Political Persuasion of CEOs Force Some Directors to Quit: Study

According to a recent study from the University of Notre Dame, Indiana, if new CEOs are not on the same side of the political path as the directors on their new boards of directors, this can lead to layoffs.

The researchers analyzed directors on the boards of directors of public companies between 2008 and 2012. They studied FEC records of individual political contributions to estimate political ideology scores for each director and new CEOs.

Their results showed that directors who politically disagree with a new CEO are more likely to leave the board of directors, while directors who agree with a new CEO are more likely to stay.

However, political differences are more likely to push for withdrawal than agreements that guarantee retention. For example, a liberal director is more likely to leave after a conservative CEO is appointed than a conservative director to stay.

“Generally speaking, the study shows that people tend to internalize political ‘hate’ or intolerance more than acceptance,” Shannon Rodel writes in an article for the Mendoza University College of Business.

In addition, research has shown that when political disagreements arise, they are less likely to trigger a withdrawal if the two parties have some experience with each other and “can judge each other on other merits,” according to John Busenbark, Ph.D. associate professor management and organization at the university.

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