Do CEOs Affect Employees’ Political Choices?

Abstract

We study the relation between CEO and employee campaign contributions and find that CEO-supported political candidates receive 3 times more money from employees than candidates not supported by the CEO. This relation holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win, suggesting that CEOs’ campaign contributions are more aligned with the interests of shareholders than are employee contributions. Finally, employees whose donations are misaligned with their CEOs’ political preferences are more likely to leave their employer. (JEL G30, G38, D72, P48) Authors have furnished an Internet Appendix and Data Supplement, which is available on the Oxford University Press Web site next to the link to the final published paper online.

CEO activism. What do we know? What don’t we know? A systematic literature review

“…Finally, poor fit with the organisation provoked by misaligned ideologies can also lead to higher turnover (Chatterji and Toffel, 2015; Leak et al , 2015; Brown et al , 2020). Babenko et al (2020) found higher turnover rates when employees donated to political candidates not supported by the corporation’s CEO.…”

“…Most studies account for moderation based on recipients’ (mis)alignments (Hambrick and Wowak, 2021). This could be because their political and personal values diverge from general ideological beliefs (Leak et al , 2015), because of political engagement (Babenko et al , 2020) or in response to symbolic value systems (Melloni et al , 2019; Brown et al , 2020).…”

“…Chatterji and Toffel (2018) focus on the firm’s product strategy, stating that consumers with high switching costs will be less likely to change purchase behaviour because of activism. Other authors point to the relevance of CSR-oriented strategies and the alignment of activists’ statements with them (Maak et al , 2016; Babenko et al , 2020; Hambrick and Wowak, 2021). In conformity with this, Hadani et al (2019) show that top managers of companies with a higher level of corporate political activities are more likely to react to socially motivated shareholder activism than others.…”

“…Several executives did explain their activism statement by corporate value systems (Chatterji and Toffel, 2018). A more political culture of the firm’s stakeholders is assumed to allow for more CEO activism (Mayer, 2017; Babenko et al , 2020).…”

“…Comparably, the perception of the company as attractive employer can be enhanced by CEO activism, especially where talents and potential employees agree with the stances (Gaines-Ross, 2017a; Voegtlin et al , 2019; Babenko et al , 2020; Mkrtchyan et al , 2020; Branicki et al , 2021).…”