Boards and Political Engagement: Why, Whether, What, Who, and How Much?

As is often the case with important questions, there is no simple answer. Perhaps it would be best, like Wittgenstein, to collate our views into a series of remarks or observations, and then see whether a unifying principle emerges.

Everything is political. Up to a point

It would be naïve to believe that business could be conducted without reference to politics, any more than our personal lives can be. Just as we can’t buy something in a shop without implicitly making a sociopolitical choice, so in business our decisions have ramifications. This is why, even though Chairs may lead the diplomacy (see below), the entire board needs to have enough knowledge and engagement to be part of the discussion.

Disengagement is itself a political choice, and a reactive one: for some, including shareholders, it could indicate that the company is somehow not part of the community.

But of course, none of this means politics should override everything else. It’s one consideration among many.

Long-term, big picture

Engaging over time on thematic issues is ultimately more productive and less sensitive than lobbying for short-term gain. In Europe, we’re seeing more board members turning up in Brussels in recent years to discuss subjects including technological developments, energy, and environmental legislation such as the Corporate Sustainability Reporting Directive (CSRD).

It’s a form of proactive stakeholder management that we might say represents system-level thinking. Why? Because these are issues that, unlike administrations, won’t go away, which means that the stakeholders with whom businesses should engage aren’t just governments, but the civil service departments behind them, who can afford to take a longer view than their political leaders. This is because civil servants don’t go away either and with luck and good management, nor will your business.

Soft power

Engaging over the long term on abiding issues is best done by business representatives who are less tactical and transactional. Chairs are prime examples, because they are often taken to represent their industry as much as their individual enterprise. More importantly, they are arms-length from the day-to-day running of the business – not only in practice, but in terms of being seen in this way by politicians too, which makes engagement easier. They can test, hint, prod – in other words, play the long game.

By contrast, CEOs have much less small talk, because they simply haven’t the time for it. For entirely understandable reasons, they want answers and decisions.

Don’t pick a side

We’ve already observed that governments are transitory. This is a big reason why companies need to avoid being seen to be wedded to any one party or administration. Several company directors made this point to us. For instance, one in the U.S. said: “You need to play both sides of the aisle… As a business, you have to make things work no matter what party is in power. You need to be politically savvy.”

But do judge how close to get

The question isn’t whether to engage, but how to do it – and there are several factors that make it difficult to determine how much. For one thing, the speed of online comment obliges companies to monitor and react quickly. For another, the increasing disconnect between government and business we see in some geographies means there is greater potential for administrations to flipflop on policy. The more divisive politics becomes, the more careful a business has to be – and the political climate is volatile right now pretty much everywhere you look.

Get too close, and either the company or its individual representatives risk being seen as political actors in their own right. Stand back too far, and the business appears disengaged, devaluing its standing not just with the incumbent administration but with the society in which it operates.

Walking this fine line is difficult. Alongside other modern-day challenges such as AI and enterprise risk management (ERM), it’s a skillset that board members need to develop and sustain. And now, the European Corporate Governance Barometer highlights that European boards are falling behind their U.S. peers in focusing on geopolitics and on technology too, for that matter.

Self-knowledge

“To thine own self be true,” says Polonius in Hamlet. Boards need to know and say what they do and do not stand for. This position may sometimes have to weave to accommodate changing circumstances, and boards may have to decide how vocal to be on an issue if it carries a reputational risk – but overall, transparency is a positive. Governments like it. Customers like it. Even opponents respect it.

“You have to let your core principles and values guide you,” a director told us. “It’s the only way to navigate effectively around the political discord.”

Keep boards neutral

You can’t keep politics out of the boardroom, but directors told us that in most cases it was not a good idea to make board appointments specifically for political reasons. One said: “Optically, it is not good. Also, anyone who doesn’t agree with that person’s politics will not be supportive.” Another added: “Generally, to gain access to someone with political strings you would add them to an advisory board but not usually the main corporate boards.”

There are caveats, though. Some directors observed that political connections can be useful either in heavily regulated industries such as banking, or in industries for which governments are major customers – notably, defence.

What’s the answer?

So then, is there a unifying principle?

It’s hard to be definitive, because so much is conditional. Chairs should lead, but whole boards should engage. Political animals should not be appointed to the board, but sometimes they should. Disengagement is not an option, but too close a relationship can be damaging too. Boards should have political understanding, but they shouldn’t allow these considerations to dominate.

It’s a form of quantum state, in which things can be conversely but simultaneously true. In these conditions, boards need to be guided by the principles for which they stand, and in the circumstances in which they find themselves.

It’s messy. But then, politics is itself messy. And so is life.