Q&A: Politics and Ethics in Business

Daniels faculty members Michael Nalick and Tricia Olsen weigh in on the political and ethical underpinnings of business

Michael Nalick

Many faculty members at the Daniels College of Business are evaluating the historic events of the past week—corporations ceasing political funding and endorsements and Big Tech pulling the plug on social media accounts and apps following a deadly riot that disrupted certification of the presidential election results at the U.S. Capitol—through the lens of their academic research. With divisive rhetoric and corporate-political discord escalating in Washington, D.C., Silicon Valley and everywhere between, individuals and organizations are affected across the political spectrum.

The Daniels newsroom reached out to Assistant Professor of Management Michael Nalick and Associate Professor of Business Ethics and Legal Studies and Associate Dean of Undergraduate Programs Tricia Olsen for their analysis. Nalick’s research covers corporate misconduct, the intersection of politics and business, and CEO activism. Olsen has published widely in business ethics, management and political science outlets on corporate-community relations and the political economy of development. She also is co-director of the University of Denver’s Global Business and Corporate Social Responsibility Certificate.

A growing number of companies are ceasing political contributions. We’ve seen CEOs and corporations speak out before on political topics, even lending or removing support. Is this week’s news any different?

Nalick: In many ways these actions are not all that different from prior behavior. I recently published an academic research article on the subject. In the article, we examined how companies react to politicians accused of misbehavior and find that while companies often do pull back some donations to the tarnished politicians, they typically re-allocate resources to other politicians and frequently come back to the focal politician at a later date if they survive reelection. Thus, in this context, what is different is that large companies are saying that they are going to cease all political donations. Yet, based on my research, this ban is not going to persist and the companies will just allocate more money to other types of political activities such as lobbying and grassroots activities.

What considerations do CEOs and companies face in making these decisions? Are the stakes different in the current political climate?

Nalick: CEOs consider balancing political influence with reputation and maybe even some personal sentiment. In other words, CEOs examine the downsides of losing political partners that can help with regulation and government contracts with downsides if the relationship is continued, facing the ire of customers, shareholders and even other politicians. Because the political environment is hyper-partisan and the issue at hand is also a moral one and not just a political one, I think the stakes are raised. Meaning that, any miscalculation is magnified, and alienation of particular groups is likely.

Tricia Olsen

Olsen: Even prior to last week, CEOs were already privately communicating to lobbyists that their firms would no longer support elected officials who denied the results of the presidential election. Members of the Business Roundtable, the U.S. Chamber of Commerce and the National Association of Manufacturers—the latter of which previously supported the president—made statements that rejecting the results of a free and fair election was unacceptable. Over the weekend, Jay Timmons, the president of the National Association of Manufacturers, called for Vice President Pence to remove the president from office via the 25th Amendment. As my research in Organization Studies argues, markets and states co-evolve; industry organizations are more likely to organize when they feel threatened by the state. Today, businesses want stability and, it seems, are making their voices heard to tamper unrest.

What kind of research have you done to show the effects of these moves on corporations and their stakeholders?

Nalick: I have research under review at Academy of Management Journal that examines when and why firms take stances on controversial social issues (Nalick, M., Kuban, S., Josefy, M., Leonel, R. & Chin, MK. Chasing Controversy: Motivations Behind Firm Involvement in Socially Contentious Issues.) In this research, we find that CEOs are very pragmatic and calculative—understanding that taking a stance on certain issues is likely to bring long-term reputational benefits, even at the cost of short-term backlash. 

Olsen: My most recent research explores the variation in companies’ ability to effectively navigate corporate-community relations, which can lead to further conflict, fruitful cooperation or something in between. In this context, this research would suggest that firms with a solid nonmarket strategy and transformational engagement with external stakeholders would not have been surprised by last week’s events; they would have been paying attention to the increasing polarization and violent rhetoric by publicly elected officials and their constituents. In other words, a robust nonmarket strategy means business leaders are rarely surprised.

Corporations have not traditionally leveraged their power at this magnitude—including tech giants like Facebook/Instagram, Twitter, Amazon, Apple and Google shutting down politicians’ and followers’ accounts and pulling down social media apps altogether, citing violations of their terms of service. Where do we go from here?

Nalick: I think this movement accelerates the ongoing push to have Big Tech better regulated. While these companies have been protected because of free-speech considerations and the fact that they are private enterprises with profit motivation, we are going to start to see legislation (supported by both political parties) to regulate these companies in a similar manner in which utilities, telecoms and airlines are regulated.

Olsen: Corporations have always had a lot of power; this is not new. What is new is that the public square—dialogue, debate, shifts in discourse—is no longer public; those engagements are taking place in privately controlled spaces (e.g., Facebook, Twitter, etc.). Suddenly, there is no public square in which the issues of the day can be debated and heard by all. Instead, we each have our own individualized digital square; one in which we only invite those who agree with us, we cast aside those with alternative viewpoints, and we easily fall prey to ever more extreme points of view. Without public discourse and a shared version of reality, it is hard to foresee a public policy in which compromise, compassion and mutual respect prevail.

Daniels prepares students to become ethical business leaders who are conscientious of corporate social responsibility. What lessons can students learn from the current intersections of business and politics as they begin or grow their careers?

Nalick: There are two big takeaways from the current situation. First, leaders must pay attention to a variety of stakeholders including employees, host communities and the government. Shifts in these arenas can have wide-ranging implications for business. Second, at the micro-employee level, your private life is not very private. What you post on social media, even if you believe it is a benign political statement, is carefully watched by current and potential employers, so tread carefully.

Olsen: Crises of one kind or another are here to stay; business and markets change over time and affect the lives and life chances of individuals around the globe. It’s not whether there is a role for politics in business or business in politics, but the quality of those engagements. We need business leaders who will engage seriously with the nonmarket environment while refusing to leave their conscience at the door. We need politicians who are actually working to better the lives of those they represent, not enrich themselves and silence the opposition. We need ethics—in business and politics—today more than ever.

Is there anything important to note about what is unfolding on the U.S. business-political front from a global business perspective?

Olsen: Populism, by which I mean an anti-pluralist regime, has been on the rise for some time, due to increased economic uncertainty and related crises around the globe. What perhaps many don’t realize is that democracies rise and fall. Ours is no different. Economic development and a growing middle class are important for democratic stability and longevity. It’s not just growth for the sake of growth. What matters is the distribution of the fruits of economic gains and whether people think they have a shot to improve their lot in life. Capitalism, the institutions that support it and the business entities of which it is comprised, are facing crises of confidence. As I have argued in a paper that is under review at Business Ethics Quarterly (Olsen, T. and Van Buren, H.), this matters because when individuals believe they lack legitimate avenues of recourse to protect and advance their interests, business is perceived as less legitimate and social unrest is likely to occur. If people believe they have no chance to improve their lives and the system is rigged against them, they’ll opt out—as the rioters who overtook the U.S. Capitol last week indicated they were willing to do.