The United States Supreme Court has ruled that corporations are, essentially, people. They enjoy many of the same rights and responsibilities as individual Americans. But do profit-seeking enterprises also have discernible political ideologies? Our research suggests that they do.
In a recent study, we demonstrate that employees’ personal donations to the two major American political parties serve as an accurate indicator of the employer’s “organisational political ideology.” This organisational ideology, in turn, predicts the employer’s corporate social responsibility (CSR) behaviour in a variety of domains, such as equality for women, and for lesbian, gay, bisexual, and transgender (LGBT) employees.
CSR is defined by those business practices that are intended to benefit stakeholders and society, beyond the narrow interests of the firm or the requirements of the law. CSR can take the form of environmental initiatives, sustainable operations, diversity & inclusion policies, ethical labour and sourcing practices, philanthropy and volunteering. Most existing studies of CSR consider such behaviours 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 considered how internal, organisation-wide factors might also come into play.
In particular, in this study we focused on one internal factor: organisational ideology. To establish its existence, we reasoned that a credible way of measuring an organisation’s ideology would be to take an average of its employees’ personal ideologies. And perhaps the purest indicator of personal ideology is one’s choice to financially support a candidate or political party. Unlike corporate political contributions, which are often intended to seek influence, individual donations are more likely to be an expression of ideology.
Fortunately for our purposes, the Federal Election Commission makes public its records of gifts to candidates and political parties, and these entries typically include the donor’s employer (one of a few biographical questions asked in online giving forms). To chart patterns of support within each firm, we matched 15 years (1998-2012) of political donors to the Fortune 500 companies that employed them. As depicted in the graph below, these patterns translated into each firm’s political ideology along the liberal-conservative spectrum: red firms, blue firms, and shades of purple in the middle.
How do liberal and conservative firms differ in their commitment to CSR? To answer this question, we examined the CSR record of each Fortune 500 firm over the same 15-year period, using three measures: 1) firm rating on the KLD/MSCI Social Index, a comprehensive measure of CSR activities for socially conscious investors; 2) percentage of women in top management, an indicator of gender equality throughout an organisation; 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 behaviours, and adoption of these practices appears to be influenced by organisational ideologies — above and beyond the ideology of the chief executive. To further understand the influence of organisational ideology, we then explored the effects of contextual conditions that may make the effect of organisational ideology either stronger or weaker. Specifically, we focused on three contextual conditions:
1) Industry standards – When there is less acceptance of CSR practices in an industry, the importance of the organization’s particular ideological leanings may be heightened.
2) Human capital intensity – People-centered organizations, such as information technology firms, tend to delegate more decisions down the chain of command, to the employees who define the firm’s political ideology.
3) CEO tenure – A chief executive who has been with an organization for a long time develops a better appreciation for the organizational ideology while a new CEO may often try to act against the ideology to “shake things up.”
We found that liberal-leaning companies engaged in more CSR than conservative-leaning companies — and even more so when other firms in the industry had weaker CSR records, when the company operated in a human capital-intensive industry, and when the company’s CEO had a long organisational tenure.
What do these findings mean for business managers and observers?
We know that modern organisations can be a little obsessive about company culture, which is believed to be a key ingredient in the recipe of success (or failure). Yet culture is difficult to define and even harder to measure. Our study advances understanding of at least one piece of the larger mosaic of organisational culture.
First off, for business observers and future leaders, our study offers renewed scepticism for any notion of the firm hierarchy as a top-down dictatorship, where a CEO can create mandates that middle managers and line managers will reliably implement. Instead, our study shows that the influence is more distributed, and value-laden decisions are made and shaped by people at every level of the org 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 issue: should corporations embrace their latent ideological leanings? Companies are certainly not democracies – yet our study suggests it may be futile to think that political discourse can really be kept out of the workplace. Indeed, a firm that integrates the ideological leanings of its employees into its official values and communications might enjoy the fruits of greater cultural alignment: attracting, retaining and inspiring like-minded employees toward shared goals.
On the other hand, there are compelling reasons to be wary of fueling ideological homogeneity inside organizations. Instead, leaders who de-emphasize or counter-balance the ideological leanings in their workforces may enjoy greater external trust and the flexibility to connect with an ideologically-diverse set of external stakeholders. Similarly, internally, if leaders can create safe avenues for employees with different values and beliefs to voice their ideas (about CSR practices, products, or other business-related issues), this may lead to greater innovation, not to mention goodwill among those who value ideological tolerance as an over-arching feature of their workplace. More research is needed to fully understand these effects.
- This blog post is based on the author’s paper 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.
- The post gives the views of its author, not the position of LSE Business Review or the London School of Economics.
- Featured image credit: Taliessin’s Folly, by Shakimba, under a CC-BY-2.0 licence
- Before commenting, please read our Comment Policy.
Abhinav Gupta is Assistant Professor of Strategic Management at the Foster School of Business, University of Washington, Seattle. His current research focuses on the political ideology of corporations and elites, inter-organisational diffusion and social activism.
Forrest Briscoe is Associate Professor in the Department of Management and Organization at Penn State Smeal College of Business, and a Frank & Mary Jean Smeal Research. Much of his research focuses on how organizations adopt new practices and how changes spread across industries and fields of organizations. He is especially interested in how organizational decision makers react when there is controversy and contention surrounding the changes they are considering, and when stakeholders are advocating for (or against) those changes.
Donald C. Hambrick is the Evan Pugh University Professor and Smeal Chaired Professor of Management at Penn State University’s Smeal College of Business. He is the author of numerous articles, chapters, and books on the topics of strategy formulation, strategy implementation, executive staffing and incentives, and the composition and processes of top management teams. His recent book, Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation, presents leading-edge thinking for executives who are embarking on corporate change initiatives.