“Silence is Not an Option!” Is (Liberal) CEO Activism Beneficial to Firm Performance?

Abstract

This study frames CEO activism as a sensegiving process and focuses on the effects of CEO activism on organizational outcomes. We propose that the effects of CEO activism on firm performance are contingent upon whether CEO activism is perceived as congruent with employees’ dominant political ideology. As a symbolic action, CEO activism has the power to influence employees’ values and goals; therefore, when it is aligned with employees’ political ideology, it will engender a positive employees’ cognitive, affective and behavioral response in the organization, which will ultimately benefit firm performance. However, such positive outcomes will be hindered when the executive is perceived as not invested in the activism. By contrast, CEOs who are also firm founders tend to amplify the beneficial effects of CEO activism. All of these findings were derived from tests of a sample of 236 CEOs who engaged in activism between 2015 and 2018 and a total of 880 firm-year observations. Through a set of post-hoc and supplementary analyses we also tested for endogeneity concerns, treatment effects, and the plausibility of our theoretical mechanism.