Politics seeps into our daily lives and corrupts almost everything, and that’s as true for business leaders as it is for those of us who buy from them. But ideologically loaded environmental, social and governance (ESG) concerns and the “wicked” capitalism debate show that some companies embrace the danger of politicizing themselves. If you think corporations make mistakes by joining the war, so do business leaders themselves. A recent survey found that corporate executives are concerned about the political minefield and worry that it is becoming more dangerous.
The Conference Board, a century-old business membership and research organization, has surveyed corporate leaders in recent months and found them in a bad mood.
“Ninety-eight percent of respondents described today’s political environment as challenging for companies, with 78 percent describing it as very or very challenging—compared to just 47 percent in 2021,” said Paul Washington and Evan LaDao of the Conference Board’s ESG Center. Black, of the agency’s government relations and executive council, wrote in a related report.
The report divided respondents’ concerns into four categories: extremism/polarisation; weakening of trust in government and political institutions; anti-corporate speech and actions, including “the use of government power to reward or punish companies for political purposes”; and with sharp state-level policy differences Both Anti-ESG feedback and pressure to expand ESG programs.
Some of these challenges are unavoidable; We all live in the same country and suffer from the tribal divisions and governance uncertainties that plague American politics.
Author Paul Washington commented, “Combining a polarization among policymakers, with extremely close elections, companies are facing potentially sweeping changes in government policy with each election, which is not conducive to business planning and investment”.
But much of this pain is self-inflicted and avoidable.
“At the same time, many companies are understandably hesitant to talk about things because they might be attacked for going too far or not enough,” Washington added. And yet, many companies there is Don’t like jumping into a fight and then the pushback they suffer in return.
Case in point is the Walt Disney Company, an entertainment behemoth that has quickly gone from American icon status to controversial political player. This month, state officials wrested control of the board that oversees development around its Florida theme parks after it called for repeal of laws that restrict classroom discussions of gender and sexual orientation. The company has also drawn criticism from conservatives for programming that includes politically progressive messaging. Disney has a right to take a stand on controversial issues, but seemed unprepared for the inevitable backlash from those who disagreed. Pushback should have been expected when corporate execs allowed themselves to be convinced that being political was a necessary marketing move.
“New research from Ipsos shows that more than half of American consumers make purchases based on their political or social values—a sign that even the most cross-border companies are not immune to America’s political polarization,” Clifford A. Young, president of Ipsos Public Affairs USA, and Justin Guest, professor of government at George Mason University, wrote about the results of the summer 2021 poll. “Partial consumers are important. Not only are there millions of them, but they also tend to be more educated and therefore spend more. Power.”
Like other pollsters, Ipsos found that “partisan consumers exist in roughly equal numbers across parties. But Democrats significantly more want and expect their favorite brands to take a stand on what they care about.” This helps explain why organizations that embrace politics overwhelmingly take progressive positions. But the poll results have a caveat: If only about half of Americans want business to get political, roughly half no. Brands risk alienating both those who prefer apolitical brands and those who disagree with the positions taken.
“The risk brands take on commenting on political divisions: alienating consumers at any cost,” rival polling firm Morning Consult headlined its own study the same year.
This year’s polling continues to find divisions over politicized business, though both Trafalgar/Convention of States and Gallup now report most Americans opposition Corporate Issue Advocacy. Gallup adds that Democrats (and younger adults) are the most likely to mix politics and corporate identities. This leaves a lot of room for fights to start over on the business side.
Surprisingly, the Conference Board found “most companies are concerned about ESG feedback from federal and state elected officials, advocacy groups and employees.”
The inclusion of employees on the list is interesting, since many companies say that employees push to support their causes. But the report notes, “employees are not aligned in their views on many social issues” and pleasing one group can alienate another. Netflix is among the companies that have advised workers who can’t leave their reasons at home to seek employment elsewhere.
Business leaders don’t expect things to improve anytime soon. “Looking to 2025, 71 percent of companies expect challenges in the political environment to be ‘about the same’ (at 29 percent) or ‘more challenging’ (at 42 percent),” The Conference Board found.
So, why are business leaders walking the political minefield?
Sanjay Bagat, a University of Colorado finance professor, observed last March that “there is some evidence that companies openly embracing ESG account for poor business performance.” “A recent paper by Ryan Flugum of the University of Northern Iowa and Matthew Souther of the University of South Carolina found that when managers underperform earnings expectations (set by analysts following their companies), they often talk publicly about their focus on ESG. But When they beat earnings expectations, they make few public statements regarding ESG, if any.”
That is, companies may adopt reasons to conceal their defects in the provision of goods and services. Consumers looking for quality may want to look beyond brands that offer ideological marketing.
The conference board report recommended “helping firms effectively manage the risks associated with their corporate political activities,” but few executives had had enough. While a third of survey respondents wanted to take a “leadership” role in improving the business political environment, 29 percent preferred a supporting role. Thirty percent called for minimal political activity and 7 percent wanted to focus only on business.