We focused last week on employees’ roles in some US companies’ exits from Russia, and noted the internal backlash at Disney over CEO Bob Chapek’s initial unwillingness to take a stand on LGBTQ+ rights in Florida.

Both are examples—which some observers have called “unprecedented”—of US business action on moral grounds. Stepping back, what are the situations that can trigger this? And what are the most effective ways to apply pressure to businesses to speak out on societal issues? For answers, we spoke with Stephanie Creary, an assistant professor of management at Wharton. Her research suggests that a key ingredient for corporate action is what she calls “social authorization,” something she’s studied in the context of companies’ responses to George Floyd’s murder. Here is a transcript from a recent conversation, edited for clarity, where she explained that and its implications:

What is social authorization and why is it important?

Social authorization is the idea that firms and related entities, like boards, are feeling that they are being granted the power from other groups, collectives, or other people in society to engage in societally-based work. That's anything related to taking a stance on social issues or responding to social causes. Not only are they starting to feel that they've been granted the authority to engage in this work, but also it enables many firms and boards to begin to influence others in doing the same. The social authorization process is about feeling—corporations and boards now feeling as if they have the right to do this work that many of them previously were not so deeply immersed in.

So what are examples of social authorization?

To understand social authorization, it's first important to understand who might be doing the authorization, giving firms the authority that they might not have felt that they had previously. This can be any number of entities. We can start with legislation and policymakers. One of the examples that I often think about, because it's in my research on board diversity, is how in California around 2019 legislation was passed to require that firms headquartered in the state have at least one woman on their board. That has since expanded to include more than one woman and expanded to include people from the LGBTQ community and racial minority groups. That said, in the implementation of the policy itself, we often talk about that as social activism or a form of activism. The fact that the boards then took up the responsibility of enacting this law and speaking to the law as their reason for increasing diversity on the board is an example of them now feeling authorized to do this work, including recruiting more women and underrepresented minorities to the board.

This was not something that they were doing to such an extent prior to the enactment of this legislation. If we fast forward a few years, another example—which I think comes up quite extensively in my research that examines the experiences of Black board directors—is the Black Lives Matter movement following the murder of George Floyd. Again, this is something that we often think about as social activism, but what I find in my research with Black board directors is that boards now feel licensed to not just recruit directors to the board—which is what the California legislation did. What happened following the murder of George Floyd is that Black board directors and their boards now felt authorized to take on diversity issues broadly and to engage more deeply in the company's DEI work as responsibilities of the board. That's actually a different impact of social authorization in the case of the Black Lives Matter movement: the authorization that boards felt following that movement relative to the authorization that boards felt after the enactment of the California law mandating women on boards.

What's on the list of mechanisms of social authorization?

Aside from legislation and the Black Lives Matter movement, we have peer authorization, which is social authorization coming from peer groups. There are any number of business leader collaboratives out there, like the Business Roundtable, chambers of commerce, and the Silicon Valley Leadership Group, and the Executive Leadership Council. There are now so many groups formed of business leaders who are finding ways to create an agenda that can span across firms. Developing this collective voice enables any single firm to feel authorized to engage in diversity types of work.

Again using the example of the time following the murder of George Floyd, PWC has a CEO action for diversity and inclusion. As part of that work, they collected many statements from a number of the corporates who belong to that. They used that as a way to help firms to say that they felt that it was important for them to engage in not just diversity broadly, but also issues of racial justice. It also helped them say that even in spite of the backlash that they might receive from a variety of their stakeholders, this work wasn't just something that they personally thought was meaningful or that their firm thought was important. It was backed by hundreds of firms.

Does social authorization influence whether corporate actions go beyond just PR and marketing? Researchers have found, for example, that the many of the signatories of the Business Roundtable resolutions around stakeholder capitalism and racial justice haven't followed through with actions....

