BUSINESS & POLITICS - Global Strategy Group

BUSINESS & POLITICSDO THEY MIX?THIRD ANNUAL STUDYJANUARY 2016Global StrategyGroup.com@GSG

Business & Politics: Do They Mix?Page 2DO BUSINESS AND POLITICS MIXIN A TIME OF POLARIZATION?by a national audience. But in today’s highly politicized environment, how arethese corporate stances perceived? Could wading into the political fray put acorporation at odds with half the country?Controversy is no stranger to politics. 2015 saw a number of issues polarizeand deadlock Washington—and the country—on many levels. Enteringinto the 2016 presidential election looks to be no different. A handfulof controversial candidates with backgrounds that buck the traditionalpresidential candidate pedigree and hardline stances on issues that alreadypolarize Americans have so far driven the storyline of this election.This year’s study examines how brand stances on a range of issues areperceived differently by Democrats and Republicans and how this affectsbrand favorability. What we found has significant implications for corporatereputation and the approach corporations should take when determiningwhether or not to weigh in on political and social issues.This polarized political environment has created an opportunity for othersto step up and lead on issues of importance. Over the past several years,corporations have become increasingly more involved in political and socialissues—taking public stances on a variety of issues such as immigration,minimum wage, same-sex marriage, the environment, and race relations.Global Strategy Group (GSG) has closely monitored this trend over the pastthree years in our annual Business & Politics study, which asks Americanstheir opinions about the role that businesses should play in political discourse.In our third annual study, we learned that, as in the last two years, the publicstill has a clear opinion about how businesses weigh in on political issues, andthe positions they take. Today, Americans are overwhelmingly supportiveof corporate political engagement—88 percent of respondents agree thatcorporations have the power to influence social change, and 78 percent agreethat companies should take action to address important issues facing society.(See Figure 1).As the Presidential campaign captures the nation’s attention, the sheer quantityof news coverage will ensure that any corporate stance or response will be heardCorporations have the power to influence social change201588%201489%201381%Corporations should take action to address important issues facing society20152014201378%80%72%FIGURE 1

Business & Politics: Do They Mix?Page 3POLARIZED POLITICS ANDBRAND PERCEPTIONNot surprisingly, of all the stances we tested, themost polarizing one involves the most controversialfigure in American politics today: Donald Trump.In July 2015, the Professional Golf Association (PGA)moved its Grand Slam of Golf from Donald Trump’sgolf course following Trump’s controversial commentscalling Mexican immigrants “rapists” and “killers.”The public’s reaction to the PGA’s decision is split.The PGA’s stance scores highly with Democrats(improving the PGA brand by 28 points), but doespoorly among Republicans (hurting the PGA brandby 27 points). That produces a polarization score of55—the highest of any position we tested.–Same-sex Marriage–Confederate FlagMost polarizing–Trump/Immigration-27-30 2851-43 2151 8-6–Big Game Trophy Hunting42-19–LGBT Equality-24–Confederate Flag 3642 2342-26–Race RelationsDEMOCRATS55 1842 16 23–Parental Leave-33–Gender Neutral Products2322 37–Climate Change-2–Minimum Wage17 8–Interracial Families14–Smoking and Tobacco UseNegative Brand Impact 2413 33117 32 25–STEM Education 52 22 34–GMOs in Food–Domestic Violence15 15–Minimum Wage–Environmental Issues 45-10Least polarizingWith all eyes on the race for the White House,we took a look at how the divisions in the electorateintersect with stances corporations take. We testedthe impact on their respective brands of nearly 20different stances taken by companies in the past year.The amount to which the impact is different betweenDemocrats and Republicans, we call the GSGPolarization Score. The higher the number, the morepolarizing the issue is for the brand.GSG POLARIZATIONSCOREREPUBLICANS5 47 44 29 352 37 23 I 240Positive Brand ImpactPlease see page 9 for a more complete description of the above stances. FIGURE 2

Business & Politics: Do They Mix?Page 4Other hot-button issues follow closely behind. The next most polarizingstances represent a laundry list of topics that have divided Democrats andRepublicans over the past year—guns, same-sex marriage and LGBT equality,the Confederate flag and race relations.response to a big news story (producing a positive brand impact score of36 points with Democrats). But to some Republicans, it is perceived as aninfringement on the rights of hunters and produces a negative brand impactscore of 6 points—a 42-point gap between the parties.Like Trump and the PGA, some of these divisions are obvious. Democratsand Republicans have distinctly different reactions to Apple CEO Tim Cook’spublic denunciation of the Indiana law giving businesses the right torefuse service to a customer based on their religious beliefs—producing apolarization score of 51 points.Meanwhile, some issues that polarize our politicians tend to have a lesspolarizing effect when framed by business. For example, IKEA’s andMcDonald’s positions on the minimum wage are less divisive, as the distanceseparating Democrats and Republicans on this issue is much smaller.This is in part because the minimum wage is a less polarizing issue amongthe public. But it is also because Americans feel it is much more appropriatefor businesses to take positions on economic issues than social issues—especially when the issues affect their business. (See Figure 3 below.)But responses to other stances are more nuanced, like Delta’s announcementthat the company would no longer transport big game animal trophies in thewake of Cecil the Lion’s death. To those on the Left, this is an appropriateHow appropriate is it for a company to take a stance on each of the following issues?How appropriate is it for a company to take a stance on each of the following issues?Domestic ViolenceLGBT EqualityConfederate FlagObamacareRace vironmental IssuesMinimum Wage;Pay EqualityEconomicIssuesDemocrats and Republicans who3540LegalizingMarijuana4550Gun ControlBig Game Hunting;Transgender Issues556065Gender Neutral ProductsPolice Body CamerasOther Issues707580IndustrySpecificIssues8590% found type of stance appropriatePolitical Issuesthat Affect BusinessParental LeaveEconomic IssuesFIGURE 3

