Under the old Friedman dictum that a company’s only responsibility is to make a return for shareholders, it would be rational for the only political engagement expected of leaders to be that which would enhance the business. That is no longer the case, however, and new research from ESMT highlights how we increasingly want leaders to be politically and socially engaged.
The researchers surveyed 40 leaders of large companies from across Europe. An overwhelming 77.5% of them said that leaders should be taking a stand on political issues, with 62.5% of them saying they are willing to do express themselves in sociopolitical terms. The primary motivation for this was to make a positive contribution to society, but there was also strong belief that speaking up helped to express corporate values.
Speaking up
“The results of the study show that managing directors express themselves publicly, primarily on political issues, so that they can use their influence to make a positive contribution on socially relevant topics. Personal motives and potential advantages for shareholders do not play a greater role,” the researchers say. “European CEOs want to add value to the substantive discourse with their public statement, but do not want to take a party-political stance. Thus, ecological, economic and social issues are identified as the most suitable topics for public comment. Less than one in ten of the CEOs surveyed stated that it is appropriate to take a party political stance in public.”
Of course, things aren’t always so straightforward, as research from San Francisco State University highlights. The study suggests that business leaders are less likely to follow their values when they agree with the incumbent president. This perversely leads to greater investment in corporate social responsibility (CSR) when they disagree with the president.
The researchers studied CEO behavior and the CSR activities of their organizations from the mid 1990s to the mid 2000s. The analysis found that liberal CEOs were more likely to engage in CSR when they believed the values inherent in them, such as environmental conservation or diversity, were under threat from the president.
“Republican presidents aren’t as interested in those values, so business leaders think, ‘We need to do more to promote and protect these values,’” the researchers explain.
Threatened values
When the values of political and business leaders conjoin however, the investment in CSR fell by around 18% on average. The researchers posit that this is likely because they feel more confident that the government will take responsibility for things, so they don’t have to do so much themselves. As such, they funnel their investments into boosting corporate performance instead.
The researchers continued their exploration to examine whether politicians implicitly encourage poor corporate behavior, such as increasing pollution or removing policies designed to protect minorities. Thankfully, no such evidence materialized to suggest that the values alignment between political and corporate leaders influenced this.
Nonetheless, the findings do shed an interesting, if somewhat surprising, perspective on the way CSR investments may fluctuate depending upon the political environment.
“You think that the people who are committed to social responsibility will stay committed regardless of the context,” the researchers explain. “[CEOs] may change their stance if the context changes.”
