Political Affiliation Shapes U.S. Boards

Political Affiliation Shapes U.S. Boards

Are corporate boards as polarized politically as the general population? That’s one of the questions we asked ourselves as we conducted a survey of directors of public and private companies headquartered in the United States.

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We and our research partners found that Republicans are more highly represented on boards than in the general population: they were 50% Republicans, 24% Democrats, and 26% Independents, while the American public, according to Gallup, is 28% Republicans, 31% Democrats, and 39% Independents. But affiliation doesn’t guarantee enthusiasm, as this sample of survey comments reveals: “On sabbatical from the Democratic party”; “Republican, unless they keep acting like goofballs”; and “Independent (especially this year!).”

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As with the general public, we found differences among demographic groups. Female directors are much more evenly split between the two main political parties. By comparison, male directors are more than twice as likely to identify as Republicans than Democrats. Our limited sample sizes suggest that African American/Black and Asian/Pacific Islander directors are more likely to be Democrats than their white (not Hispanic) counterparts, and single directors are more likely to be Democrats than their married counterparts. We did not find any notable differences by age group or education.

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We also found that industry matters. Boards of companies operating in the consumer discretionary industry have a disproportionately high representation of Democrats, while boards operating in the industrials and energy and utilities industries skew more Republican. The proportion of Democrat and Republican directors does not substantially differ between public and private firms.

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We found that directors of all political stripes care a lot about the economy and cybersecurity, and that Republican and Democrat directors are aligned in their concerns about political instability and healthcare costs, even though they may have conflicting views on how these costs should be contained. Alongside these commonalities, we also found some notable partisan differences. Democrats are less pessimistic about the economy: 10% of Democrats expect a global economic slowdown in the next three years, compared to 18% of Republicans. Democrats care more about economic justice, environmental sustainability, and equal rights for women. Republicans care more about corporate tax rates, the national budget deficit, and regulation. The ideological divisions we’re seeing in the political arena have permeated the boardroom. The disparities in the perceived importance of these issues could affect how directors prioritize and choose to address risks to the company.

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Directors are also consistent in their views of the key challenges to achieving their companies’ strategic objectives: attracting and retaining top talent, the regulatory environment, and domestic competitive threats top the list for directors from both parties.

Our limited sample suggests that both groups agree that board leadership should serve as champions of board diversity, but they differ on the policies they advocate to increase board diversity. Republicans generally favor developing a pipeline of diverse candidates through director advocacy and mentorship, while Democrats are more likely to favor requiring that every director slate include diverse candidates, or that boards implement targets for diverse membership. Democrats are also more strongly in favor of boardroom quotas for diversity, and Republicans are strongly against disclosure requirements on steps taken to seat diverse director candidates.

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We found differences in how Republican and Democrat directors view the performance of their boards. Both Republicans and Democrats say the most effective board committee is audit/finance. However, Republican directors are more likely to identify the compensation committee as the least effective committee. Interestingly, Republican directors think the compensation level of the CEO of their company is “too high.” Directors of both political views rate their boards similarly on processes, dynamics, and effectiveness as a whole, but differ on the question of compensation.

Democrat and Republican directors diverge on the skills they think are most important for board service today. Republicans prioritize industry knowledge, financial and audit expertise, and international expertise more than their Democrat counterparts. Meanwhile, Democrats place greater importance on technology expertise and risk management. It’s important to note that the representation of Democrats on risk committees is disproportionately high. These differences can manifest themselves when boards identify and select candidates for open board seats or when evaluating other directors.

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We also looked at how Democrat and Republican directors diverge on their self-evaluations. More Republicans consider themselves to be very good at negotiation, while more Democrats consider themselves to be very good at building teams. Overall, directors from both sides are bringing diverse strengths to the table.

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Why does all this matter? Boardrooms are not insulated from the widening rifts in political ideologies in the United States. Democrat and Republican directors differ in their economic outlooks, evaluations of the most pressing political issues, approaches to increasing board diversity, and even in their assessments of their own skills and strengths. Political affiliation is another form of board diversity–one that is rarely discussed, but could have profound implications on how corporate boards function and set priorities. Having directors with a range of political philosophies can invigorate board discussions and ensure that a wide array of issues and solutions reach the boardroom. Maintaining a diversity of political perspectives is an important consideration to ensure that boards are equipped to anticipate and tackle the multitude of challenges that confront companies today.

 

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