Businesses See Political Advocacy As a No-Win Situation

Companies who embrace political agendas to please some of their employees or customers risk alienating others.

Politics have been seeping into our daily lives and ruining pretty much everything, and that's as true for business leaders as it is of those of us who buy from them. But debates over ideologically loaded environmental, social, and governance (ESG) concerns and "woke" capitalism show some companies embrace the danger by politicizing themselves. If you wonder whether corporations make a mistake by joining the battle, so do business leaders themselves. A recent survey found that corporate execs fret over the political minefield and worry that it's growing more hazardous.

The Conference Board, a century-old business membership and research organization, surveyed corporate leaders in recent months and found them in a foul mood.

"Ninety-eight percent of respondents describe today's political environment as challenging for companies, with 78 percent describing it as very or extremely challenging—up from just 47 percent in 2021," Paul Washington and Evan Ladao of the Conference Board's ESG Center, and Bill Black of the organization's Government Relations and Executives Council, wrote in a related report.

The report separated respondents' concerns into four categories: extremism/polarization; weakening of trust in government and political institutions; anti-corporate rhetoric and actions, including the "use of government power to reward or punish companies for political purposes"; and sharp state-level policy differences, including both anti-ESG backlash and pressure to expand ESG programs.

Some of these challenges are unavoidable; we all live in the same country and have to suffer the tribal divisions and regime uncertainty that plague American politics.

"The combination of a polarization among policymakers, coupled with extremely close elections, means that companies are facing potentially wide swings in government policy with each election, which is not conducive to business planning and investment," author Paul Washington commented.

But a lot of this pain is self-inflicted and avoidable.

"At the same time, many companies are understandably hesitant to speak out about certain issues because they can be attacked for going too far or not far enough," Washington added. And yet, many companies have waded into the battle and then don't like the pushback they suffer in return.

Case in point is the Walt Disney Company, the entertainment behemoth that rapidly went from the status of American icon to controversial political player. This month, state officials stripped the company of control of the board that oversees development around its Florida theme parks after it called for the repeal of legislation that restricts classroom discussion of gender and sexual orientation. The company has also come under fire from conservatives for programming incorporating politically progressive messaging. Disney has the right to take positions on controversial matters, but seemed unprepared for the inevitable backlash from those who disagree. Pushback should have been anticipated when corporate execs let themselves be convinced that getting political was a necessary marketing move.

"New research from Ipsos shows that more than half of American consumers shop with their political or social values in mind – a sign that even the most boundary-crossing companies will not be spared from America's political polarization," Clifford A. Young, president of Ipsos Public Affairs USA, and George Mason University government professor Justin Gest wrote of polling results in the summer of 2021. "Partisan consumers matter. Not only are there tens of millions of them, they also tend to be more educated and therefore have greater spending power."

As did other pollsters, Ipsos found that "partisan consumers exist in about equal numbers across the parties. But Democrats are significantly more likely to want and expect their favorite brands to take a stand on issues they care about." That helps explain why companies that embrace politics seem to overwhelmingly take progressive stances. But the polling results contained a warning: If roughly half of Americans want business to get political, then roughly half don't. Brands that do so risk alienating both those who prefer non-political brands and those who disagree on the positions taken.

"The Risk Brands Take in Commenting on Political Divisions: Alienating Consumers Either Way," is how competing polling firm Morning Consult headlined its own research the same year.

Polling this year continues to find division over politicized business, though both Trafalgar/Convention of States and Gallup now report a majority of Americans oppose corporate issue advocacy. Gallup adds that Democrats (and younger adults) remain among those most likely to favor mixing politics and corporate identity. That leaves a lot of room for businesses to start fights by taking sides.

Unsurprisingly, the Conference Board found "a majority of companies are concerned about ESG backlash from federal and state elected officials, advocacy groups, and employees."

The inclusion of employees on the list is interesting, since many companies say staff push them to endorse causes. But as the report notes, "employees are far from united in their views on many social issues" and pleasing one faction can alienate another. Netflix is among those firms that have advised staffers who can't leave their causes at home that they may want to seek employment elsewhere.

Business leaders don't expect matters to improve anytime soon. "Looking ahead to 2025, 71 percent of companies expect the challenges in the political environment to be 'about the same' (at 29 percent) or 'more challenging' (at 42 percent)," found the Conference Board.

So, why do business leaders continue to stroll into the political minefield?

There's "some evidence that companies publicly embrace ESG as a cover for poor business performance," University of Colorado finance professor Sanjai Baghat observed last March. "A recent paper by Ryan Flugum of the University of Northern Iowa and Matthew Souther of the University of South Carolina reported that when managers underperformed the earnings expectations (set by analysts following their company), they often publicly talked about their focus on ESG. But when they exceeded earnings expectations, they made few, if any, public statements related to ESG."

That is, companies may adopt causes to conceal their shortcomings at delivering goods and services. Customers seeking quality might want to pass over brands offering ideological marketing.

The Conference Board report offers advice to "help firms effectively manage risks associated with their corporate political activity," but some execs have had enough. While a third of survey respondents wanted business to take a "'leadership' role in improving the political environment," 29 percent preferred a supporting role. Thirty percent called for minimal political activity and 7 percent wanted to focus solely on business.