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 express themselves in sociopolitical terms. The primary motivation for this was to make a positive contribution to society, but there was also a 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.”
Research from Harvard Business School suggests that employees might not be getting quite what they hope from such a desire, however. The researchers looked at the political allegiances of bosses across America and found that 69% align themselves with the Republicans, versus just 31% with the Democrats.
The researchers looked up the top five earning executives at each of the S&P 1500 firms, and then looked up their voting records to understand the political composition of each executive team. If the team was dominated by a particular party then it was viewed as being partisan.
The analysis revealed that the likelihood of partisanship grew by around 7.7% between 2008 and 2020. What’s more, this trend was around twice that seen across the population more broadly.
Republican-leaning
It was also interesting that 69% of executives voted Republican. While the polarization of executive teams has worsened, the data suggests that the orientation toward Republicans has remained pretty stable, despite the accusations that capitalism has become “woke” in recent years.
Instead, the opposite appears to be the case, and the researchers believe that the public statements from companies may be more a case of reflecting how customers and employees perceive various issues rather than their own political views.
That companies appear to be becoming more partisan is generally not a positive thing for companies or their shareholders, with more diversity generally producing better results.
