Should Companies Refrain From Making Political Statements?

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MIT SMR Strategy Forum

The MIT SMR Strategy Forum offers monthly insights from academic experts on pressing strategy issues related to business, management, technology, and public policy.
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Two years ago, soccer organization UEFA attempted to opt out of taking a political stance — a decision that was itself decried as a political statement. When Munich’s mayor asked that the city’s stadium be lit in rainbow colors to protest a Hungarian anti-LGBTQ law during a Germany-Hungary match, UEFA declined the request, responding that it was “a politically and religiously neutral organization.” The organization’s decision was met by widespread criticism and the distribution of over 10,000 rainbow flags around the stadium on the day of the match.

Since then, many companies have publicly responded to social and political developments, and pressure has ramped up for more corporations to follow suit. In the U.S., the feud between Disney and Florida Gov. Ron DeSantis over LGBTQ+ rights continues to unfold, and a record number of activist shareholder proposals were filed this year for corporate annual meetings.

“Companies are getting dragged into partisan fights that they don’t want to be in, but they can’t avoid it anymore,” Heidi Welsh, executive director of the Sustainable Investments Institute, told The Wall Street Journal.

In a fraught and polarized political environment, should companies avoid making statements, as UEFA tried to do, or dive in, as Disney has? To find out, we turned to our expert panelists for their responses to this statement: The diametric experiences of Disney and UEFA illustrate that firms should refrain from making political statements in support of particular stakeholders.

Disagree

The majority of our panelists (71.5%) disagree at some level that companies should refrain from making political statements, with some noting that silence can itself be a risk. “Refraining from making political statements is often itself tacit support for particular stakeholders,” writes Olav Sorenson of UCLA. Anita McGahan of the University of Toronto says, “The problem with not making a statement is that saying nothing may be tantamount to assenting to something that runs contrary to the position that is implicit in a firm’s purpose.”

Political statements can engage important stakeholders and strengthen customer loyalty, some experts argue. “If there is one thing corporations should be allowed to speak on, it is on policies that impact their employees or customers, regardless of political consequences,” says Joshua Gans of the University of Toronto. MIT Sloan’s Scott Stern asserts that “engagement with key stakeholders can be powerfully shaped by [a company’s] ability to stand ‘for something’ that aligns with the core value that the company delivers.” Olenka Kacperczyk of London Business School writes, “By choosing to counter-position, firms can build a stronger customer base and foster loyalty and commitment among core customer groups.”

Strongly disagree


“Attempting this strategy half-heartedly can lead to a backlash. Those who succeed are those who are authentic.”
Olenka Kacperczyk
Olenka Kacperczyk
London Business School

Disagree


“Firms are composed of people who care about issues and outcomes and will choose to advocate for what they think is right, even if there are short-run costs.”
Preston McAfee
Preston McAfee
Economist

Neither Agree nor Disagree

A smaller group of our panelists (21.4%) took a stance in the middle, pointing out that stakeholder preferences may drive companies’ decisions to make political statements. Consumers’ values and expectations may create pressure for a company to respond, as New York University’s Petra Moser notes: “Many people today want to work for and buy from companies that share their values, especially those that are central to their identity. So sometimes companies may not have a choice but to take a stance.”

Bocconi University’s Alfonso Gambardella emphasizes that big-picture concerns and desired financial outcomes will drive company behavior on this front. “It depends on whether shareholders or owners of the company want to maximize financial returns or their general utility,” he says. “Ultimately, the choice is a higher-level decision by owners or shareholders about their goals, values, and the purpose of their companies.”

Neither agree nor disagree


“In most cases, it’s probably OK to stay mum, but on some core issues, silence can be deafening.”
Petra Moser
Petra Moser
New York University

Agree

Only about 7% of our panelists agree that companies should refrain from making political statements. Annamaria Conti of IE Business School warns of an array of negative consequences that political statements can bring. “Firms may risk alienating the support of those consumers who disagree with the statement, [which] may negatively impact a firm’s sales more than the reactions that approving consumers might have produced,” she contends.

Agree


“These statements may backfire if some firms’ strategies are inconsistent with their political statements.”
Annamaria Conti
Annamaria Conti
IE Business School

Risk of a backlash from a potential multitude of stakeholders and observers notwithstanding, pressure to vote on activist shareholder proposals is becoming an unwelcome yet unavoidable reality for some companies. Timothy Simcoe of Boston University — who strongly disagrees with the statement at hand — suggests taking this rising expectation in stride: “The lesson is not to avoid things that might be unavoidable but to think ahead and develop a clear set of values to guide managers’ actions and statements in those circumstances.”

Topics

MIT SMR Strategy Forum

The MIT SMR Strategy Forum offers monthly insights from academic experts on pressing strategy issues related to business, management, technology, and public policy.
More in this series

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