Two-thirds of U.S. executive teams are Republican and growing more partisan
While U.S. firms are outwardly supporting progressive causes, inwardly researchers found executive teams in U.S. firms to be overwhelmingly Republican (68%) and becoming more partisan with negative implications on shareholder value, as departures of politically misaligned executives are value-destroying for shareholders. The study looked at political affiliations from voter registration records of over 3,700 executives of S&P 1500 firms between 2008 and 2020.
A June 2022 study by researchers at Boston College, Cornell University, and the University of Chicago finds the executive suite of U.S. firms overwhelming Republican and growing more partisan, with negative shareholder implications. The study analyzed voter registration data of more than 3,700 executives from S&P 1500 firms between 2008 and 2020. The working paper was published in the National Bureau of Economic Research (NBER).
- In 2020, 68% of executives were Republican and 32% were Democrat
- A growing tendency of politically like-minded U.S. executives to cluster
- Such polarization reduces diversity in executive leadership costing shareholder value
- $238 million in estimated average shareholder cost when a misaligned executive departs
“Executive teams in large U.S. firms are becoming increasingly dominated by one political party, leading to a political polarization of corporate America,” according to the paper’s authors. The trend suggests that “the growing tendency of U.S. individuals to socialize and form relationships and friendships with politically like-minded individuals extends also to the highest-level decision makers in the workplace,” the study states.
The increasing partisanship of the C-suite has implications both for managers and shareholders, as executives whose political views are misaligned with the rest of their team are more likely to depart the company. According to the researchers calculations, these executive exits bring down the value of companies, costing shareholders an estimated $238 million around the average departure.
More research is needed
It’s unclear why these kinds of executive departures are more costly, but the finding opens up a new avenue for future research, said Elisabeth Kempf, associate professor of finance at the University of Chicago and one of the paper’s authors.
“It’s more and more the case that executives who don’t fit politically with other team members have a higher likelihood of leaving the firm,” Kempf said. “This trend towards more misaligned executive leaving has negative consequences for for shareholders of financial wealth.”
The Political Polarization of Corporate America (The National Bureau of Economic Research)
Diversity Washing (SSRN, formerly Social Science Research Network)
The business case for diversity in the workplace is now overwhelming (World Economic Forum)
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