The Politicization of Social Responsibility

Abstract

Institutional investors are less likely to support shareholder proposals related to environmental and social issues for firms headquartered in Republican-led states. The lower support concentrates in recent years, coinciding with politicians highlighting firms’ social responsibility efforts, and among companies that receive state-level subsidies and tax breaks. Investor backing also varies with changes in state leadership. Support for these proposals drops by 13 percentage points in the same state when Republicans are in charge instead of Democrats. The findings suggest that politicians can influence businesses by swaying the votes of institutional investors, who prioritize maximizing shareholder value in their portfolios.