Wednesday, September 7, 2016

2437. A New Dimension of Bourgeois Democracy

By Andrew Ross Sorkin, The New York Times, Septmber 5, 2016

Late last month, Tim Cook, Apple’s chief executive, hosted a private fund-raiser for Hillary Clinton in Los Altos, Calif., along with his colleague Lisa Jackson, vice president of Apple’s environmental, policy and social initiatives. The private, off-the-record event required a donation of $2,700 to $50,000.

While Mr. Cook’s role was as a private citizen — it was not an Apple event — the message to employees about whom he is supporting for president is clear.
The influence of chief executives like Mr. Cook over employees’ political leanings and donations, intentional or not, is substantial: It may not be an overstatement to suggest that a chief executive’s politics may be one of the most significant factors in swaying how employees think about elections.

The results of a new academic study looking at the power of chief executives over the politics of their employees is stunning and perhaps unsettling.

Three business professors set out to examine “how the political preferences of C.E.O.s affect their employees’ campaign contributions and electoral choices.” The results of the study, which looked at eight federal election cycles from 1999 to 2014 and over 2,000 companies, showed a statistically significant correlation among campaign contributions made by the chief and his or her employees as well as voter turnout. The study found that “employees direct approximately three times more of their campaign contributions to political candidates supported by their firm’s C.E.O. than to otherwise similar candidates.”

If you’re thinking, “Well, C.E.O.s and employees donate along similar party lines because they share common values and interest,” think again.

The study uncovered patterns that show a chief executive’s influence is profound: “When a new C.E.O. contributes to different political candidates from the ones supported by the prior C.E.O., employees tend to follow his/her lead and redirect their donations as well,” wrote the professors, Ilona Babenko of Arizona State University, Viktar Fedaseyeu of Bocconi University in Italy and Song Zhang of the University of Lugano in Switzerland.

There is nothing inherently wrong, in most cases, with a chief executive or employee raising money for a particular candidate or party. Mr. Cook, it is worth noting, gives to both sides of the aisle, having just hosted a separate fund-raiser for House Speaker Paul Ryan in June.

But the influence of a boss’s political leanings should not be underestimated. “Our evidence indicates that C.E.O.s are a political force, with potentially important implications for firms they manage and for the nature of democracy,” the authors wrote. “The welfare implications depend both on whether C.E.O.s promote their own political agenda or act in the interests of their firms, and on whether the interests of the firm coincide with the interests of its employees.”

Some C.E.O.s don’t just lead by example; they actively solicit donations from their own employees for candidates and company-sponsored political action committees, which can create its own thicket of ethical questions. The Federal Election Commission, for example, investigated the way Robert Murray, chief executive of Murray Energy, had solicited political donations from his employees through emails and internal videos. Some employees told The New Republic that they felt pressured to donate, fearing that not to do so might risk their jobs.The Federal Election Commission, ultimately, found Mr. Murray hadn’t broken any laws.

Still, the risks – and complex set of election laws – make political fund-raising a complicated endeavor for those in the corner office. “The potentially coercive effect of an employer’s solicitation counsels in favor of avoiding the situation altogether,” said Harvey Pitt, a former chairman of the Securities and Exchange Commission and the chief of Kalorama Partners, a Washington consulting firm. “The logical alternative — having a very strong and clear disclaimer — doesn’t really work, since many employees might not believe the disclaimer, no matter how strongly it is worded.”

Tony Fratto, a former deputy assistant to President George W. Bush who now operates a consulting firm, Hamilton Place, took issue with the idea that C.E.O.s should remain outside the political campaign arena.

“I don’t doubt that some employees feel pressure to align with the C.E.O. politically, but my experience is that in most cases both C.E.O.s and employees are overwhelmingly influenced by a candidate’s views or voting record on industry issues,” he said. “I encourage firms to do more to inform their employees at all levels about what political leaders’ records are on their key policies. I actually think that doesn’t happen enough.”

Alexander Hertel-Fernandez, a professor at Columbia University, found in his own survey that “a quarter of employees reported that their bosses have tried to engage them in politics,” but reported that “about 7 percent of employees reported clearly coercive kinds of political contact at work – messages that made workers uncomfortable or included threats of plant closures, cuts in hours or layoffs.”

This election cycle, it seems that many C.E.O.s, especially on Wall Street, have chosen to be less public about whom they are supporting in the presidential race. Perhaps because of the lingering negative memories of the financial crisis or perhaps because this presidential election has turned so decidedly nasty, many executives have stayed on the sideline. In June, Brian Krzanich, chief executive of Intel, canceled an event at his home for Donald Trump after it was reported to be causing a firestorm among Intel employees and peers in Silicon Valley that felt Mr. Trump’s policies were damaging to the industry. Mr. Krzanich later said he canceled the event because it had turned into a fund-raiser without his approval. “I do not intend to endorse any presidential candidate. We are interested in engaging both campaigns in open dialogue on issues in technology,” he wrote on Twitter.

When it comes to presidential politics, some executives privately say they worry they could see reprisals against their business or industry if they were to actively campaign for one candidate or another.

“The risk of being on the record publicly against a politician is high, particularly if that politician may take retaliatory action,” said Brian Richter, an assistant professor at the University of Texas at Austin.

That didn’t stop 150 technology executives from writing an open letter in July opposing Trump’s policies. The list of signatories included the leaders of Silicon Valley darlings like Slack and Box but notably was not signed by the current leaders of Google, Apple or Facebook, which typically face the most regulatory scrutiny.

Clearly the influence of C.E.O.s and other senior executives’ political preferences on the people working for them deserves more scrutiny. In the meantime, while it is hard to know how individuals will ultimately vote when they pull the lever in November, perhaps a new election polling data point should be the preferences of their bosses.

No comments: