Liberal-leaning companies are more committed to CSR than conservative-leaning companies, write Abhinav Gupta, Forrest Briscoe and Donald C. Hambrick.
The Supreme Court of the United States has ruled that businesses are essentially people. They enjoy many of the same rights and responsibilities as individual Americans. But do for-profit companies also have discernible political ideologies? Our research suggests they do.
In a recent study, we show that employees’ personal donations to the two major US political parties are an accurate indicator of the employer’s âorganizational political ideologyâ. This organizational ideology, in turn, predicts employer corporate social responsibility (CSR) behavior in various areas, such as equality for women and for lesbian, gay, bisexual and transgender employees ( LGBT).
CSR is defined by business practices that aim to benefit stakeholders and society, beyond narrow company interests or legal requirements. CSR can take the form of environmental initiatives, sustainable operations, diversity and inclusion policies, ethical labor and procurement practices, philanthropy and volunteerism. Most existing studies on CSR consider such behavior to be a response to external pressures (government regulation, social activism, consumer boycotts, industry standards) or the product of a CEO’s political ideology. But we’ve 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 financially support a candidate or a political party. Unlike corporate political contributions, which are often intended to seek influence, individual donations are more likely to be the expression of an ideology.
Fortunately 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 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 graph below shows, these patterns translated into the political ideology of every company along the liberal-conservative spectrum: red companies, blue companies, and shades of purple in the middle.
How do liberal and conservative companies differ in their commitment to CSR? To answer this question, we examined the CSR record of each Fortune 500 company 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 aware investors; 2) percentage of women in senior management, an indicator of gender equality across 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. More specifically, we focused on three contextual conditions:
1) Industry Standards – When there is less acceptance of CSR practices in an industry, the importance of particular ideological tendencies in the organization may be heightened.
2) Human Capital Intensity – People-centered 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 company. ‘business.
3) CEO Mandate – A CEO who has worked for a long time in an organization develops a better appreciation of organizational ideology while a new CEO can often try to act against ideology to “make things happen”.
We found that liberal-leaning companies were more engaged in CSR than conservative-leaning companies – and even more so when other companies in the sector had weaker CSR records, when the company was operating in a low-income sector. intensive in human capital 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 bit obsessed with corporate culture, which is seen as a key ingredient in the recipe for success (or failure). Yet culture is difficult 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 observers and future leaders, our study offers a renewed skepticism about any notion of corporate hierarchy as a top-down dictatorship, where a CEO can create mandates as executives middle and line managers will reliably implement. 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 organization chart. Politically astute middle and lower level employees can – and will influence – company decisions to reflect their beliefs and judgments.
Yet this raises a related question: Should companies embrace their latent ideological tendencies? Businesses are certainly not democracies – yet our study 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 tendencies of its employees into its official values ââand communications could reap the rewards of greater cultural alignment: attracting, retaining and inspiring like-minded employees towards common goals.
On the other hand, there are compelling reasons to be wary of fueling ideological homogeneity within organizations. Instead, leaders who downplay or counterbalance ideological tendencies in their workforce may benefit from greater external trust and the flexibility to connect with an ideologically diverse set of external stakeholders. Likewise, internally, if leaders can create safe ways for employees with different values ââand beliefs to express their ideas (on CSR practices, products or other issues related to the company), this can lead to greater innovation, not to mention the goodwill of those who value ideological tolerance as a primary feature of their workplace. More research is needed to fully understand these effects.
This blog post is based on the author’s article Red, Blue, and Purple Firms: Organizational Political Ideology and Corporate Social Responsibility, co-authored with Forrest Briscoe and Donald C. Hambrick, in the Strategic Management Journal, and published for the first time in LSE Business Review.
Image Credit Featured: Taliessin’s Folly, by Shakimba, licensed under CC-BY-2.0
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Note: This article gives the author’s point of view, not the position of the USAPP – American Politics and Policy, or the London School of Economics
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About the authors
Abhinav Gupta – Pennsylvania State University
Abhinav Gupta is Assistant Professor of Strategic Management at the Foster School of Business, University of Washington, Seattle. His current research focuses on corporate and elite political ideology, inter-organizational diffusion and social activism.
Forrest Briscoe – Pennsylvania State University
Briscoe Forest is Associate Professor in the Department of Management and Organization at Penn State Smeal College of Business, and Frank & Mary Jean Smeal Research Fellow. Much of his research focuses on how organizations adopt new practices and how changes propagate across industries and areas of organizations. He is particularly interested in how organizational decision-makers react when there is controversy and conflict around the changes they envision, and when stakeholders advocate for (or against) those changes.
Donald C. Hambrick – Pennsylvania State University
Donald C. Hambrick is Professor at Evan Pugh University and Smeal Professor of Management at 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, staffing and incentives, as well as team composition and processes. of management. His recent book, Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation, presents cutting-edge thinking for leaders embarking on business change initiatives.