©2023 Authors. This manuscript version is made available under the Creative Commons Attribution–NonCommercial–NoDerivatives 4.0 International (CC BY–NC–ND 4.0) license, https://creativecommons.org/licenses/by-nc-nd/4.0/fi=vertaisarvioimaton|en=nonPeerReviewed

Fatmy, Veda

Kihn, John

Sihvonen, Jukka

Vähämaa, Sami

English

Osuva

  This is a self-archived – parallel published version of this article in the publication archive of the University of Vaasa. It might differ from the original. Why do corporations embrace the LGBTQ+ cause? Author(s): Fatmy, Veda; Kihn, John; Sihvonen, Jukka; Vähämaa, Sami Title: Why do corporations embrace the LGBTQ+ cause? Year: 2023 Version: Published version Copyright ©2023 Authors. This manuscript version is made available under the Creative Commons Attribution–NonCommercial–NoDerivatives 4.0 International (CC BY–NC–ND 4.0) license, https://creativecommons.org/licenses/by-nc-nd/4.0/ Please cite the original version:  Fatmy, V., Kihn, J., Sihvonen, J. & Vähämaa, S. (2023). Why do corporations embrace the LGBTQ+ cause? LSE Business Review, 23.2.2023. https://blogs.lse.ac.uk/businessreview/2023/02/23/why-do-corporations-embrace-the-lgbtq-cause/  Veda Fatmy John Kihn Jukka Sihvonen Sami Vähämaa February 23rd, 2023Why do corporations embrace the LGBTQ+ cause?2 comments | 25 sharesEstimated reading time: 3 minutesBig Tech companies and many other prominent  rms have been vocalsupporters of LGBTQ+ rights, despite the risk of alienating their conservativestakeholders. Why do they do that? In which way does being LGBTQ-friendlybene t businesses? In their study, Veda Fatmy, John Kihn, Jukka Sihvonen, andSami Vähämaa found that LGBTQ-friendly corporate policies have a positiveimpact on  rms’ stock market valuation and  nancial performance. Corporate social advocacy can be a tricky business. While taking a public standon sensitive issues can result in positive outcomes and give companies acompetitive edge, it can also have negative consequences if the company’sstance does not align with the values of its key stakeholders. In the US, onecontentious form of corporate social responsibility has been companies’involvement in the public debate surrounding the rights of sexual minorities.Despite the potential for alienating employees, customers, and otherstakeholders with different values, many prominent  rms have been vocalsupporters of LGBTQ+ rights and anti-discrimination policies.So, why do companies get involved in such a controversial issue, especiallywhen it has no direct connection to their business operations? Does beingLGBTQ-friendly actually bene t companies? These are the questions we aimedto answer in our study by investigating the impact of LGBTQ-friendly corporatepolicies on  rms’ stock market valuation and  nancial performance.Corporate social advocacy: a changing landscapeAs argued in recent reports by Kantar Consulting and Edelman, especially largecompanies feel increasing pressure to take a stance on social and politicaltopics. While corporate advocacy may be popular among politically activestakeholders, does it bring more bene ts than just placating them? Especiallybig companies with well-known brands have the power to in uence politics andeconomics and shape the future cultural and  nancial landscape of theircommunities.For instance, several companies spoke out against proposals for ReligiousFreedom Restoration Acts in Georgia and Alabama in 2016 and 2017, whichwould have counteracted LGBTQ equality. Walt Disney and Salesforce cancelledprojects and employee engagement in these states, and Angie’s List abandonedits expansion plans as a result. In 2019, 209 major companies, includingAmazon, Apple, Coca-Cola, Facebook, General Motors, Goldman Sachs, Google,JPMorgan Chase, Microsoft, and Walt Disney, submitted a brief to the U.S.Supreme Court in support of LGBTQ rights. The brief argued that a lawprohibiting workplace discrimination based on sexual orientation wouldimprove a company’s ability to recruit and retain top talent.Beyond activism, companies can express their views on socio-political issuesthrough their workplace policies. While activism may be short-lived,stakeholders can differentiate companies that truly invest in a cause byexamining their history with employees and customers. Companies can alsoexpect multiple returns on their investment in social capital.Do LGBTQ-friendly policies result in better performance?Research indicates that companies with LGBTQ-inclusive policies experiencenumerous bene ts, such as increased employee commitment, job satisfaction,productivity, and more altruistic workplace behaviour. Additionally, beingLGBTQ-friendly can improve a company’s ability to attract and retain talentedemployees, enhance customer relationships, and boost its reputation as asocially responsible corporate citizen. Together, these  ndings suggest thatbeing LGBTQ-friendly