Rutgers researchers find ideology is a strong determinant for firms that publicly engage in divisive social issues

Some of America’s largest companies make their most important business decisions based on political ideology rather than profit, according to a Rutgers study.

“People often assume that companies are only motivated by money or trying to generate the biggest returns for shareholders,” said Andrey Tomashevskiy, an associate professor in the Department of Political Science at Rutgers–New Brunswick and coauthor of the study published in the journal Economics and Politics. “Our research suggests political ideology plays a key role in the public positions corporations take, even if those decisions aren’t always economically sound.”

Researchers have long known that companies’ political activities are driven by pragmatic and ideological factors. Corporations act pragmatically – an energy giant supporting carbon credits, for instance – to maximize profit and contribute to positive public perception. Alternatively, companies take partisan political or social stances for ideological reasons.

What scholars haven’t been good at is quantifying firms’ public political stances.

To help close this gap, Tomashevskiy and Volkan Tibet Gur, a graduate student in the Department of Political Science and coauthor of the study, analyzed publicly available corporate social responsibility (CSR) statements for 601 Fortune 1000 firms. Using computer models and language algorithms, they identified topics in the reports reflecting stances on environmental and social issues and calculated the percentage of the documents devoted to either topic.

By controlling for company size, sector and other variables, the researchers then evaluated the effect of political contributions and history of legal challenges. Political contributions are typically driven by a firm’s ideology, said Tomashevskiy, while companies facing legal issues would be expected to spend more space in CSR statements on social and environmental issues for pragmatic public relations reasons.

The researchers found that although pragmatic considerations do play a role in public CSR messaging, ideological orientation of employees and managers also is an important driver of firms' political posturing. 

The data also suggests while firms with more liberal employees and managers tend to communicate liberal political messages, this effect only persists for social topics – such as Black Lives Matter or LGBTQ+ issues. Political preference for Democratic candidates is negatively associated with environmental messaging, meaning that firms reduce their emphasis on environmental issues as they become more liberal.

Tomashevskiy said the findings are important when placed in the context of polarization in American society.

“We are seeing corporations take more active political stances, and just like in society, corporations are increasingly blue or red in their politics,” he said.

Future work is needed to understand how multinational corporations make political decisions, and whether United States firms operating abroad change their approaches for different contexts. Still, Tomashevskiy said the findings shed new light on the determinants of corporate political activity. 

“Think about Bud Light or Disney, brands that have been embroiled in political debates: Our results shed light on why, and would seem to suggest that the political ideology of employees and company owners plays an important role in how companies operate,” Tomashevskiy said. “It’s not always about the money.”