In 2017, did it seem like many of your favorite brands suddenly became overtly political in a way they never had before, and uniformly against President Donald Trump and the Republican Party?
For example, in January 2017, Starbucks posted on Twitter, “We are committed to hiring 10,000 refugees over the next five years in the 75 countries where Starbucks does business. #StandWithRefugees.”
Starbucks had never posted about immigration policy before. Why the sudden change?
According to groundbreaking new research published by the Harvard Business School, there was a massive rise in political corporate speech in 2017, and it was almost entirely in favor of Democratic Party-aligned causes.
The study’s authors collected all Twitter posts from S&P 500 corporations between 2011 and 2022. For firms with multiple accounts, all verified accounts linked to a company were credited to that company. The authors also collected posts between the same years from the personal and official accounts of every Republican and Democrat in Congress.
The authors then used the Republican and Democratic posts to create a measure of partisanship for each post. Between 2011 and 2016, the authors found that corporate partisan speech was rare, and when it did happen, it was split between the two parties.
However, that all changed in 2017, when the volume of political speech doubled, driven overwhelmingly by “increased Democratic-leaning language.” The Starbucks post above is just one example.
The authors did not connect Trump’s election with the sudden rise in corporate political speech, but they did note that “the growth of Democratic-leaning corporate speech is closely correlated with the expansion of assets under management in funds with environmental, social, and governance objectives.”
A generation ago, corporate stock was owned by individual investors who had diverse political opinions. However, over the last 30 years, corporate stock ownership has been taken over by large investment management entities such as Vanguard, BlackRock, and the California State Teachers Retirement System. Many of these firms are led by executives and managers who have Democratic Party leanings. The authors found that corporations with high levels of ownership by BlackRock, in particular, saw the highest increases in Democratic-leaning statements.
It is not that there aren’t any conservative investors or investment funds out there; there are. It is just that Democratic-leaning investors care more about the political positions that the corporations they invest in take. On the other hand, conservative investors just care about making money. As a result, corporate leadership is more likely to parrot Democratic talking points to keep Democratic investors happy since they are more likely to choose their investments for nonfinancial reasons.
Interestingly, the authors also found that when corporations issued partisan posts, their stock prices often fell. For corporations with already established liberal identities, this effect did not occur, and often the stock would go up after a post that matched their brand was made. However, for corporations that were not viewed as political entities, political posts often did lower their stock price. Nevertheless, these corporations persisted with their partisan behavior.
The authors warned that their data only go through 2022, and there is anecdotal evidence that corporations have internalized the harm caused by their partisan speech, and many corporations have since abandoned their ESG policies. However, the leadership of BlackRock and CalSTRS is still uniformly liberal, and the effect they still have on corporate behavior should not be underestimated.