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Top business executives are more polarized than the nation as a whole – Harvard Gazette

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According to a recent paper, “The Political Polarization of Corporate America,” authored by Elizabeth Kemp, Associate Professor of Management at Harvard Business School, nearly 70% of America’s top executives belong to the Republican Party, and 31% belong to the Democratic Party. . Her Fos from Boston College, Margarita Tsutsuura from Cornell University. The Gazette recently told Mr. Kemp about why so many executives support the Republican Party and the potential dangers of growing partisanship at the top of American companies. Interviews have been edited for length and clarity.

Gusset: Can you talk a little bit about how you measured the partisan shift of top executives in American corporations?

Kemp: We started by collecting data on the top five revenue-generating executives of US S&P 1500 companies. These are large publicly traded US companies that are required to disclose the names of their top five revenue-generating executives to the Securities and Exchange Commission. Then he needed to figure out who was Democrat, who was Republican, and who was independent, and to get that, he matched these executives against voter registration records in his nine different states in the United States. Did. In doing so, I was able to see the political make-up of management.

The paper defines partisanship as the degree to which political views within a team are dominated by a single party. Measured by the probability that two of her executives on the same team are in the same party. Over time, I’ve found that the degree of partisanship has increased considerably. From 2008 he is looking at 2020, and we find that he increased by 7.7 percentage points during that time. This is a pretty big change.

Gusset: How is partisanship among US executives increasing relative to the rest of the US population?

Kemp: Part of the paper simulated what would happen if executives followed local residents or local registered voters. It turns out that the tendency to increase homogeneity is twice as high as his in the general population. This is something I didn’t necessarily expect as we are talking about very highly skilled people at the top level of the organisation, and a lot of the decisions to hire or retain executives who have nothing to do at that level. may include in their political affiliation. It’s surprising that these trends are so strong among top-level executives. Especially since there has been a push for more diversity in the last few years, both in systems and in his suite of executives. For example, we can see that there is more diversity in terms of the percentage of women, but we have yet to see diversity in political views.

Gusset: Your paper found that 69% of US executives are Republicans and 31% are Democrats. When and how did the shift take place?

Kemp: Voter registration data limits the amount of time you can go back in time. Only available after 2008. Harvard Law Her School professor Alma Cohen and her co-authors surveyed the CEO and his political contributions and found that for quite some time (at least since his 2000), he has mostly donated to the Republican Party. I found The fact that the CEO leans Republican or contributes heavily to the Republican Party isn’t all that surprising. Interestingly, despite what many observers had expected, there was no strong shift toward more Democratic executives. You may have heard of “awakened capitalism”. And while many companies are voicing their support for progressive issues, we don’t see more executives leaning toward Democrats. In fact, during the study period, the percentage of Republican executives increased from 63% in 2008 to 71% in 2018. Their public statements may have more to do with how they are perceived by customers, employees, or investors than with their own political ideology.

Gusset: With the number of Republican Party leaders increasing year by year, would you say that this era is more right-leaning than the era of “Mad Men”?

Kemp: I would like some data on that. Even if you look at the data on political donations, you can trace them all the way back to the late 1970s. It’s very difficult to make comparisons to the 1950s or his 1960s, but I think it’s interesting to try to find out what was similar and what was different.

Gusset: How does political polarization show up in the top ranks of American corporations?

Kemp: In our paper, we used the terms “political polarization” and “increased management partisanship” interchangeably. This means that more and more teams are dominated by one political party. Basically, there is a high degree of political segregation among senior management. We see this in other parts of American society as well. For example, political scientists have investigated political ties within families and found that there are more political divisions within families. There are other forms of political polarization, but political detachment is one of the many facets on which political polarization manifests itself.

What we found is that companies are more split between Democratic and Republican companies than they used to be. Our measure of the extent to which one party dominates speaks directly to that trend. There is another measure that looks at the likelihood of an executive who is not politically aligned with the rest of the team leaving the company. This index has also increased in recent years. We can see that since 2015, politically inconsistent executives have tended to leave the team at a higher rate. It all speaks to the same phenomenon of seeing more political silos across corporate America.

Gusset: Do corporate divisions reflect the political geography of the Red and Blue States?

Kemp: After documenting a tendency for cadre teams to become more partisan in my paper, I wanted to know where the fact that one particular political party dominated a particular cadre team came from. To understand this trend, it is very important to understand geographic-political segregation. What appears to be happening is that the California and New York executive teams are leaning Democratic, while the Texas and Ohio executive teams are leaning Republican. A large increase in this geographic classification accounts for a large part of this phenomenon.

Gusset: Does increased partisanship among US executives pose any dangers or risks to shareholders and stakeholders?

Kemp: The current paper looks at the impact on shareholders, but I hope that more research will be done on the impact on stakeholders, employees, capital providers, communities, etc. The impact on shareholders is unclear, as it is not clear whether shareholders would prefer a politically homogenous team or a politically non-homogeneous team.

On the one hand, it could be argued that having a more homogenous team would probably allow executives within the team to get along better, have fewer disagreements, and get things done. If there is only one, we may be missing out on important kinds of perspectives that could improve decision-making, and some argue that the trend toward greater political homogeneity is a bad thing.

Amidst this theoretical ambiguity, we examined the stock price response to executives leaving the company and found that it was particularly destructive to corporate value when misaligned executives, meaning those who brought diversity to the team, left. It turns out that Companies were found to lose an average of $238 million more related to the departures of these executives compared to those who were aligned with their teams and contributed to greater uniformity. This suggests that investors seem to view inconsistent executive turnover not as a good thing, but rather as highly disruptive to corporate value. This trend does not appear to be in the financial interest of shareholders, at least.

Gusset: What other questions should researchers investigate to understand the consequences of political segregation in US corporations?

Kemp: Our hope is that there is more research being done on the issue of political diversity. That’s it. Because they are making important decisions and we have data about them. But I think it will be interesting to see to what extent this happens in other areas of the workplace.

Another big question is what exactly are the recent changes that have accelerated this trend? Is it that companies are under pressure to take a stance on political issues? Does that mean that political issues are being discussed in the workplace? , we also recognize that even non-political issues are shaped by our political views. There’s a lot of investigative evidence about it, explaining why even topics that aren’t necessarily political but still important to business decisions are becoming more controversial across partisan lines. I think this would be a fascinating question to explore.