A Better Way to Manage Corporate Political Activism

Corporate political activism (CPA) is defined as activities that are visible to stakeholders and that support or oppose issues viewed as politically charged. Social media and press accounts suggest a growing desire among consumers, employees, and shareholders for companies to engage in  CPA.. The reality is that most people are not politically active and perceive most brands as apolitical and in the middle.

Contrary to the accepted narrative, evidence from peer-reviewed, academic research shows that CPA does not help – but can harm – companies on many fronts. Specifically, CPA can harm a company’s brand equity, employee productivity, and financial performance while also alienating customers.

Strategies to Manage Corporate Political Activism

In a new paper, we discuss four strategies, shown in Figure 1, that senior executives can use by assessing two factors: (1) their customer base – whether their customers are homogeneous or heterogeneous in their political identity – and (2) corporate values.

Figure 1: Corporate Political Activism Strategies

Are the company’s values strongly political?
YES NO
Is the company’s target customer base politically diverse? HOMOGENEOUS Cell A: Convergence

Company can engage in direct political activism.

e.g., Mypillow.com; Let’s Go Brandon; ALLRIOT; Patriot Mobile; Cornerstone Payment System

Cell C: Depoliticized But Supportive Stance

Company need not engage in direct political activism. If needed, they can support non-political causes important to their stakeholder base.

e.g., Many small family-owned businesses

HETEROGENEOUS Cell B: Selective Engagement

May engage in selective political activism at owner, founder, or corporate level, but not at brand level.

e.g., Hobby Lobby

Cell D: Divergence

Company does not engage in political activism. Use careful stakeholder research and long-term strategy to diverge.

e.g., Costco Wholesale; See’s Candies, Chick-fil-A; Microsoft

(1) Convergence Strategy (Cell A): A convergence strategy occurs when a company has strong political values and engages in political activism aligned with those values – these two factors “converge.” Convergence works well when the company has a small, politically homogeneous customer base and its products or services have political elements that appeal to those customers (e.g., news, commentary, political merchandise). For example, ALLRIOT is a liberal-themed clothing brand positioned as “the RED PILL that lifts apathy and challenges stale ideas”[1] whereas Let’s Go Brandon is a New England based chain of stores that sells conservative-themed merchandise. Both businesses engage in overt political activism that directly appeals to their customers and employees. A convergence strategy tends to suit relatively small and privately owned companies that can bypass the heightened level of investor pressure or employee scrutiny with which publicly traded companies must contend.

(2) Divergence Strategy (Cell D): In a divergence strategy, companies diverge from political activism if the company’s core values are not political, and its customer base is politically diverse. Most large companies’ values are not strongly political, and their customers are not uniformly liberal or conservative. As an example, Costco Wholesale focuses its charitable giving only on supporting children, education, or health and human services and doesn’t support politically charged causes.[2] Microsoft won’t support political, labor, and fraternal organizations.[3] Divergence strategy doesn’t alienate customers, polarize employees, or reduce shareholder return.

(3) Selective Engagement (Cell B): A strategy of selective engagement works when a company’s values are strongly political, but its customer base is politically diverse. For most companies, a selective engagement strategy emerges over time. Initially, some companies may start out politically active. As they grow, their customer base becomes more politically diverse, and they separate their political activism from customer management. For example, despite having a politically diverse customer base, Hobby Lobby initially incorporated the owners’ Christian conservative values into its corporate values and often imbued its operations with its religious beliefs. When the company’s owners’ actions sparked controversy, Hobby Lobby framed its owners’ activities as driven by deep religious beliefs, with a sometime overlap with politics. Over time, the company separated the owners’ personal beliefs from company operations. Some apolitical companies can choose to engage in political activism because of changes in the expectations of salient stakeholders.  or [NOT SURE WHAT THIS MEANS — the private utility of senior management]. This needle must be delicately threaded by accounting for the prevailing values at the time and by being respectful to the company’s shareholders, employees, and customers.

(4) Depoliticized But Supportive Stance (Cell C): If a company’s values are not political, and its customer base is politically homogeneous, a depoliticized but supportive stance may be appropriate. Examples of this include donating to charities like the local food bank and volunteering at neighborhood public schools or the cancer unit at a hospital. These companies often have policies and training aimed at keeping customer conversations focused on its value proposition and trained to keep conversations apolitical.

Political Activism Strategy Migration

The four cells in Figure 1 display archetypical strategies that evolve. Our historical research shows a few distinct patterns notable for senior management of any company.

(1) Convergence → Selective Engagement → Divergence: As family-owned and small companies grow, they show this pattern. As their customer base, geographic reach, and employee base expand, companies must embrace the increased political diversity of stakeholders. One example is Chick-fil-A. When the Cathy family started Chick-fil-A in Georgia, it donated to conservative-leaning causes such as the Marriage and Family Foundation. As the business grew, the family slowly migrated to a selective engagement stance by also supporting non-conservative causes. Lately, the company has slowly distanced itself from its founder’s original political positions and worked to support various social causes and employee well-being.

(2) Divergence → Depoliticized but Supportive Stance → Selective Engagement: Today, large companies such as Target, Disney, and Continental have moved from a divergence strategy to a selective engagement strategy. These companies have taken such a stance for many reasons, such as senior managements’ private beliefs and goals, pressure from activists, or a desire to meet employees’ needs. For example, Disney has historically stayed out of politics, preferring to focus on providing entertainment to children. During the 1990s and early 2000s it took a depoliticized but supportive stance, backing apolitical causes such as wildlife conservation, reading for children through First Book, and donating toys through the Marine Toys for Tots program.[4] After Robert Iger took over in late 2022, Disney adopted a selective-engagement strategy and distanced itself from active CPA. Under Iger, Disney is more cognizant of balancing the political diversity of its customer base and the need for a co-operative relationship with Florida against the demands of activists. Otherwise, it risks becoming reactive and harming customers, employees, and shareholders.

Conclusion

On average, corporate political activism is not beneficial for companies. If senior executives decide to engage in CPA, they must walk a delicate and risky line. Frequently, the downside of engaging in corporate political activism exceeds the benefits. The framework shown in Figure 1 can help senior management in deciding whether to engage in CPA. Companies can adjust their strategy to create value for their customers, employees, and shareholders.

ENDNOTES

[1] See: https://www.allriot.com/brand

[2] https://www.costco.com/charitable-giving.html?msclkid=31c07b5eb9c611ecb51fe771aa6e2092

[3] https://www.microsoft.com/en-us/nonprofits/eligibility?msclkid=feb28782b9c511ecbcf042a6c7371013&activetab=pivot1:primaryr5

[4] https://impact.disney.com/environment/conservation/

This post comes to us from Vikas Mittal at Rice University’s Jones Graduate School of Business and Jihye Jung at the University of Texas at Austin’s Alvarez College of Business. It is based on their recent paper, “Strategic Management of Corporate Political Activism,” forthcoming in Management and Business Review and available here.

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