The Cost of Taking a Stand

What happens when CEOs speak out on hot-button issues or even directly rebuke the president of the United States? Do their companies suffer sustained backlashes? Damaging boycotts? Or do customers — new and existing — embrace their brands enthusiastically? Stock price is one metric for evaluating how financially damaging or beneficial taking a stand may be. To explore the connection between leaders’ actions and stock performance, we looked at more than a dozen U.S. companies whose CEOs publicly declared a position on issues ranging from state-level bills eroding LGBTQ rights (for instance, Indiana’s Religious Freedom Restoration Act and North Carolina’s Public Facilities Privacy & Security Act, also known as the “bathroom bill”) to President Trump’s noncommittal remarks after the clash between white supremacists and counterprotesters in Charlottesville, Virginia, to the Justice Department’s efforts to rescind DACA, the federal policy giving some immigrants brought to the country as minors — the so-called Dreamers — deferred action from deportation. We collected daily closing stock prices over a four-month period, from two months before each CEO’s statement to two months after, and plotted the percentage change in stock performance. We then compared the results for each stock with the closing prices of the exchange on which it trades. The animated charts below show what we learned. Most companies did not see a sustained rise or drop in stock price following their CEO’s public statement. Among those that did, in most cases the price returned to its previous level within two months. There were some notable exceptions. For example, Papa John’s CEO John Schnatter came out against the NFL, claiming that the league’s mishandling of protests against racial injustice by some players during the national anthem was turning off customers and hurting the company’s pizza sales during broadcasts. The stock fell sharply following Schnatter’s statement; weeks later he resigned, and the stock continued a downward trend over the next two months. By contrast, Apple’s stock surged following CEO Tim Cook’s denunciation of religious freedom laws in Indiana and Arkansas and remained high throughout the period we studied. The stocks we looked at generally tracked the market’s ups and downs, suggesting that any fluctuations after a CEO’s statement were most likely associated with normal economic factors. Again, we found some exceptions: For example, Comcast’s stance in support of the Dreamers was followed by a steep fall in its stock price, even though the NASDAQ rose overall. (However, Microsoft’s support of the Dreamers was not associated with either a tumble in stock price or a divergence from general market trends.) To be sure, correlation is not causation, and the market is a complex machine, with many inputs that affect price. But the data here suggests that avoiding CEO activism because of worries about stock performance may be misguided. The Big Idea

The Cost of Taking a Stand

Partner Center