Business & Politics: Do They Mix?Page 5VISUALIZING CORPORATE POLARIZATIONNASCAR (Confederate Flag)Republicans and Democrats are dividedExploring Polarizing StancesExploring Non-Polarizing StancesThe decision facing businesses like Amazon and NASCAR about theConfederate Flag last year epitomized the challenges businesses facewhen navigating politics in a polarized era. The issue struck at the coreof race, politics, guns, and regionalism in America. NASCAR’s attemptto thread the needle—they prevented the use of the flag in officialcapacities but still allowed fans to fly it on their own—still polarizes thepublic. Just 41% of Republicans find the stance appropriate versus 69%of Democrats. Apple’s stance on same-sex marriage and the PGA’sstance on immigration are likewise polarizing amongst Democratsand Republicans.Pfizer recently committed to a 60% to 80% reduction in theirgreenhouse gas emissions by 2050. Given the contentious politicaldebate around climate change, the fascinating finding here is thatPfizer’s stance does NOT polarize the public. Instead, views amongboth Democrats and Republicans are aligned in their positive reactiontowards Pfizer. How did Pfizer accomplish this? They made it abouttheir internal commitment as opposed to wading into the politicalor legislative debate over the issue. Likewise, the public also sees theconnection to their businesses on the NFL’s stance on domestic violenceand CVS’s position on smoking and tobacco use, and therefore are notpolarized in their reaction to the brand.When the two lines peak at different points on the scale it means the parties disagreeon an issue—therefore the issue is polarizing. The chart below shows that Republicansthink NASCAR’s position was inappropriate (indicated by the peak on the left) andDemocrats think it was appropriate (indicated by the peak on the right).When the two lines are closer together, it means the two parties align on an issue.The chart below shows that Democrats and Republicans agree in their evaluation ofPfizer’s position on climate change as both groups find it to be mostly appropriate(indicated by the lines aligning).NASCAR (Confederate Flag)Not AppropiatePfizer (Climate Change)Apple (Same-sex Marriage)Apple (Same-sex Marriage)Republicans and Democrats are dividedAppropiateNFL (Domestic Violence)NFL (Domestic Violence)Republicans and Democrats are alignedPGA (Trump/Immigration)CVS (Smoking and Tobacco Use)CVS (Smoking and Tobacco Use)PGA (Trump/Immigration)Not AppropiateAppropiatePfizer (Climate Change)Republicans and Democrats are alignedFIGURE 4Not AppropiateAppropiateFIGURE 5

Business & Politics: Do They Mix?Page 6USING POLARIZATION TOGET NOTICEDAwarenessof corporatestancesAwarenessof CorporateStances70This year’s study found that the public is more aware of corporatestances on a wide range of issues than in previous years. While lastyear the average percentage of adults who had previously heard aboutthe corporate stances we tested was less than 15 percent, this yearthat figure nearly doubled, to 29 percent.Short of paid advertising, how can a company get noticed for itsstances? Simply put, the higher the polarization score, the more likelyit is to spark awareness. For example, NASCAR’s Confederate Flagpolicy has a much higher level of awareness than Pfizer’s climatechange initiative. Perhaps the most well-known example of corporatepolarization from recent years—Chick-fil-A’s position on same-sexmarriage—has an awareness level higher than CVS and the NFLwithout the million-dollar ad campaign.Smoking and Tobacco Use60Domestic ViolenceThe non-polarizing stances withthe highest awareness had majorad campaigns behind them.50Familiarity with stance taken by companyBut that 29 percent figure is still quite low. So how do companiesget attention? The two companies with—far and away—the highestawareness of their positions were CVS with its ban on the sale oftobacco products (61% report having knowledge of this position)and the NFL with its domestic violence prevention campaign(59% report knowledge). Both companies drove this awarenesswith substantial paid media advertising campaigns, which alsogenerated significant earned media.Same-sex Marriage (2013)40Gender Neutral Products,3020,Minimum WageGMOs in Food, Interracial Families, Confederate FlagConfederate FlagHighly polarizing stancesalso drive high awareness.Big Game Trophy HuntingTrump/ImmigrationRace RelationsSame-sex MarriageParental LeaveMinimum WageLGBT EqualitySTEM Education10Climate Change0Non-polarizing stances withlittle paid or earned medialead to low awareness.FIGURE 6