When Not One of the Crowd: The Effects of CEO Ideological Divergence on Lobbying Strategy

Abstract

This paper explores the extent to which CEO ideological divergence influences firm lobbying strategy. Because a CEO’s political ideological disposition is shown to affect firm outcomes, we theorize there are nonmarket strategic implications when the governing party is divergent or convergent from their ideology. Accordingly, we integrate insights from organizational fit literature regarding value congruence and strategic complementarity in order to examine whether CEO political ideological divergence affects lobbying investment and changes the balance between internal and external lobbying activities. Further, we theorize that these outcomes are less pronounced for firms that are highly regulated. Our results support our theorizing, therefore, by identifying how CEO ideology interacts with the opposing political ideology. We unpack the ways in which CEO political ideology influences firm political behavior, thus extending research on CEO political ideology and lobbying.

How and Why? A Review of Corporate Political Activity Predictors and Actions

“…This can be a potential risk for the firm because they also find that intermediaries can shape their client’s agendas. More recently, Nalick et al (2022) finds that when a CEOs ideology diverges from the ideological bents of those in power, internal lobbying decreases more when compared to external lobbying. Future research should continue to further investigate the differences between internal and external lobbyists.…”

“…In a more recent study of investment professionals in the private equity industry, Bermiss and McDonald (2018) found that ideological misfit leads to employee departure and that those who leave join organizations that fit their ideology better. These studies have significant implications because firms are often identified with their CEOs in the public mind and strong political positions by CEOs may have unintended consequences, especially when the CEOs’ political positions are misaligned with their employees (Brown, Manegold, & Marquardt, 2020) or the current political ideologies of those in power (Nalick et al, 2022). The implications of CEO political activism in terms of reactions by financial markets, customer groups, and employees are yet to be researched.…”