Red or blue? Political ideology and corporate social responsibility

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The United States Supreme Court has ruled that businesses are essentially people. They enjoy many of the same rights and responsibilities as Americans. But do for-profit companies also have discernible political ideologies? Our research suggests yes.

In a recent study, we demonstrate that employees’ personal donations to the two major US political parties are an accurate predictor of the employer’s “organizational political ideology”. This organizational ideology, in turn, predicts employer behavior with regard to corporate social responsibility (CSR) in various areas, such as equality for women and for lesbian, gay, bisexual and transgender (LGBT) employees. ).

CSR is defined by business practices that seek to benefit stakeholders and society, beyond narrow corporate interests or legal requirements. CSR can take the form of environmental initiatives, sustainable operations, diversity and inclusion policies, ethical labor and sourcing practices, philanthropy and volunteerism. Most existing CSR studies see these behaviors as a response to external pressures – government regulation, social activism, consumer boycotts, industry norms – or the product of a CEO’s political ideology. But we looked at how internal, organization-wide factors might also come into play.

In particular, in this study, we focused on an internal factor: organizational ideology. To establish its existence, we thought that a credible way to measure the ideology of an organization would be to take an average of the personal ideologies of its employees. And perhaps the purest indicator of personal ideology is the choice to support a political candidate or party financially. Unlike corporate political contributions, which are often intended to seek influence, individual donations are more likely to be an expression of ideology.

Luckily for our purposes, the Federal Election Commission makes its records of gifts to candidates and political parties public, and these entries typically include the donor’s employer (one of the few biographical questions asked in online donation forms). To trace the patterns of support within each company, we compared 15 years (1998-2012) of political donors to the Fortune 500 companies that employed them. As the chart below shows, these patterns translated into each company’s political ideology on the liberal-conservative spectrum: red companies, blue companies, and shades of purple in the middle.

corporate-ideology-and-csr

How do liberal and conservative companies differ in their commitment to CSR? To answer this question, we looked at each Fortune 500 company’s CSR record over the same 15-year period, using three metrics: 1) the company’s rating on the KLD/MSCI Social Index, a comprehensive measurement of CSR activities for socially responsible investors; 2) percentage of women in senior management, an indicator of gender equality within an organization; 3) and health care coverage for same-sex partners of LGBT employees.

We found consistent evidence that liberal-leaning companies tended to be strong in all three behaviors, and adoption of these practices appears to be influenced by organizational ideologies – beyond CEO ideology. To better understand the influence of organizational ideology, we then explored the effects of contextual conditions that can make the effect of organizational ideology stronger or weaker. Specifically, we focused on three contextual conditions:

1) Industry Norms – When there is less acceptance of CSR practices in an industry, the importance of particular ideological leanings of the organization may be heightened.

2) Human Capital Intensity – People-centric organizations, such as information technology companies, tend to delegate more decisions down the chain of command to employees who define the political ideology of the organization. ‘business.

3) CEO tenure – A CEO who has been with an organization for a long time develops a better appreciation for organizational ideology, while a new CEO may often try to act against the ideology to “get things done”.

We found that liberal-leaning companies engaged in CSR more than conservative-leaning companies – and even more so when other companies in the sector had weaker CSR records, when the company operated in an industry with high human capital intensity and when the CEO of the company had a long organizational tenure.

What do these results mean for business leaders and observers?

We know that modern organizations can be a little obsessed with corporate culture as a key ingredient in the recipe for success (or failure). Yet culture is hard to define and even harder to measure. Our study advances understanding of at least one element of the larger mosaic of organizational culture.

First, for business watchers and future leaders, our study offers renewed skepticism of any notion of corporate hierarchy as a top-down dictatorship, where a CEO can create mandates that middle managers and line managers will implement reliably. Instead, our study shows that influence is more distributed and that value-laden decisions are made and shaped by people at all levels of the organizational chart. Politically astute mid- and lower-level employees can – and will – influence company decisions so that they reflect their beliefs and judgments.

Yet it raises a related question: should companies embrace their latent ideological inclinations? Companies are certainly not democracies – yet our research suggests that it may be futile to think that political discourse can really be kept out of the workplace. Indeed, a company that incorporates the ideological leanings of its employees into its values ​​and formal communications could enjoy the fruits of greater cultural alignment: attracting, retaining and inspiring like-minded employees toward common goals.

On the other hand, there are compelling reasons to be wary of nurturing ideological homogeneity within organizations. Instead, leaders who downplay or counteract the ideological leanings of their workforce may benefit from greater external trust and the flexibility to connect with an ideologically diverse set of external stakeholders. Similarly, internally, if leaders can create safe channels for employees with different values ​​and beliefs to voice their ideas (on CSR practices, products, or other company-related issues), it can lead to greater innovation, not to mention goodwill among those who value ideological tolerance as a paramount characteristic of their workplace. Further research is needed to fully understand these effects.

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Remarks:


abhinav guptaAbhinav Gupta East assistant professor in Strategic Management at the Foster School of Business, University of Washington, Seattle. His current research focuses on corporate and elite political ideology, cross-organizational diffusion, and social activism.

forrest-briscoeBriscoe Forest East Associate Professor in the Department of Management and Organization at Penn State Smeal College of Business, and a Frank & Mary Jean Smeal Research. Much of his research focuses on how organizations adopt new practices and how changes spread across industries and areas of organizations. He is particularly interested in how organizational decision-makers respond when there is controversy and conflict surrounding the changes they are considering, and when stakeholders advocate for (or against) those changes.

Donald HambrickDonald C. Hambrick is a professor at Evan Pugh University and the Smeal Professor of Management at the Smeal College of Business at Penn State University. He is the author of numerous articles, chapters and books on the topics of strategy formulation, strategy implementation, executive staffing and incentives, and composition and processes. management teams. His recent book, Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation, presents cutting-edge thinking for leaders embarking on corporate change initiatives.

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