University of Iowa Study Finds Investors Prefer Quiet CEOs on Issues
A recent study shows investors respond better when CEOs stay silent on controversial issues
Iowa, Investors, CEOs, Controversial Issues, Michael Durney
City: Iowa City:
Michael Durney sees news about CEOs making or retracting controversial statements almost daily. These issues can range from gun control to climate change, but they often have little to do with the business itself. Durney, an assistant professor at the University of Iowa, notes that CEOs who share their personal views are becoming a vocal minority.
For over three years, he and his team have been digging into how these statements affect investors, and they recently shared their findings in a journal. They discovered that when a CEO stays quiet, investors react positively, similar to when the CEO shares a viewpoint they agree with. However, if the CEO takes a stance that investors disagree with, the reaction is negative.
Durney emphasizes that while it’s not inherently good or bad for a CEO to take a stand, it’s a trend worth noting. He wanted to explore how these choices impact investors, especially as this trend grows.
To understand investor reactions, the team created scenarios where participants had already invested in a fake company. They looked at how investors felt when the CEO either supported or opposed gun control or chose not to comment at all. Surprisingly, they found that investors were just as interested in companies with silent CEOs as they were in those whose views aligned with theirs.
Durney remarked that if the goal is to please investors, the best move might just be for CEOs to keep quiet and focus on managing their companies.
However, he cautions against interpreting these results as a reason for CEOs to never share their opinions. Investors are just one piece of the puzzle; employees, customers, and the public also matter. If a CEO feels strongly about an issue, they should speak up if it can lead to positive change.
He stresses that the takeaway shouldn’t be to avoid taking stances on controversial topics. This research is just one part of a bigger picture.
Durney points to real-world examples like Elon Musk’s posts on X and Jeff Bezos’s decision to stop political endorsements at The Washington Post. Social media has made it easier for public figures to share their views, which wasn’t as common before.
This study stemmed from Durney’s curiosity about a growing trend, and he didn’t have any specific goals beyond understanding it better. He finds the results interesting and believes they can help companies make informed decisions about how their statements might affect investors.
In the end, Durney hopes that this research helps people navigate the complex relationship between CEO statements and investor reactions.
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