can help some companies develop intangibles related tohuman capital, stakeholder relations, and  rm reputation.In addition, there are various reasons why being LGBTQ-friendly may have apositive impact on a company’s  nancial performance. Generally, LGBTQ-supportive policies are considered an element of corporate social responsibility(CSR). As such, the arguments for a connection between CSR and companyperformance also apply to LGBTQ advocacy. Stakeholder theory, which iscentral to CSR literature, explains why social responsibility can pay off byimproving a company’s reputation, customer relationships, accumulation ofhuman capital, and access to resources and  nancing. If being LGBTQ-friendlydoes not con ict with stakeholders’ expectations and values, stakeholdertheory predicts a positive relationship between LGBTQ-inclusive policies and rm performance. Similarly, theories in human resource management (HRM)regarding employee satisfaction and diversity management provide anotherreason to hypothesize a positive relationship between LGBTQ-friendly policiesand  rm performance.In our study, we examined the in uence of LGBTQ-friendly corporate policies on rms’ stock market valuations and  nancial performance. For this purpose, weused the Corporate Equality Index (CEI) constructed by the Human RightsCampaign to measure the LGBTQ friendliness of large, publicly-traded US  rms.Although both stakeholder theory and HRM arguments can be used to predict apositive association between LGBTQ friendliness and  rm performance, bothmechanisms also suggest that the linkage is likely to depend on stakeholders’preferences and socio-political values. If the policies con ict with the socialvalues of the key stakeholders, the adoption of LGBTQ-friendly policies maylead to stakeholder alienation and backlash. Therefore, we also investigatedhow local social norms and attitudes in uence the linkage between LGBTQ-friendly policies and  rm performance by exploiting regional differences insocial conservatism across states.The bottom line: LGBTQ friendliness pays offOur study demonstrates that LGBTQ-friendly corporate policies pay off.Speci cally, we found that  rms with more LGBTQ-friendly policies are morepro table and have higher stock market valuations. Regarding the in uence ofsocio-political norms and attitudes towards sexual minorities, our studysuggests that regional differences in religious and political leanings moderatethe relationship between LGBTQ-friendly policies and  rm performance. Inparticular, we found that the positive effect of LGBTQ policies on pro tabilityand market valuation is more pronounced for  rms located in more liberalstates while being weaker or non-existent for  rms located in more religiousand decisively Republican states. Nevertheless, it is worth emphasising thateven for  rms located in more socially conservative states, the effect of LGBTQfriendliness on  rm performance is positive or, at worst, neutral, suggesting thatthe adoption of LGBTQ-friendly policies does not generally have detrimentalrepercussions over the period studied.In conclusion, while the implementation of LGBTQ-friendly corporate policiesmay have its challenges, our study provides evidence to suggest that LGBTQ-friendly corporate policies enhance  rm performance. Firms that are proactivein promoting LGBTQ inclusion can bene t from a more diverse, engaged, andproductive workforce, improved customer relationships, and a strengthenedreputation as socially responsible corporate citizens.♣♣♣Notes:• This blog post is based on Does lesbian and gay friendliness pay off? A newlook at LGBT policies and  rm performance,  Accounting and Finance.• The post represents the views of its author(s), not the position of LSEBusiness Review or the London School of Economics.• Featured image by Marek Studzinski on Unsplash• When you leave a comment, you’re agreeing to our Comment Policy.About the authorVeda Fatmy is a University Teacher in Finance at the University of VaasaVeda FatmyJohn Kihn is a University Teacher in Finance at the University of Vaasa. Heobtained his Ph.D. from London School of Economics and PoliticalScienceJohn KihnJukka Sihvonen is an Assistant Professor of Accounting at AaltoUniversity School of Business.Jukka SihvonenPosted In: Diversity and Inclusion | Management2 CommentsRelated PostsSami Vähämaa is a Professor of Accounting and Finance at the Universityof Vaasa.Sami VähämaaGenderHow we de ne competition fuels gender inequality in businessSEPTEMBER 28TH, 2015Economics and FinanceHow the rise of the service sector boosted the demand for womenworkers

Why do corporations embrace the LGBTQ+ cause?

https://osuva.uwasa.fi/bitstream/handle/10024/16770/Osuva_Fatmy_Kihn_Sihvonen_V%c3%a4h%c3%a4maa_2023.pdf?sequence=1&isAllowed=y

Why do corporations embrace the LGBTQ+ cause?

Abstract

Similar works

Full text

Available Versions

Osuva