The Economics Behind Corporate Politics

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By Rohan Kapur -

Our current political era has left Americans more politically involved and simultaneously divided than ever before. Following the lead of consumers, many companies have left their previously neutral political stances and have intertwined themselves into the political debate. The reasoning behind these political stances has subsequently become a fierce topic of debate.

Many have cautioned companies planning to involve themselves in the political debate, arguing that such involvement would be economically detrimental. However, this may not be the case and, long-term, a company’s political involvement may be beneficial for them or, at the very least, provide them with no real negative implications.

The rationale behind the argument opposing political involvement by major companies is clear. Given today’s polarizing political climate, any political decision made by companies will anger and alienate consumers with a differing political view, leading them to buy products from another company.  Just look at Nike and In ‘N Out. In the aftermath of Nike’s Kaepernick ad, #BoycottNike trended on Twitter for hours and conservatives posted videos of them burning Nike products. When In ‘N Out donated $25,000 to California’s Republican party, just like #BoycottNike, #BoycottInNOut trended on Twitter for hours as liberals vowed to never eat at the fast food joint again. In both cases, many customers were angered by each company’s political involvement and vowed to not buy any of each company’s products again due to their involvement.

While the short-term angry backlash resulting from In ‘N Out’s and Nike’s political involvement provide a strong argument that supports the point that companies should stay out of politics, the long term effects suggest something much different. When Nike announced its endorsement deal with the highly politically controversial Colin Kaepernick, it lost $3.75 billion in market cap as many investors banked on the company losing money in the future due to its political involvement. However, the opposite occurred. Just under 2 weeks after Nike announced its association with Kaepernick, its stock hit an all-time high as sales surge. Three months later, while the surge in sales has not continued at the same rate, Nike stock continues to do well in comparison to the rest of the market, similar to performance pre-Kaepernick ad. (Since the ad dropped, the Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 have all fallen by over 9%, while Nike has fallen just 3%). Another example of this can be seen with Chick-fil-A. The Georgia based fast food restaurant has always been political with deeply conservative views and openly contributes to groups with similar views. In spite of this, the company remains the nation’s favorite fast food restaurant and ranks number one in yearly sales per restaurant, despite not being open on Sundays.

Despite the polarization of politics among Americans, political involvement by companies does not necessarily have negative implications. The reality is that most Americans care more about the products sold than the political views of the company who sells them. The minority of Americans who do care about a company’s political involvement seem to be more interested in supporting companies with similar views rather than boycotting companies with contrasting views. Moreover, most companies are taking on political views that reflect their consumer bases. Whether it was Nike taking a more liberal stance due to its large younger, progressive base or Chick-fil-A taking a more conservative stance due to its conservative roots, many companies are just following their consumer base. Even with these things considered, it is more likely that Americans do not care about a company’s political involvement or are not up to date or interested enough with the political views of such companies.

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Featured Image via Nike

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