When politics shape corporate culture: How national leadership influences company messaging

As presidential administrations change, so too does the way America's largest companies talk about themselves. A new study led by researchers at The University of New Mexico examines how corporate leaders adjust their messaging about company culture across different political climates-and what those changes reveal about broader shifts in polarization and public trust.

The research, led by Kateryna (Kate) Holland, a professor at UNM's Anderson School of Management, and Esther Im of Washington State University, was published in the Journal of Financial and Quantitative Analysis under the title "Corporate Culture Messaging and National Politics." Holland explores how firms' discussions of corporate culture-values such as integrity, teamwork, innovation, quality, and respect-shift depending on political alignment and national polarization.

"Corporate culture is a belief system that's unwritten," Holland said in a recent podcast episode, Questions in Finance.

Historically, corporate culture has been difficult to quantify. Companies often present polished, "prescriptive" messages in annual reports or on websites, while the true nature of their culture shows up more subtly in employee reviews and spontaneous communications.

"The difficulty in this research has been removing the prescriptive part where everybody wants to shine and finding the true nature of corporate culture," she said. "That comes from unscripted communication-like employee reviews and spontaneous comments in earnings calls. Most people understand what culture is, but nobody can measure it."

That was the case until recently, when advancements in artificial intelligence and language modeling began allowing researchers to analyze large volumes of corporate text to detect patterns that correspond to actual corporate behavior.

"These models let us see how firms describe their culture in ways that match real outcomes," Holland said. "For example, when companies emphasize innovation, they tend to be more innovative and issue more patents. When they highlight teamwork, they tend to demonstrate it in practice by participating in more joint ventures."

Her research focuses on the five corporate values most frequently discussed in the field: integrity, teamwork, innovation, quality, and respect.

Holland and Im focused on corporate earnings calls, quarterly meetings where executives discuss financial results with investors and analysts. "Companies communicate with investors and shareholders in earnings calls several times a year," Holland explained. "Before these earnings releases, which are extremely important events for the market, executives meet with analysts to share highlights about performance and answer questions. These calls are an important place where corporate culture is communicated in real time, not just in polished reports."

The study analyzed data from 2002 through 2020, capturing periods of low and high political polarization. This timeframe allowed researchers to compare how executives communicated during the presidencies of George W. Bush, Barack Obama, and Donald Trump.

"Basically, what we see is that these political changes are influencing how executives are talking about their corporate culture," she said.

The research revealed two key pathways in how politics influence corporate communication:

1. Political alignment: When executives or firms are aligned with the sitting president, they tend to emphasize corporate culture more strongly. Pride and optimism often drive these messages, especially regarding innovation, quality, and respect.
   
2. Political misalignment: When executives or firms are politically opposed to the administration, they tend to downplay these values, focusing less on quality and respect and highlighting only neutral or product-focused messaging.

"Individuals have different outlooks and levels of optimism depending on who the president is," Holland said. "Two people can observe the same economic conditions, but the one who's politically aligned with the president often interprets the outlook more positively."

This optimism translates into the way executives talk about corporate culture. During periods of low political polarization (pre-2010), these differences were pronounced.

"During the Bush presidency, Republican-leaning firms spoke more positively about corporate culture-especially in areas like quality and respect-while Democrat-leaning firms were less vocal," Holland said. "Then, during the early years of the Obama presidency, that pattern reversed. Democratic firms highlighted their values more strongly, while Republican-leaning firms scaled back."

Importantly, as political polarization increased after 2010, these alignment-driven differences largely disappeared.

"Interestingly, the period of higher political polarization makes firms more similar in terms of how they talk about corporate culture, because we don't find statistically significant differences in any of the five corporate culture aspects-integrity, teamwork, innovation, quality, or respect," Holland said. "When political polarization goes up, firms choose to talk less in general about everything that's not directly related to their product."

Holland's research also highlights that corporate culture messaging is not just talk, it often corresponds to tangible outcomes:

• Innovation: Firms that speak more about innovation tend to be more adaptable, producing more patents and generating more citations.
• Quality: Firms emphasizing quality often produce high-rated products, evaluated by Consumer Reports and other rating agencies.
• Respect: Companies highlighting respect often excel in CSR and ESG rankings, investing in employees and DEI initiatives.
• Teamwork: Organizations emphasizing teamwork are more likely to engage in joint ventures and strategic alliances.
• Integrity: Companies stressing integrity are less likely to be investigated by the SEC or issue earnings restatements.

However, when cultural messaging changes occur due to national political influences, the researchers do not find corresponding changes in tangible outcomes. This suggests that corporate executives communicate strategically.

"We found some clear evidence of firms changing corporate culture messaging along the political dimension without changing the outcomes," Holland said. "I think this is just the beginning."

The study's findings are relevant not just to Wall Street, but to anyone paying attention to corporate messaging, including investors in New Mexico.

"If you're in New Mexico-or anywhere-and you're factoring corporate culture into your investment decisions, take it with a grain of salt," Holland said. "Corporate culture should be sticky, but what often changes is how executives talk about it. Our message is simple: close your ears to the noise and look at the numbers. Focus on the financial facts because that tells you what's really happening."

Holland encourages other scholars to explore the intersection of corporate culture and politics further:

"I would encourage others in their disciplines to take a closer look at what else has changed with increases in political polarization and political alignment in the United States," she said. "There are ways to think about dialing back and bringing more unity to companies, employers, customers, and shareholders during times of high polarization. This is an innovative area for future research."

The findings highlight how deeply intertwined corporate behavior has become with the nation's political climate. As polarization increases, even the way companies discuss integrity, teamwork, or innovation may subtly evolve to reflect the broader environment.

"Corporate culture is an unwritten belief system," Holland said. "When national politics change, the way leaders express those unwritten beliefs often changes too."

Through her research, Holland provides a new lens for understanding the relationship between business and politics, and how company values evolve alongside the country's shifting social and political landscape.