CEOs are becoming more politically polarized, survey finds

US boardrooms have become more Republican and more partisan over the past decade, according to a new study.

The survey, published last month by the National Bureau of Economic Research, was based on voter registration data on more than 3,700 executives from nearly a thousand S&P 1500 companies. And it comes as corporations come under pressure to take positions on politically charged issues such as voting rights, gun violence and abortion.

In 2020, the share of Republican executives was 68 percent, up from 63 in 2008 (but down from 75 percent in 2016).

It’s not new that boardrooms are overwhelmingly Republican, said Elizabeth Kempf, an associate professor of finance at Harvard Business School and one of the study’s authors. But what’s more telling is the 8 percent increase in political homogeneity, Kempf said, “more grouping of Democrats with Democrats and more grouping of Republicans with Republicans.”

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The trend suggests that the “increasing tendency of people in the US to socialize and form connections and friendships with like-minded people extends to decision-makers at the highest level in the workplace,” the study said.

The finding that boardrooms have become more conservative stands in stark contrast to cries of “woke capitalism” by some Republicans in recent years, who have accused certain American corporations of pandering to liberal consumers and foisting social justice agendas on the public. In December, Florida Gov. Ron DeSantis (R) introduced the Stop the Wake Act to target the “corporate wake” in the workplace, and in May, Sen. Marco Rubio (R-Fla.) introduced the “No Tax Cuts for Radical corporate activism ” to prevent employers from deducting medical travel expenses for abortion and gender-affirming care.

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It also reflects the generational divide in terms of consumer values ​​and expectations. While a sense of shared values ​​is becoming increasingly important to younger consumers who want companies to engage with social issues that have traditionally been outside the scope of executive discussions, older generations tend to think it is “irrelevant ” business to step in, according to MK Chin, Associate Professor of Management at Indiana University. Chin, who did not participate in the study, has spent years studying the intersection of political ideology and corporate leadership.

“CEOs are facing more difficult decision-making situations,” Chin said. “In the past, they were kind of exempt because they didn’t take any action on these social issues. Now there are different expectations from different generations, different pressures from different areas.”

Companies’ stances on political issues are already taking them into uncharted territory, with companies such as Netflix, Procter & Gamble and Target announcing travel reimbursements for employees seeking abortions following a Supreme Court ruling that overturned Roe v. Wadetaking legal and financial risks in the process.

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In April, the Florida Legislature passed a bill to repeal Walt Disney World’s special tax district in the state — a decision with billions of dollars in ramifications for the company and the communities that surround the theme park — after the company publicly clashed with DeSantis, a Florida law restricting the way educators discuss LGBT issues in the classroom.

The researchers defined partisanship as “the degree to which policy views within the same executive team are dominated by one party.” They measure it by the probability that two randomly drawn executives share a political affiliation.

The most likely explanation for the rise in political partisanship is that “executives seem to match each other based on political affiliation,” said Margarita Tsutsura, an associate professor of finance at Washington University in St. Louis and another author. “A secondary reason is that the share of Republican executives is increasing, so executives are becoming more homogeneous.”

Part of the divide is geographic, the researchers noted, with executives in Texas and Ohio becoming more Republican and executives in California and New York becoming more Democratic.

The sense of growing division is not unique to boardrooms: A March analysis by the Pew Research Center found that Democrats and Republicans are “further apart ideologically today than at any time in the last 50 years.” But the jump in political polarization among executives was more than double that of local registered voters during the same period, the study authors noted.

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“Consumers have a growing expectation that companies will take sides,” Tsutsura said. “This may be because, with political partisanship on the rise, people’s political ideology seems to play a greater role in how they think about their identity.”

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While greater political alignment in the boardroom can be an advantage for organizations in terms of more effective communication and execution of company strategies, the effect is likely to limit the outlook of corporate decision makers, Chin said.

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“Groupthink will happen more easily,” Chin said. “They could suffer from a narrow scope of scanning environment, a narrow scope of new ideas and strategies.”

It can also weigh on corporate results. The researchers found that executives from the political minority were more likely to leave and that “the departure of executives who do not align with the political views of the team majority is more costly to shareholders than the departure of politically oriented executives.”

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