This question looks at the qualities of social authorization that enable it to lead to these outcomes versus those outcomes. I have a larger study on corporate board diversity, and a lot of the data I collected around the enactment of the California legislation. Then I collected a second separate set of data following the murder of George Floyd. In any case, both of these were sort of socially authorized movements to have boards engage more with diversity. The California one, again, led to an increase in the representation of women on boards and murder of George Floyd and the Black Lives Matter movement led to more, deeper diversity work.

What was different about these movements? At a superficial level, you could say one was legislation and policy, and we know that compliance-driven mandates might not be as helpful as public opinion and social movements. So you can stop there, but what I looked at when I interviewed board directors is how they interpreted what their job was following these movements. It was interesting to see that framing matters here. The ways in which the California legislation was framed was very much about seats. It was about getting people on the board. It wasn't about all the things that come along with gender equity and what you should do once you get on the board.

The minimalist framing around that limited the capacity, willingness, or sense that board directors felt they should be doing more. Whereas the ways in which the Black Lives Matter movement was framed in relation to a board's diversity work was about ending systemic racism. That's a very different cause than the one that's about representation. Part of this is about the way that it's framed: how concrete are the messages that the corporate entity, whether it's the firm or the board, is receiving on what their charge is?

That said, there are plenty of firms that were socially authorized to end systemic racism, and we see some only doing the minimum and some doing much more. That goes to say that social authorization, in and of itself, isn't necessarily going to trickle down into these deeper levels. There has to be some movement within the firm. People have to actually take up the charge and drive it forward to sustain it in deeper ways,

What does your research say about the most effective ways for people who want to see change to bring organizations around to addressing it?

There's a long, extensive body of research on organizational change in my field of organizational behavior. Scholars who have contributed to this research have said that you need both bottom-up and top-down change, and you need people in the middle who are willing to carry it out after the bottom and the top have decided that this is what they want to do. What's been especially effective, with respect to the latest movement around racial justice and racial equity within organizations, is not just the public Black Lives Matter movement and the global reactions as citizens to the movements, but also the extensive amount of employee bottom-up action by people who don't necessarily have hierarchical power.

They don't manage anything. They work in this organization, and they feel the power of their voice is really important. Essentially what that's showing is that when two levels of an organization—the employees and the boards and institutional investors—are authorizing this as an important issue that the organization should take up, it is very different from when it just comes externally, like legislation, or just from the CEO. While those are really important and really instrumental in allowing issues to be taken up and advanced, there are lots of other people who work in organizations, such as those of us who don't manage and those of us who supervise people who have to be engaged as well. What my research and the broader research on organizational changes shows is that if it's actually going to be adopted in any meaningful way, it has to come from multiple sources: those who are on the ground and those who are external, who have more power and resources.

Should organizations and business leaders require social authorization to activate against issues like racial justice and climate change?

Your question brings me to the point of why social authorization is so interesting. Well, because there's actually something called self-authorization where you decide for yourself as an individual, as a firm, or as a board to take on this issue. What the disconnect here is that social authorization seems to be a more powerful force for organizations and for many people in positions of leadership than feeling as if they can license themselves. Now that said, there are some outliers. We can think of corporate leaders who take it upon themselves to say, 'Hey, this is what I'm going to do. I will take the brunt of responsibility for any backlash or concern.' For the most part, what I'm finding is that this social piece is really part of it.

In terms of requirements, I always hesitate to talk about 'shoulds'—should something happen or not. Because when I think about the power of mandates, mandates are not necessarily always as effective as sheer appreciation, engagement, and interest in the matter. What's powerful about social authorization is that perhaps I, as a leader, might be concerned about taking my firm down the path of engaging in issues of racial justice. But if I become part of a business collective and get to hear other people talking about why this is meaningful and why it makes sense, then I become more courageous and excited about engaging. So to me, it's not a question of which one should you do. It's a question of whether you are concerned or feeling afraid. If you are, here's your other option: social authorization relative to self authorizing. At the end of the day, self authorization seems to make the most sense for so many people who are passionate about social issues in organizations, and many of the people who are pressing their organizations to do this are saying, 'Why don't we just do it?' And I'm saying it's because they're a little afraid—so social authorization becomes another pathway,

Does your research on social authorization provide guidance for organizations or leaders into which issues they should be activating on?

