Political Activism Doesn’t Pay

Based on research by Vikas Mittal (Rice University) and Jihye Jung (University of Texas at San Antonio)

Key findings:

• Political activism doesn’t increase customer satisfaction or purchase intent; it actually decreases what people are willing to pay for a brand.
• Most people are politically passive: 77% of Americans have never joined a boycott, and most consumers rate brands as politically “in the middle.”
• Engaging in political activism can reduce employee productivity and motivation.
• Whether a company should engage depends on two factors: how political its own values are, and how politically homogeneous its customer base is.

From Coca-Cola’s CEO publicly condemning Georgia’s voting law to Starbucks reversing a ban on employees wearing Black Lives Matter shirts, brands increasingly wade into political and social fights, often believing, based on survey data, that customers want them to. An Aflac survey found 55% of Americans think companies should take a stand on social and political issues; an Edelman Trust Barometer found 64% of consumers surveyed believe CEOs should address societal problems governments aren’t fixing.

But such surveys can be misleading. They only show customers want them, but do not reveal if corporate political activism actually creates any value for them. It doesn’t.

Supporting causes like climate change or racial justice through donations, policies or public statements will win loyal customers and boost profits — so the thinking goes. But that assumption can lead CEOs astray, according to a new paper co-authored by Rice Business Professor Vikas Mittal, “Strategic Management of Corporate Political Activism.” In many surveys, consultants only report what people say they want, they do not go the next step to relate people’s wants to actual outcomes for customers and companies. 

Mittal and his co-author, Jihye Jung from the University of Texas at San Antonio, share results from multiple peer-reviewed studies showing there’s no upside for brands to engage in corporate political activism. In fact, doing so could harm a brand, its employees and shareholders, while creating no real value for consumers. Instead, CEOs and other senior executives need to measure the actual lift that political activism produces — or fails to produce — on concrete business outcomes like customer satisfaction, purchase intent and willingness to pay, rather than assuming it will pay off. In reality, most people are politically passive. According to the World Values Survey, 77% of Americans have never participated in a politically motivated boycott. Most consumers rate brands as politically “in the middle.”

“When we ask customers directly, investments in product quality and competitive pricing consistently increase satisfaction and purchase intent,” Mittal says. “Political activism does neither, and it actually decreases what customers are willing to pay. There is no upside to it.” 

The co-authors illustrate the downsides of corporate political activism and propose a simple framework CEOs can use to determine whether or not they should engage in it.  

The downside of political activism

Several high-profile cases with major brands illustrate the often swift, negative repercussions of taking on political or social causes. Take Coca-Cola, for example.

In 2021, Coca-Cola CEO James Quincey spoke out about a new Georgia law that made it illegal for election officials to mail absentee ballot applications. Opponents saw the law as an attempt to suppress votes. Quincey said, “I want to be crystal clear. The Coca-Cola Company does not support this legislation.” Within a month, Republican lawmakers in Georgia demanded that all Coca-Cola products be removed from their offices.

Starbucks saw similar backlash after it banned employees from wearing Black Lives Matter shirts in 2020 — customers and employees expressed such outrage that the brand reversed its decision within days, and then printed 250,000 Black Lives Matter T-shirts for employees who wanted them.

“Leaders must pay attention to the science,” Mittal says. “If they don’t know what the lift of political activism is for their business, then they just shouldn’t do it.” 

The co-authors’ research suggests that a company’s commitment to social or political values doesn’t necessarily translate into customer purchases, perceptions of higher quality or a greater willingness to pay. Instead, political activism can alienate current and potential customers. For example, after the CEO of Penzeys Spices emailed customers accusing Republicans of racism, the company lost 10,005 email subscribers. 

It can also affect investors. One analysis of 293 corporate political activism events across 149 firms in 39 industries found a negative association with stock returns, particularly when a company’s political stance conflicted with its stated values. No study the researchers reviewed found a positive link between political activism and financial performance.

Employees can be affected, too. In a field experiment involving 780 freelancers on Upwork, contractors who disagreed with a company’s stance on a social or political issue produced lower-quality work and were less willing to go above and beyond. Surprisingly, productivity also declined among freelancers who agreed with the company’s stance.

Not every brand pays the same price, however. Some companies are simply strong enough to absorb the backlash, according to the co-authors: Coca-Cola has kept both liberal and conservative customers despite leaning into more progressive causes in recent years, while Target has retained conservative shoppers even as some objected to its gender-identity policies for restrooms and fitting rooms. For most companies, though, that kind of brand equity is the exception.

A framework for knowing when to engage

Given the potential downside of corporate political activism, company leaders need to tread carefully, according to the co-authors. 

First, they shouldn’t make assumptions about the political views of their customers or employees based on the demands of the most vocal people. Instead, they need to survey a random sample of both and assess their political views.

Second, leaders should candidly assess how political their company’s values actually are, separate from their personal views. Mittal and Jung’s framework plots these two questions against each other, producing four distinct strategies.

If a company’s customers largely share the same political views, leaders may choose to take a more direct stance on political issues if they feel strongly about doing so. This approach can work for brands that are built around a specific political identity, such as Let’s Go Brandon or Patriot Mobile. 

But for companies with a politically diverse customer base, a passionate owner or founder can express personal views or engage in activism outside the business, as Hobby Lobby’s founder has done, while keeping that separate from the brand. The co-authors call this “selective engagement”: leaders pursue their own convictions personally, without putting the brand itself on the line.

Companies without a clear political identity and with customers across the political spectrum should avoid political activism altogether, the co-authors say. Large companies like Costco Wholesale do this apolitical “divergence strategy” well, the co-authors explain. Costco focuses its charitable giving on supporting children, education and health and human services, and avoiding politically-charged causes. Microsoft doesn’t support political, labor or fraternal organizations, either.

The fourth strategy applies to companies whose values aren’t political but whose customers are politically homogeneous. Here, the co-authors say, leaders don’t need to take an overt stance, they can instead support noncontroversial local causes their community already cares about. One family medicine practice in a conservative pocket of Houston, for instance, backs the local food bank and public schools rather than anything politically charged.

Meanwhile, as small companies grow, their approach to political issues often evolves. Many family-owned and small businesses begin by aligning closely with the views of their core customers and communities. But as they expand, reaching more customers, entering new markets and hiring more employees, leaders often become more selective about when and how they take public stands, recognizing that their stakeholders may hold a wider range of political views. 

Leaders should periodically revisit both questions in the framework, the co-authors say, since a company’s customer base and values can shift long before its political strategy starts to feel outdated. 

“Leaders must pay attention to the science,” Mittal says. “If they don’t know what the lift of political activism is for their business, then they just shouldn’t do it. Companies cannot be arenas for CEOs and executives to play out their personal preferences, because they have a responsibility to their customers, their shareholders and their employees.”

Written by Deborah Lynn Blumberg 

“Strategic Management of Corporate Political Activism,” Management and Business Review (2023).