CEO activism—CEOs publicly expressing their opinions on social or political issues not directly related to their firms' core operations—has become increasingly prevalent. This study posits that CEO activism functions as an informal control mechanism. Prior research on management control systems suggests that managers use values and belief systems to influence employees’ behavior (“value-based control”). However, CEOs may seek additional means to communicate specific values because formally stated values tend to be broad and less specific by design. Using novel datasets, I find that CEO activism has short-term negative effects on employee sentiment on the firm’s beliefs and values. Moreover, it amplifies the sensitivity of employee turnover to employee sentiment. In the longer run, CEO activism is positively associated with the firm’s operating performance. Further analysis shows that the inflow of better-educated employees increases after CEO activism. Collectively, these findings suggest that CEO activism promotes employee sorting based on value alignment, ultimately shaping workforce composition and firm performance.
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