How Directors Can Successfully Navigate Political Turmoil

While there was a time when what happened outside of the boardroom didn’t drastically affect conversations inside of it, that time has come to an end. Politics and business are inextricably linked, especially in a generation that cares so much about what corporate leaders think about social issues.

How can board members and top executives win in such a challenging landscape? While it may seem impossible, corporate leaders can take certain actions to curb instability while still showing care and concern for their stakeholders. Understanding how to strike this balance can help business leaders find success, even in the midst of political turmoil.

How Politics Affects the Corporate Landscape

The realm of politics affects far more than politicians and voters. Thanks to a number of factors, corporate leaders have now been pulled into the melee, often finding themselves tossed to and fro in the ever-shifting political playground. Here’s a breakdown of how political turmoil has affected the boardroom in recent years.

Changing Regulations

Many different areas have seen shifts in the last few years. Environmental, social, and governance (ESG) reporting; DEI initiatives; immigration; workplace safety; healthcare benefits; and even the issue of non-compete contracts have faced public and political scrutiny and widespread change. 

While some changes in legislation have been beneficial, the rapid legislative movement has taken its toll on companies. It has made stability seem like a distant dream and caused difficulties in knowing which initiatives are worth the time and monetary investment. 

For example, the recent Supreme Court decision on race-based college admissions has put corporate DEI programs in the hot seat, resulting in possible lawsuits against companies that are found to be engaging in discriminatory policies — even if those policies were meant to help certain groups. Is it worth it for companies to continue with DEI initiatives, knowing that some politicians are pursuing the issue further? 

Many report that the automobile and energy sectors feel these changes the hardest as climate change becomes even more pressing with each passing year. While some government officials see these issues as a political battlefield, they may not realize that they have far-reaching effects on companies.

Employer Branding

Undoubtedly, Gen Z employees — whose numbers are increasing in the workforce — seem to care more about social issues than previous generations. 65% of today’s undergrads would not even bother applying for a job if the company’s values don’t align with their own, and 43% expect their employer to take a public stance on issues that affect them and the world around them.

Employees also want to be able to feel connected to the company’s mission. Research from Gallup has found that just a 10% increase in an employee’s connection to the company mission can result in a more than 8% decrease in turnover and a more than 4% increase in overall profitability.

Clearly, if an employer’s mission isn’t on point when it comes to employees’ social sentiments, such a reputation can hinder talent acquisition, engagement, productivity, and profits. It also affects public perception, which in turn can affect company performance. Many in this generation care about supporting and working for companies that show concern for social issues. 

For many, investment decisions are governed and affected by a company’s ESG initiatives. Experts project that ESG-mandated assets will make up half of all professionally managed assets by the end of 2024.

Using Political Power Against Private Companies

In a time when many regulatory changes are pushed by political figures and their constituents, companies have to be more careful about their DEI and ESG activity. If they take the wrong position, some worry that their companies will be used as political pawns to bring about changes that could punish corporations.

In conjunction with political activism affecting private enterprise, it’s also important to discuss the rise of shareholder activism. CEOs and board members can now have even their private conversations and opinions held against the company, with politically motivated shareholders looking to unseat those they don’t like. In this way, being on the “wrong” side of a political issue can be costly to a company. 

Shifting Focus in the Boardroom

Getting involved in political and social issues takes up time that some board members insist they don’t have. Directors now have to take time to think about issues that simply were not a problem before the business sector got caught in the crosshairs of political debate.

These issues take up extra space and time on the agenda. However, they also introduce another opportunity for differing opinions to flourish. Such a situation heightens the need for diplomacy in the boardroom.

What Boards Need to Do to Combat Political Turmoil

While companies may never be able to completely evict politics from the boardroom, corporate leaders can do the following to ease the burden of dealing with it:

  • Identifying core values and goals — companies need to define themselves before anyone else can define them, as this will help guide responses to media scrutiny
  • Examining corporate actions and investments to ensure that all are in alignment with core values and goals as well as current rules and regulations
  • Becoming more aware of changing sentiment and possible regulatory changes and planning for potential crises
  • Having alternative plans for long-range strategies, knowing that public sentiment, regulations, and policies could shift at any moment
  • Staying out of as many political issues as possible and reserving public comment for those that truly affect the business, employees, shareholders, or customers

Though these actions won’t guarantee that there will never be bumps in the road toward corporate unity and stakeholder satisfaction, they can help corporate leaders more easily navigate a shifting political landscape, protecting themselves and their companies in the process.

Planning and Purpose Are the Keys to Successful Navigation

Political turmoil has affected corporations in many ways. Constantly changing regulations make it hard to know where to allocate resources, and they also impact the ability of corporations to build a sustainable employer brand. 

Additionally, corporate leaders worry about politicians and shareholder activists wielding political power against private companies. This concern takes up valuable space on boardroom agendas.

To prevent politics from becoming the main issue, boards and CEOs must identify the company’s core values and goals and weigh all decisions against them. Furthermore, corporate leaders need to pay attention to political issues and plan for what may be next. When leaders stay aware of current problems but commit themselves to a greater purpose, they can achieve much more stability.