Why more companies are standing up on social issues

From the war in Ukraine to anti-LGBTQ+ legislation in Florida, companies are increasingly speaking out on social issues. Wharton management professor Stephanie Creary explains why silence is no longer golden for firms.

Peer pressure is hard to resist, even for big corporations.

Disney CEO Bob Chapek spoke out against Florida’s anti-LGBTQ+ legislation after criticism of his silence began trending on social media. Microsoft stopped sales and service in Russia after releasing a sharply worded statement condemning Vladimir Putin’s “unjustified, unprovoked, and unlawful” invasion of Ukraine. And Goldman Sachs pledged $10 million to address racial and social injustice after the 2020 police killing of George Floyd.

Person working on a laptop looking at their smartphone with a news feed on it.

“What we’re seeing right now in many companies is a really strong response to external advice, recommendations, pressure to engage more intently around social issues,” says Wharton management professor Stephanie Creary.

Creary, who studies organizational behavior, identifies this response as “social authorization” or a kind of permission granted by external groups for business leaders to take internal action. Executives are growing more aware of the close connections among societal issues, the company’s responsibility on those issues, and their bottom line, which makes them more likely to engage. External pressure isn’t the only mechanism that elicits a response from the C-suite, she says, but it is an effective one these days.

Historically, most companies kept their eyes on business objectives and their noses out of the political or social fray. But that’s changed in the last 15 years—and especially in the last two years since Floyd’s death—with investors and consumers demanding greater transparency and authenticity. They want to know where companies stand and what they are doing on a broad range of big-picture issues, from reducing carbon emissions to closing the wealth gap. It’s one reason why ESG—environmental, social, and corporate governance—is at the top of many corporate agendas.

“What I’m finding in my research is that companies are starting to see the linkages between their activities and what happens socially—that these are not separate entities,” Creary says. “These are things that are new and emerging but certainly promising.”

Read more at Knowledge at Wharton.