Directors who disagree politically with an incoming CEO are more likely to leave, study shows
Speaking up about political views is becoming more common with political ideologies playing an increasingly pervasive role in shaping how people interact.
Studies have shown that people not only prefer those who share their ideals, but they also dislike others with differing political ideologies, including in business.
A new study from the University of Notre Dame shows that the political ideology of an incoming, newly hired CEO influences whether directors on the board of a company choose to continue or leave their positions.
“Director departure following political ideology (in)congruence with an incoming CEO” is forthcoming in the Strategic Management Journal from lead author John Busenbark, assistant professor of management and organization at Notre Dame’s Mendoza College of Business.
The study looked at a sample of directors on boards of publicly traded firms following CEO successions between 2008 and 2012. The researchers examined the Federal Election Commission’s individual political donation records to develop a political ideology score for all directors and CEOs in their sample. They then employed a sophisticated analytic technique, allowing them to reveal the extent to which directors are apt to leave their positions following political disagreement with the incoming CEO or remain in their seats with ideological agreement.
The study states, “Executives’ political ideologies have a profound impact on the organization, so it is imperative to understand whether the political views of those in the upper echelons play a role in cultivating who sits at the apex of the firm.”
“We show that directors who disagree politically with the new CEO are increasingly apt to leave the board, and directors who share the CEO’s political views tend to remain,” said Busenbark, who specializes in corporate governance. “But even more interesting is that we find political disagreement plays a much more salient role in departure than political agreement plays in retention.”
Most research in this area assumes that political agreement and disagreement are simply two sides of the same coin. This study, however, finds that differing political opinions between two people stimulate much more vehement reactions than do those of similar ideologies.
“Our research suggests that a liberal director, for instance, is much more likely to leave the board following the hiring of a conservative CEO than is a conservative director apt to remain on the board after hiring that same conservative CEO,” Busenbark said.
Broadly speaking, the study reveals that individuals tend to internalize political “hatred” or intolerance more than they do acceptance. This means that people are more likely to avoid others who disagree with them politically to a greater degree than they seek out or welcome others who share their ideological view.
“At the same time, we also find that this viscerally negative reaction to political disagreement is weakened considerably when the people have some experience with one another and can evaluate each other on other merits beyond political ideology,” Busenbark said.
Co-authors of the study include Jonathan Bundy from Arizona State University and M.K. Chin from Indiana University.
Contact: John Busenbark, 574-631-1735, jbusenba@nd.edu
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