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Partisanship in the C-suite
EMEL AKAN is a senior reporter for The Epoch Times in Washington. Previously, she worked in the financial sector as an investment banker at JPMorgan. Emel Akan
Political Polarization in Corporate America
Research finds partisanship at the C-suite surged from 2008 to 2020
Executive teams of large U.S. corporations are becoming increasingly partisan, resulting in “a political polarization of corporate America,” according to a new study from the National Bureau of Economic Research. This polarization has implications for the values of firms as well, the study found.
While workplace diversity in recent years has received a lot of attention, particularly in relation to gender and color, political diversity is clearly moving in the opposite direction.
Historically, the workplace has been more politically diverse, offering more opportunities to form cross-party relationships compared to other settings, such as the family, neighborhood, or voluntary organizations.
But it’s no longer the case at the corporate leadership level, according to researchers from Boston College, the University of Chicago, and Cornell University. They conducted their study by analyzing voter registration records for senior executives at S&P 1500 companies between 2008 and 2020.
In contrast to previous studies, the new study argues that voter registration data, rather than political contributions, are more reliable for inferring political preferences of executives.
Partisanship is defined by the researchers as the extent to which a single political party dominates political views within the same executive team. And they found that over the years, C-suites (top senior executives) of public U.S. firms are increasingly dominated by one political party.
“More specifically, our measure of partisanship is the probability that two randomly drawn executives are affiliated with the same political party. We find a 7.7-percentage-point increase in the partisanship of executive teams over our sample period,” the researchers write.
The rise in partisanship is mostly a result of executives’ increasing tendency to associate with those who share their political beliefs, according to the authors.
“Our results show executives who share the same political party are 34% more likely to work in the same firm,” they write.
The study also found that the majority of executives lean Republican.
“The average share of Democratic and Republican executives is 31.0% and 69.0%, respectively,” the paper states.
The researchers discovered that the proportion of Republican executives climbed to 68 percent in 2020 from 63 percent in 2008, while the proportion of unaffiliated executives decreased. This, they state, is another reason why the executive population has become more “politically homogeneous.”
Additionally, partisan division among executives is growing across states.
“Executives in Texas and Ohio are becoming more Republican, whereas executives in California and New York are becoming more Democratic,” the researchers write.
In the study, they also examined if political affiliation may explain why CEOs or top managers leave their positions. They discovered that executives whose political beliefs differed from those of the majority of the team had a greater likelihood of quitting the company than executives whose political views matched the team’s views.
The researchers thus raised a question: Do shareholders benefit from the exit of CEOs who are politically misaligned?
To help answer this, the researchers analyzed abnormal stock performances around the resignation announcements of the executives. They observed trends that strongly indicate that the exits of politically mismatched leaders are detrimental to firm value.
“Hence, some aspects of the rising polarization among U.S. executives have negative consequences for firms’ shareholders,” the study states.
The authors also raised the question of whether governments should be worried about political discrimination in the workplace.
Many businesses today don’t hold back when it comes to making public statements about current political events.
One of the authors of the paper, Elisabeth Kempf, a faculty research fellow at the University of Chicago, said executives who identify as Democrats may have become more outspoken on progressive issues over the years.
“The Democratic executives are increasingly giving to the Democratic Party,” she said in a podcast, referring to political donations.
She added that this is consistent with the notion that “maybe executives have become more outspoken on progressive issues or are more openly Democrat.”