I always think about the context of my student population at the Wharton school, where I teach diversity, equity, and inclusion classes to undergraduates and MBA students. Part of the hallmark of a business school education is to help people learn how to effectively make the decision when asking, 'Should we do this or should we do that?' The answer to this question is that it depends—which not everyone can appreciate—but it depends on what the decision points are that are laid out in front of you and how you would make those decision. Let's talk about making a decision around 'Should you or should you not engage in this issue versus that issue?' When I think about social issue engagement, the first part is to identify the issues that we're focused on right now.

What are the issues that are on our plate? There's some total, with some that feel especially urgent, and there might be some in the back stream that we're not exactly thinking about. So what are the issues? And when we think about those issues, how do we begin to think about wether we're going to decide that these are all issues that we should be addressing? Or this is the pot that we have to choose from? Who internally in our organization should be here as we're trying to figure out what issues to put on the table and what to select from? That's the important part about social issues: having a groundswell of support rather than going at it alone is often really important internally. So what issues should we be addressing? Who do we involve internally to help us figure out what issues we should be paying attention to?

There's also this idea of going it alone versus collectively. When I say go it alone, there's going it alone as the one CEO in the company who will do it regardless of what everybody else in the c-suite thinks. But I'm also talking about going it alone as a single firm, instead of engaging with, partnering with, and collaborating with other firms that are also interested in this. That's another decision point that needs to be made: do we go it alone, with our firm by itself, deciding we're going take on this issue and put our face on the map, or are we going to band together with other corporates as a way of creating social authorization for all of us that way? The last point here—and this is what is often in the minds of corporate leaders I talk to when they're trying to figure how to address social issues—is the worry about the backlash.

It's not about addressing the issues that's a problem. It's about how we're going to deal with the fact that some group of our constituencies aren't going to like this. That's the reality of social issues—we don't all agree. That needs to be part of the decision plan, knowing that someone's not going to value whatever stand that you take on a social issue as a firm. What is your plan for responding that backlash? That plan might be, 'We can appreciate that not everyone will respect how we've chosen to address social issues or take up issues of systemic racism, but our firm is doing this because we believe that it upholds our values around diversity, equity, and inclusion and social justice. The end.' And that's what you decide as a firm. How I would address that is it's not about the issue. It's about figuring out who to include and how to go at it. Then, what's the plan for addressing the backlash from some group of people for the stance that you've chosen to take?

Even seemingly basic issues—like voting rights and and racial justice—are actually intensely politicized these days. How does that factor into the mechanisms for organizations to take action?

When we talk about the politicization of social issues, it's like the chicken and egg. I always think about politics as legislators, policymakers, and government. They are a strong institution and every economy has something of that kind. Then businesses are a different institution. In a great world, there would be some collaboration among the two. Whether you see it as a political institution sometimes speaks to where you sit. I happen to see it as an organizational and a business issue because I sit in a business school, but it is a social issue. Social issues can be owned, operated on, and curated by the political sphere and also by the business sphere. Obviously, what one does can affect how the other one treats it.

That's one way in which I think about this. One of my examples comes from my experience working in healthcare for a long time. I worked in healthcare prior to the Affordable Care Act, at a time when it was increasingly becoming part the political conversation in the US. I thought it was strange and odd that politicians on Capitol Hill were all of a sudden talking about my healthcare plan and what we in healthcare should be doing. It became politicized. But, before that, there were plenty of people who worked in healthcare organizations who were dealing with issues of healthcare. It's the increasing politicization of social issues and people's appetite for it that turns the conversation into an ideological one that becomes about laws, which is different from a business conversation that's more about engaging, operating, and identifying who we serve and who our stakeholders are which might include the politicians, but includes a lot of other people.

