Company leaders should speak 'as citizens, not as CEOs': Richard Edelman

Edelman CEO Richard Edelman joins Yahoo Finance at the Davos World Economic Forum to discuss how companies removed or kept business in Russia, how executives should address social issues, and ESG investments.

Video transcript

DAVE BRIGGS: So whether it's Russia's invasion of Ukraine, China's human rights abuses, or even American corporations weighing in on our own political policies, businesses' reputational risks are at a tipping point. Yahoo Finance editor-in-chief Andy Serwer spoke with Edelman CEO, Richard Edelman, about that and more in Davos. Take a listen.

RICHARD EDELMAN: Geopolitics has emerged as the third ball that businesses have to juggle, along with run a good business and then societal issues, such as diversity and inclusion or sustainability or reskilling.

ANDY SERWER: And so, of course, front and center is Ukraine. And we've seen the private sector taking the lead here, really, ahead of governments in many instances, right?

RICHARD EDELMAN: Well, compare it to South Africa. It took 20 years to get 200 companies out. Here, it was 10 weeks and 1,000 companies out. And it's because there was a huge expectation by both employees and customers that companies would act. In fact, in our trust study, we found that companies that got out, 31 point jump in trust. Companies that stayed in, 38 point drop in trust.

ANDY SERWER: Yeah, so how do companies begin to balance it, I guess, if they have a big business in Russia? I mean, there are some instances-- McDonald's maybe a little bit slower. They have a lot of exposure, so that's a tough issue for them, right?

RICHARD EDELMAN: Well, Andy, I think what's been clear is, even McDonald's has gotten out. You see Allianz leaving. This is a continuing process of companies getting out of Russia. I think there are only something like 500 major companies left, 1,000 gone. So the change is significant because it's economic as a priority for business, 85%. But 78% say it's to do with societal issues. And then 60% say geopolitical issues in terms of order of business.

ANDY SERWER: Where does business stand versus governments in terms of being trusted in your survey?

RICHARD EDELMAN: So business became the most trusted institution two years ago, January. And that's continued in this study. And the most important fact, though, Andy, is the gap in competence between business and government is 50 points. So when you think about why are businesses being asked to do so many new things, it has everything to do with competence. They get stuff done, whereas government just leaves the ball.

ANDY SERWER: That's not necessarily easy for CEOs, and never mind whether it's good or not, because someone was telling me that, yes, while government's gridlocked, that means that companies have to fill the breach and start to address social issues a la Disney in Florida. And we've seen how difficult that is to navigate, right?

RICHARD EDELMAN: Well, look, I think the important point is, we are now at the extreme of what business can manage. And companies are going to have to make choices. I think you should stay in your swim lane as much as you can of, where do I have comparative advantage and knowledge on supply chain with China? Or I'm really good on reskilling. And don't deviate into social issues where it is going to put you in harm's way, again, unless you're headquartered in that state where you have a reason to speak on behalf of your employees.

ANDY SERWER: So do CEOs say, what then? We have these values. Because invariably, they are going to be asked by various constituents, shareholders or employees, where do we stand on these very difficult social issues? And so, how do they navigate that?

RICHARD EDELMAN: I think you have to put priority on those that are directly affecting your business. Again, supply chain or health of your employee base. But on ones where it's a matter of personal choice, leave that for your personal politics and donations to senators. But your mandate as the CEO is to stand up and speak up only on those issues where you actually can add value.

ANDY SERWER: Yeah, I mean, should CEOs, if they have personal opinions on things, should they speak out?

RICHARD EDELMAN: They should speak out as citizens, but they shouldn't speak out as CEOs.

ANDY SERWER: Right.

RICHARD EDELMAN: And the CEO position, again, this remit of issues can expand beyond the long length of my arm. And we better be careful here because there's starting to be a pushback against wokeness.

ANDY SERWER: Absolutely, and has there ever been a time when government was really trusted? Because we don't trust government. Well, that's sort of a trope. You just kick the dog.

RICHARD EDELMAN: But Andy, it was only 2 and 1/2 years ago, at the height of the pandemic, the government was the most trusted institution. And what was perceived is, we gave you the big bazooka, and then there was disappointing performance. And so, in fact, the businesses had to step in on PPE or taking care of their employees. And that's a different kind of thing. Business had its head down in the beginning of the pandemic. Just do your work, have layoffs, whatever. And increasingly, business stood up and took the ball.

ANDY SERWER: And in terms of issues like sustainability and supply chain, how can businesses take a stand there and garner even more trust?

RICHARD EDELMAN: What's interesting is investors, which I know you speak to mostly, now care as much about ESG as they do operational performance and financial results. So it's operations, financial, and ESG. So if you want to be a long-term investment for Wall Street, you've got to be leading on ESG. And again, companies that have recognized this as a societal obligation, it's good to get for employees, because you get the best and brightest. It's good for customers. Half the people now say I'm a belief driven buyer. I only buy brands from companies that stand up on these issues. And then lastly, you have the investors.

ANDY SERWER: Right, and final question, Richard, you mentioned employees. Attrition is a huge issue. Besides speaking to values, are there other ways that CEOs can gain trust of employees?

RICHARD EDELMAN: I think a smart employer realizes that the pyramid used to be like this, and it flipped upside down. And you've got to let the employees feel as if they have a way to speak to you, that they have a way to influence company policy, that, in fact, it isn't just a top-down world anymore.

SEANA SMITH: That was Richard Edelman, Edelman CEO, with Yahoo Finance editor-in-chief, Andy Serwer. And Dave, what was so interesting, what he was saying there, especially when he was asked about CEOs weighing in on political and social issues and when they should speak out versus when they should speak out, and he was basically a proponent of saying, it's very important for businesses to really stay in their own lane.

DAVE BRIGGS: I was shocked at that. I thought he'd say the complete opposite of that because polling has suggest that employees want their CEO to speak out and take a stance. But yes, he said stay in your lane as much as possible, and speak out as a citizen, but not as a CEO. I still would have liked one more question on, what do you do if you're Bob Chapek? You are in Florida. They did pass legislation that thousands of your employees are unhappy about and walking out. He was an untenable situation, probably because his predecessor put him in that by coming out with the public statement.

But it is a very difficult path to navigate. And Richard takes a survey, so he hears from thousands of CEOs and people. And I guess that is his belief at the end of the day. I don't know what I would do if I'm Bob Chapek or if you're in another situation similar. We're going to see that with abortion coming up soon.

SEANA SMITH: It makes it extremely tough, right, Rachelle?

RACHELLE AKUFFO: I think so because I mean, where is that line that if someone's speaking out as a private citizen, but they happen to be the CEO, at what point do the lines become blurred? Obviously, people are looking at you leading this company and thinking, well, if that's your view, should we still want to buy from you? So I'm not sure that being able to separate the two is as easy and realistic as he believes.