How Did Corporations Get Stuck in Politics and Can They Escape?

Corporations have long sought to promote their business interests through political engagement. Today, however, corporations are taking public positions on a multitude of contested political and social issues—through advertisements, statements, and promotions—positions that are unrelated to their business operations.  In our forthcoming article, How Did Corporations Get Stuck in Politics and Can They Escape? (forthcoming University of Chicago Business Law Review), we term this form of engagement, “political posturing,” and we argue that it is bad for shareholders, stakeholders, and society.

Examples of political posturing are everywhere. Hundreds of corporations proclaimed their support for BlackLivesMatter. Dozens publicly opposed the Supreme Court’s Dobbs decision, which overturned Roe v. Wade. Coca Cola and Delta prominently criticized Georgia’s restrictive voting laws. Disney took a stand against Florida’s “Don’t Say Gay” law. Today, we know where corporations stand on almost every politically contentious issue.

There are several reasons corporations suddenly developed political views. Activists, employees, and investors began to call for companies to take a stand. Corporations obliged, not only to quell these voices, but to use politics as a way to market their products. Gillette, for instance, ran an advertising campaign highlighting forms of toxic masculinity and asking, in reference to its famous slogan, whether this is “the best a man can be.” The campaign thus sought to use politics to sell razors rather than the razors’ attributes. Corporations are also trapped in a collective action problem, where they fear that if they fail to take a position, they will lose ground to competitors that do. Social media, where taking a stance is the only way to get noticed and silence is denounced as complicity, amplifies these effects.

Many welcome political posturing, arguing that corporations are powerful and wealthy and can bring attention to important issues. Statements such as Disney’s are seen as a way of amplifying the voices of corporate stakeholders. And political posturing enables customers, employees and shareholders to engage with companies that support their political positions.

We challenge these defenses of political posturing. Instead, we argue that it creates significant business risks and social concerns. First, political posturing is bad for shareholders. Business attempts to capitalize on social issues can backfire unpredictably and catastrophically. The poster child for consumer backlash is Bud Light. The company’s advertising campaign featuring transgender influencer Dylan Mulvaney triggered a consumer boycott and a massive drop in revenue. Bud Light’s stock price has yet to recover. Corporations also face potential backlash from politicians. Florida Governor Ron DeSantis implemented legal changes eliminating Disney’s special tax district in response to its opposition to the education statute.

Political posturing also raises deeper questions about the origin of a corporation’s political views. For whom does the corporation speak when it adopts a political position—its managers, its shareholders, its consumers, or its employees? And in a highly polarized country, can a corporation fairly reflect the multiple and often-conflicting political viewpoints of its stakeholders?

Corporate political posturing also ill-serves society. The core problem is that corporations are inherently self-interested economic actors. As such, they are poorly designed to serve as moral stewards. One manifestation of this mismatch is that corporations are hypocritical, taking positions publicly while at the same time contributing to politicians promoting the opposite position. Similarly, their political statements are often empty virtue-washing unsupported by actions. And corporations flip-flop, undermining the very causes that they purport to back. These hollow gestures potentially crowd out meaningful initiatives and increase partisan divides. Politics now dictates where people work, eat, and shop. Liberals drink coffee at Starbucks.  Conservatives go to Black Rifle Coffee.

Given these concerns, it would be best if corporations stopped their political posturing. But how can they escape?  We advocate a combination of voluntary disarmament and transparency. To resist the temptation to compete on the basis of political posturing, we suggest that corporations make a collective public pledge, akin to the Business Roundtable Statement on Corporate Purpose, to refrain from engaging in political posturing. Such an “Anti-Political Posturing Pledge” would offer easy accountability and, at the same time, enable corporations to resist the political arms race with the knowledge that their competitors would not take advantage of their choice to remain neutral.  The pledge could say something like, “We believe that our role as leaders of corporate America is to serve our stakeholders by providing quality goods and services in an ethical and sustainable manner.  Because we do not believe that taking stands on political issues furthers these goals, neither the corporation nor its executives will do so, nor will we engage in politically explicit marketing and promotional activities.”

To be sure, some companies will resist the pledge, and some may abandon it if pressure to take a stance is severe. But it is plausible that such a commitment would be attractive to many corporations that want out. Aside from taking the reducing the pressure to engage in a political arms race, the pledge would offer corporations a way to appeal to people who would prefer corporations to return to political neutrality.

We further argue that corporations should disclose the extent to which their actions match their posturing. Corporations that back BlackLivesMatter, for instance, should disclose their diversity practices. Corporations that promise funding for abortion-related travel should disclose the actual dollars spent in support of that travel. Corporations that take public stands against legislation should disclose if they make contributions to candidates that support that legislation. Further disclosure about the process by which corporations decide to take political positions would also be useful. Corporations should disclose who made the decision to engage and the basis for that decision, as well as any empirical basis for believing that the statement is consistent with either corporate or societal interests.

Corporations could make such disclosures voluntarily. Indeed, a number of recent shareholder proposals ask corporations to disclose the extent to which their political contributions are aligned with their public statements. Alternatively, the Securities & Exchange Commission could adopt rules or informal guidance requiring such transparency or explaining that material misalignments potentially subject corporations to liability for securities fraud. Greater transparency would incentivize companies to align their words with their actions or reduce their posturing. As a result, shareholders, stakeholders, and society would be better off.

Download the full paper here.