When I think about social authorization, I come back to the difference between the California legislation, where social authorization came from legal political sources, and the Black Lives Matter movement. Among the board members I studied, who were part of that authorization process, they didn't do as much to engage with diversity. The board diversity conversation was about how many women we can get on the boards. It wasn't about how we can hold our firms accountable to doing deeper levels of diversity work and enacting their commitments that they're making to gender equity. That was not the result when I collected the data back then. Compare that to a different way of socially authorization that comes from the people. Even though we say that politicians are supposed to represent the people I'm talking about, there's a different impact when things really come from the public and from employees. There's something to be said about who's doing the authorization and the potential impact that they can have. Politicizing social issues has its advantages, but it also has its limitations.

So the legislation got the numbers changed, but didn't have the impact it could have more broadly? Whereas what you saw post George Floyd was that corporate activation around racial justice was deeper?

Legislation is a reaction to a broader issue of gender equity or gender inequity, as well as racial justice and racial equity. With both gender equity and racial equity, who authorized and what were the limits to their ability to authorize boards and firms to act? That then dictated what the boards chose to do as a function of that authorization. There was a limit to what the legal and political social authorization to act on gender equity did relative to the social movement, public opinion, and employee activism types of social authorization for racial equity.

Sometimes in the face of social authorization, corporate leaders tell government officials to back off and not create laws or regulations, that they'll take care of things themselves...

I'll just talk about humility. The reason why I talk about humility is because I have worked for longer than 20 years in the professional workforce. I came into the workforce at a time when companies weren't taking up social issues in such a visible way. For someone like me, who is mid-career, my intellectual understanding of what the issue is and what should be done is vastly different from my 20-year-old students who have been eating, breathing, and swallowing social activism issues since they were in kindergarten. As a leader and as a mid-career person, we are not necessarily in an intellectually advantaged position on many of these issues because we have been socialized through our professional workspaces to not talk about or think about these issues as part of work.

What becomes really important is for us to understand that engaging, acting ,and responding to social issues is a form of expertise. We need to gain that expertise, and how we gain expertises is by hiring people who have it to teach us what we need to know. I get a bit nervous when I see companies saying, 'We've got it,' when it's not very clear that they have the resources or capabilities to address these issues because they've not addressed them for so long. It's really hard to go from, 'We're not doing it' to 'We're doing it' unless you shore yourself up with people who are experts and can help you figure out how to do this work.

How can organizations and business leaders be most effective in addressing racial justice and advancing diversity and inclusion?

There's a lot that works. We have to remember that every entity has a role to play—I, as an individual; corporations, as institutions; government, as an institution; NGOs, as an institution; the media, as an institution. There are many actors whose efforts are needed to attack and to address these big social issues like racial justice. When we're thinking about corporates, what's their unique voice, platform, and part in this conversation? Well, we have to remember that corporations are comprised of people. Those of us who work there, and what we do day-to-day in our experiences with one another does matter not only to those of us who work there, but also to the people with whom we engage. Businesses have a big role to play with respect to establishing a workplace environment where we care for people who are affected by social issues.

And I say, people who are affected because not everybody cares, but there are a lot of people who do really care and feel that talking about those those issues and problem-solving around them is welcome and appreciated. That's the first point: how do we care for our employees who are dealing with these issues and who are affected by them? How can we help them figure out how to how to manage that in addition to their other work? The second part is that so much of these social issues is actually about the employment space ,and that's the space that we're operating in. There is a larger question about racial justice in healthcare and racial justice in housing, but there is a racial justice when it comes to employment.

