There is a growing rift between corporate America and the GOP — two groups that have long been friends.
The latest incident involves Disney and its decision to speak out against a Florida law that prevents the teaching of sexual orientation or gender identity in kindergarten through third grade. State Republicans, including the governor, reacted with fury, voting to strip Disney of the special tax and self-governing privileges it has held for 55 years.
The spat follows rows between the GOP and corporate America over restrictive ballot measures and toilet bills. In 2021, Senate Minority Leader Mitch McConnell bluntly warned corporations to “stay out of politics” – although he later softened his tone.
Meanwhile, Democrats are trying to capitalize on the divide.
As a professor of management, I study how the values and political views of business leaders affect the decisions they make on behalf of their companies. While I think CEOs are partly responsible for the growing divide between business and the GOP, that’s not the only factor driving it.
A close relationship relaxes
The close relationship between corporate America and the Republican Party dates back to the 1970s. Corporations provided financial support to conservative war chests and in return received pro-corporate policies, such as lower corporate taxes and regulations.
The alliance has undoubtedly been a success for large companies. Corporate taxes as a share of U.S. gross domestic product are just about 1%, the lowest since the 1930s and down from 4.1% in 1967.
But that union has become increasingly strained in recent years over a range of social issues, particularly regarding LGBTQ rights.
For example, in 2015, many companies, including Apple and Walmart, spoke out against so-called religious freedom laws, like the one passed in Indiana, that would allow companies to discriminate against LGBTQ customers. The following year, there was a similar corporate backlash to North Carolina’s ban on public restroom use for transgender people. Boycotts by several companies, including PayPal and the NCAA, led to a partial repeal in 2017.
Companies have also been vocal during former President Donald Trump’s presidency on issues such as his ban on travel to Muslim-majority countries and his comments following the rally of white supremacists in Charlottesville, Virginia. To some, it seemed that the role he and other Republicans played in laying the groundwork for the January 6, 2021 insurrection on Capitol Hill may have been the final straw, as dozens of companies, including AT&T and Marriott, said they would cut donations to the 147 Republicans who voted against certifying President Joe Biden’s election.
The push for more restrictive electoral laws continues the battle over the election. Republicans in states across the country cite alleged fraud in the 2020 election — despite no evidence there was — as the impetus behind their push.
And as the Supreme Court debates whether to overturn Roe v. Wade said the landmark decision upholding women’s right to an abortion, the issue is certain to drive further wedges between Republicans and companies, some of which have indicated they will support employees who want to terminate a pregnancy.
Why have companies become more outspoken in recent years and willing to upend an alliance that has helped them lower their tax bills and regulatory hurdles?
My research suggests that there are three driving forces for this trend.
CEOs do “what we think is right”
The CEO is the main decision-maker of the company, which means that his political leanings can be reflected in business decisions.
And in recent years, the CEOs of some of America’s biggest companies have cited their own personal values as a reason for speaking out on social issues. As Bank of America CEO Brian Moynihan told The Wall Street Journal in 2016, “Our job as CEOs now is to drive what we believe is right.”
In my own research, I’ve found that a CEO’s political affiliation can affect how a company spends money. CEOs who donate primarily to Democrats tend to spend more on their employees, community activities and environmental issues, regardless of how profitable their company is. In other words, they seem to believe it’s just the right thing to do.
Republican CEOs, meanwhile, tend to tie spending on outside issues to financial performance, reflecting the idea that corporations are primarily accountable to shareholders.
More recent research also demonstrates that liberal executives tend to pay more attention to gender diversity within their companies and are less likely to downsize when economic conditions deteriorate, consistent with the values that liberals hold. the priority.
But relatively few CEOs are staunchly liberal, so the CEO’s impact on this trend may be limited. A recent study found that only about 18% of the more than 3,500 people who served as CEOs of Standard & Poor’s 1500 companies from 2000 to 2017 donated primarily to Democratic candidates, while 58% donated primarily to Republicans. .
Growing worker activism
Employees also play an important role in corporate activism.
Recent management research shows that companies with more liberal employees spend more resources on improving gender and racial diversity and sustainability issues. Similarly, a 2019 study found that companies are more likely to give in to activist demands on issues such as cutting carbon emissions and raising frontline workers’ pay when they have a workforce. more liberal work.
Companies can respond to research showing the benefits of listening to their employees and showing that their voice matters. For example, workers tend to show more trust and commitment to a company when they feel it shares their values, leading to higher productivity. A 2017 survey found that 89% of employees said they would accept a reduced salary to work at a company whose values match their own.
Other research shows that engaging in social activities such as environmental protection results in less employee turnover.
In my own research, which tracked corporate engagement on same-sex marriage issues in the 2000s and 2010s, I found that the likelihood of CEOs speaking out on same-sex marriage increased significantly when there was more employees donating to Democrats – which was true even when the CEO was conservative.
Popular opinion tracking
Public opinion is another factor behind the growing rift with the GOP.
Business leaders tend to follow public opinion because they want to minimize the risk of losing customers for their products and services.
The same-sex marriage debate is a good example. Public support for allowing gay people to marry first exceeded 50% in 2011 – it is now at 70%. Until then, very few CEOs had made a public statement on the issue, according to my research on same-sex marriage. Once popular opinion reaches halfway, however, many more companies — including those run by conservative CEOs — begin to come out in favor of it. Interestingly, even liberal CEOs said very little until 2011, including those who were already offering their employees domestic partner benefits.
And more recently, it has become even more critical for companies to consider public opinion when deciding to take a stand on a burning issue. Indeed, their younger customers, especially millennials, are increasingly saying that CEOs have a responsibility to speak up and that they would be more likely to buy products if they did.
When it comes to election laws, a recent poll found that most people support legislation that makes it easier, not harder, to vote.
who leaves who
But corporate America isn’t necessarily moving away from the Republican Party to move closer to the Democrats.
Instead, the companies are trying to convey that their concerns are not partisan in nature. The more than 100 companies that in 2021 signed a statement supporting voter rights and against bills that would restrict access underlined this point.
I believe that a closer examination of the three main factors – in particular the role of workers and the public – behind the growth of corporate activism suggests something else. Companies are not straying from the Grand Old Party. On the contrary, the GOP appears to be drifting, not just from corporate America, but also from the opinions of the American public — especially millennials.
This is an updated version of an article published on April 22, 2021.