Why executives should always listen to unreasonable activists

When Christabel Pankhurst argued the case for women’s suffrage to members of the London Stock Exchange in 1909, the Financial Times reported that her address excited “a few remonstrative ‘Oh, ohs!’ [but] was punctuated throughout by genuine applause, as well as a good deal of merriment at her humorous sallies”.

After three years of failing to convert such applause into voting rights, however, the movement led by Pankhurst and her mother Emmeline adopted less amusing tactics, and the business pages’ view of it darkened. Arson attacks on post boxes in the City of London in 1912 left the FT fulminating about the need for “drastic measures . . . to protect the community as a whole from the mischievous intentions of a small and insubordinate section”.

Why dredge this history up now? Because today’s business leaders are being confronted by a new generation of agitators whose aims they consider unrealistic, whose methods they consider unreasonable but whose message will probably prove worth heeding in the long run. 

This year’s annual meeting season has seen protests over executive pay at companies from AstraZeneca to GE. Nuns have harangued Amazon over its facial recognition technology and taken on Boeing over its lobbying. Diversity advocates have castigated boards for moving too slowly to achieve racial and — a century after the suffragettes — gender equality. 

No subject has attracted more militancy of late, however, than companies’ contributions to climate change. And no clash has defined this shareholder spring more clearly than the revolt at ExxonMobil, in which Engine No 1, an activist investor with a minute stake and an aversion to fossil fuels, fought its way on to the $250bn oil major’s board. 

“This is like the shot heard around the world,” says Robert Eccles, a Saïd Business School professor. Other companies and investors are realising that “if this little hedge fund can do this to ExxonMobil then, oh, things are different”. 

Shareholders’ views of Big Oil were already shifting faster than Exxon had changed its business model, Eccles notes, but like Pankhurst’s troublemakers: “You needed the spark: they blew up the mailbox.” 

Before Engine No 1, there was the civil disobedience of Extinction Rebellion, which has dumped fake coal outside Lloyd’s of London and blockaded News Corp printing sites in the past year. Environmental campaigners had targeted the offices of JPMorgan Chase in New York and BlackRock in Paris. And Greta Thunberg had shown up at the World Economic Forum last year and rubbished Davos-goers’ tree-planting incrementalism. 

Such zealous tactics seem guaranteed to generate more irritation than applause. As Eccles puts it, “here are people who . . . don’t hold any of the cards. Unless you’re breaking the rules or using the rules really aggressively, as Engine No 1 did, you can’t get attention.”

That makes them easy to dismiss. People on both extremes of the fossil fuels debate “are a little nuts”, Warren Buffett told Berkshire Hathaway’s annual meeting last month. 

Maybe, but from street style to fashions on Wall Street, new ideas tend to start on the fringes. The examples of the Pankhursts and successive campaigners for causes ranging from civil rights to gay rights suggest that the most powerful ideas become mainstream in the end. 

That rarely happens overnight: it took until 1928 for British women to gain electoral equality with men. But today’s irritants can serve as harbingers of tomorrow’s consensus. 

That should make them valuable to any company wanting to understand the risks and opportunities in the years ahead. Every CEO knows that society’s expectations of business are constantly changing, but few have worked out that their harshest critics might help them position themselves for those shifts.

Society’s expectations still matter most to boards when expressed through their shareholders’ votes, and the continued growth of socially conscious investing suggests that the agendas of provocateurs and portfolio managers are converging. 

This week, for example, a UBS survey of rich investors found 90 per cent of them claimed that the pandemic had made them more determined to align their investments with their values. 

That report again underscored how younger capitalists are driving this process: almost 80 per cent of investors under 50 said Covid-19 had made them want to make a bigger difference in the world, compared with just half of the over-50s. It is worth executives asking themselves which of those demographics they are spending more time with. 

Exxon’s unreasonable activists showed it that the world had changed and it had not. The question for other companies is whether they can learn such lessons less painfully. 

Does this mean that boards should bend to every crank who berates them at an annual meeting? No, but companies should avoid dismissing every critic as a crank, and study the agitators for early warning signs of what may become groundswells. 

Executives love to talk about innovation and “first-mover advantage”. If they are serious, they should spend more time thinking about where today’s fringes suggest tomorrow’s mainstream will be. Sometimes a small and insubordinate section points the way for the community as a whole.

andrew.edgecliffe-johnson@ft.com