That is the employer's job, to deal with issues in the employment sphere. Where is a corporation's impact? Well, corporations engage in markets. They have an impact on the communities that they are sitting in and on their customer base. That's when it becomes really important, from the vantage point of a corporation, to understand who my constituents are, how this broader issue relates to their needs, and how we can begin to address them. There is a space here for corporations, as powerful as they are, to think about how they can influence other institutions who are scrambling. How do business leaders potentially influence the political landscape? Because the political landscape is a stakeholder of business, even if it is a bit farther away in some respects than the everyday employee. It is about using your platform as a business leader to address these issues, but mapping out who your stakeholders are and how are they receiving and impacted by these issues. That's the smart thing to do.

Going back to social authorization, what are the takeaways from your research in terms of how we all can point organizations in the right direction around societal issues?

What those of us who care about social issues need to understand is there's a lot of anxiety among the corporate population. We've talked about that some in discussing potential backlash. So, first of all, we need to recognize that there's anxiety. Then, what we're thinking about is, if we want anxiety to get to manageable levels so we can begin addressing these social issues, what needs to be done? One is to understand that firms with the highest level of anxiety would probably feel more confident engaging in social issues if they are authorized to do so by any of these collectives. For corporate leaders, the business leader collaboratives are probably some of the more effective forms of social authorization because they're peers.

Certainly, an effective form of social authorization does come from the people—from employees and from social movements, but they're a little far away from the day-to-day decisions that firms have to make. For leaders, to be able to discuss it among their peers is really important. Peer group social authorization is something that we should encourage more of, and I think the second thing is related to the role of the employee, employee activism. This is certainly something that has burgeoned quite a bit in the last five years in corporations. For some time, what I've observed is corporations trying to ignore the fact that they have a lot of employees who are really passionate about these issues. Just the other day, I was on a call with an unnamed company who talked about hiring a director of social activism.

I thought that that was really interesting, and it's equated to companies hiring directors of ESG or directors of diversity, equity, and inclusion. What would it look like if more firms started creating departments of social activism? As anxiety provoking as that might seem right now, realize that that's how firms came to have departments and directors of ESG and DEI. What would it look like to have a director and department of social activism and treat this as a critical business issue just like marketing, communications, and finances and shore up that department so they could help the firm respond effectively to these issues?

What does the social authorization framework tell us about the corporate responses to Russia's attack on Ukraine?

In terms of government bans as social authorization, I think it’s important to note that President Biden’s move to ban US imports of Russian oil, natural gas, and coal occurred after many US companies had already started ceasing their Russian operations. Shell seems to be a great example of a company that needed this type of social authorization in order to address this social issue in a meaningful way. Prior to the ban, they were actively purchasing Russian crude oil. They admitted that it wasn’t until they had engaged in ‘continuous discussions with governments about the need to disentangle society from Russian energy flows’ that they fully understood the consequences of their actions and what they needed to do going forward.

In terms of the ESG Movement as social authorization, some suggest that these corporate responses are somehow tied to these companies’ ESG commitments. If this is the case, then this certainly would suggest a case of social authorization; that is, the ESG movement is granting companies the rights to suspend operations and services in Russia. An alternative point to consider is that companies that may have felt socially authorized by the ESG movement to respond to some social issues in the past (eg climate change, racial justices, etc.) might feel increasingly empowered to authorize themselves to respond to Russia’s attack on Ukraine. Thus, it could be the case that social authorization of some social issues might lead to companies to authorize themselves to engage with other social issues—suggesting a spillover effect of sorts.

Are these corporate responses unprecedented or notable from your perspective?

I think these corporate responses are notable because they don’t all seem to be stemming from active threats to corporations—such as boycotts or protests. That doesn’t mean that these companies don’t perceive risks if they don’t suspend operations in Russia. Rather, it is probable that they do. Yet, what is especially interesting about these corporate responses in relation to Russia’s attack on Ukraine is that the issue is deeply rooted in the political realm—and, historically, corporations have appeared more reluctant to take a stance on those types of issues.

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