The expression of political views is now a common occurrence and has permeated many areas of people’s lives. For instance, it has been observed that individuals tend to surround themselves with like-minded individuals and steer clear of those with differing or opposing political ideologies.

Business organizations are not immune to the impact of political ideologies either. The political views held by a company’s top leaders have been found to shape the organization’s initiatives. A recent study from the University of Notre Dame suggests that the political ideology of a new or incoming CEO can play a role in the decision of serving directors to stay or leave their positions within the company.

“As a frontline corporate governance mechanism, the board of directors’ mandate is typically more professional in nature. At the same time, directors often prioritize avoiding situations that compromise their personal reputations and provoke unfavorable publicity,” the researchers explain.

“Given the inextricable relationship between individuals on the board and the CEO, we argue that directors may depart from the organization if they have conflicting political ideologies with the incoming chief executive, and they are apt to retain their roles if they share political views with that individual.”

Politically active

The researchers argue that the familiarity of directors with incoming CEOs can dampen this effect. They analyzed data from over 200 publicly traded firms that had undergone a CEO succession between 2008 and 2012. They found that directors are much more likely to leave their role when the new CEO has a different political ideology to them, with the reverse also true.

“On further study, we found that the directors’ willingness to depart from their positions is stronger when a CEO with opposing political ideology joins the firm, as compared to their willingness to stay when a CEO with similar political ideology joins,” the researchers explain.

“We also found that when directors have shared more time and experience with the incoming CEO in the past, they are less likely to exit the firm despite opposing political ideologies.”

The authors believe that their research helps us to better understand the social circles that form among the corporate elite. They believe that their work also has some practical implications, as any executive that wishes to maximize their firm’s success should take account of the role their political views might have on the retention of senior people.

As a result, it might be prudent for boards to gather information about the political ideology of incoming CEOs so that disagreements can be avoided and unnecessary departures prevented. And lastly, from a larger societal perspective, investing in relationships with people holding opposing political views can lessen the tendency to avoid or distance oneself from such people, and help in embracing their views more openly.