The Political Polarization of Corporate America

Abstract

Executive teams in U.S. firms are becoming increasingly partisan. We establish this new fact using political affiliations from voter registration records for top executives of S&P 1500 firms between 2008 and 2020. The new fact is explained by both an increasing share of Republican executives and increased assortative matching by executives on political affiliation. Executives who are misaligned with the political majority of their team are more likely to leave the firm, especially in recent years, and their company's stock price responds negatively to the announcement of their departure. Combined, our findings indicate that the increasing political polarization of corporate America may not be in the financial interest of shareholders.

Keywords: political polarization, partisanship, executives, management teams, governance, diversity

JEL Classification: G30, G34, M12, M14