com/wp-content/uploads/2023/01/CEO-Activism-2018_Purposeful-CEO_FINAL_3.7.19.pdf).
 Can you propose the same conclusions towards state-owned company’s CEO activism? Is it even possible to separate those positions from state opinion on particular question?
My sense is that it is difficult to delineate between activism that is mainly intended to communicate a CEO’s personal view verses that which is intended to communicate an organization’s view. And I think this likely holds true both when considering publicly traded corporations and state-owned companies. Depending on the location of the state-owned company, it may be more/less difficult for CEOs to engage in activism without threat of dismissal, and this is likely to moderate how freely they engage in activism.
 Could an outcome of CEO activism increase polarization within firms (e.g., among employees)?
Yes, this could definitely occur. In our working paper, “Employee Responses to CEO Activism,” we found some examples of employees leaving comments on Glassdoor highlighting their pleasure/displeasure with their CEOs’ decision to takes stances on certain issues. For example, one employee from Apple implied that it is difficult for non-liberal people to work for Apple, saying, “Managers and coworkers [are] always making negative comments about [the] President and Conservatives. Even Tim Cook sends company-wide emails about him trying to convince [President] Trump to change his mind on certain topics.” If employees such as this individual continue to work for Apple, then Tim Cook’s comments could lead to increased polarization among Apple’s employees. But if employees such as this individual decide to seek employment elsewhere (potentially somewhere that they feel is more friendly to Conservatives), then Apple could realize less polarization among its employees because the employee composition would have become more ideologically homogenous.
Jason Sandvik is an Assistant Professor of Finance. Prior to joining Eller in 2022, he earned his PhD in Finance from the University of Utah and worked at Tulane University. His research interests include empirical corporate finance, labor economics, and disclosure policy. His work has been published in top academic journals, including the Quarterly Journal of Economics, Management Science, and the Journal of Accounting Research. His work has been cited in major media outlets such as the Harvard Business Review, The Wall Street Journal, and Forbes.
For further information on the webinar please contact Professor Jun Yang, Director of the Institute for Corporate Governance at firstname.lastname@example.org.