Shades of Red, Blue in Corner Offices: Do Executives Bring Their Politics to Work?
An oft-repeated piece of advice in American culture is to never talk politics in mixed company. But are individuals’ politics affecting more than just election results? New research indicates that the political ideologies of executives might have more influence on their firms’ strategies than we think.
Penn State Smeal College of Business doctoral student M.K. Chin, along with professors Donald Hambrick, an Evan Pugh professor and Smeal chaired professor of management, and Linda Treviño, distinguished professor of organizational behavior and ethics, set out to examine the extent to which CEOs’ personal values influence the actions and outcomes of their companies.
Many management theories exist, all with differing opinions on how executives shape the direction of their firms. But Chin, Hambrick, and Treviño hypothesized that CEOs’ values have a significant effect on their strategic decision-making, whether that effect is conscious or unconscious.
Specifically, the researchers found that CEOs on the liberal end of the political spectrum are more likely to emphasize initiatives in corporate social responsibility in the firms they lead. They also tend to emphasize these initiatives regardless of their firms’ financial performance, while more conservative-leaning CEOs are more likely to pull back on such programs in times of poor performance.
Corporate social responsibility refers to practices that further some social good beyond what is required for profit or by law. Examples include companies using their brands to advance environmental causes such as recycling or human rights.
Opinions about the role of corporate social responsibility initiatives and their place in the business world vary widely and are central to a larger debate about the purpose of business organizations. Some view these initiatives as contributing to society as a whole, others as a calculated way to gain consumers’ goodwill, and still others as a misappropriation of firm resources.
Previous theorists have looked to external factors — such as institutional environment, shareholder activism or community-level pressures — to explain the wide variety of approaches to corporate social responsibility. But Chin, Hambrick, and Treviño focus on what’s inside the firms — specifically, CEO values and preferences as expressed through their personal political ideologies.
By coding 249 CEOs’ political ideologies based on their long-term records of political donations, then comparing their ideologies to their firms’ initiatives in corporate social responsibility, the researchers were able to confirm their hypothesis: “The greater the political liberalism of a company’s CEO, the greater the company’s advances in (corporate social responsibility),” the researchers write.
A CEO’s approach to continued initiatives in corporate social responsibility in response to financial performance gives further insight into the differences between political ideologies.
Liberal-leaning CEOs continued to emphasize activities in corporate social responsibility regardless of their firms’ financial performance, as they tend to view socially responsible action as a necessary component of a successful business.
In contrast, more conservative CEOs tended to curtail their corporate social responsibility initiatives when company performance was poor. Conservative CEOs’ personal values do not necessarily support corporate social responsibility, and they are more skeptical about the business benefits that the initiatives can offer. Therefore, their promotion of these initiatives tends to hinge on positive financial performance.
“Our project reaffirms that (corporate social responsibility) is a managerial choice that emanates, in part, from executive values,” the researchers write. “CEOs’ personal values, as borne in their political conservatism vs. liberalism, will influence their firms’ corporate social responsibility initiatives.”
This study’s relevance doesn’t just stop at a firm’s social responsibility; it speaks to the larger issue of how executive preferences shape the actions and outcomes of large and economically influential establishments.
“Executives inject their personal biases into their strategic decisions and leadership behaviors,” write the researchers. “When faced with a given set of contextual conditions, CEOs of differing stripes — including differing values orientations — tend to pursue pathways that suit their personal inclinations.”
Chin, Hambrick, and Treviño’s study, “Political Ideologies of CEOs: Illustrative Evidence of the Influence of Executive Values on Corporate Social Responsibility,” is forthcoming in the journal Administrative Science Quarterly.