1529: Talk Left, Walk Right: How Firms Respond to The Political Risk of Sociopolitical Activism (21407)

When firms engage in controversial sociopolitical issues, their activism may satisfy some stakeholders while alienating others. In this paper, borrowing from the sociopolitical reputation literature we suggest that firms recognize the risks involved in sociopolitical activism and react by developing a risk management strategy. Specifically, we argue that when firms engage in liberal-oriented activism there is an apparent sociopolitical reputation risk from conservative elected officials that are potentially aggrieved by such actions. Thus, to mitigate political loss firms will engage in a political alignment strategy, which we define as the act of increasing political support for conservative elected officials at a similar time they are engaging in liberal-oriented sociopolitical activism. We then outline three conditions under which this action would be more or less likely specifically, such as a firm’s sociopolitical activism intensity, sociopolitical activism issue-specific reputation, and historic statements that coincide with activism. To test these hypotheses, we examine S&P 500 firms following expressions of support for same-sex marriage and evaluate changes to their political portfolio. Evidence from our study supports the broad notion that firms may broadcast a public position on an issue, while, perhaps less visibly, taking steps to indicate support to actors on the other side of a partisan debate.

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