Social Challenges for Business in the Age of Populism

The last decade has seen the rise of populist leaders and parties around the world. Despite some setbacks, such as the electoral defeats of U.S. President Donald Trump in 2020 and President Jair Bolsonaro of Brazil in 2022, populism continues to exert significant influence in these countries and to gain ground in other nations through electoral processes (e.g., Orbán in Hungary, Meloni in Italy, and Erdoğan in Turkey in 2022–2023). Even in countries where populists fail to control executive or legislative power, they can be highly influential in shaping the policies of mainstream parties either directly through participation in coalitions (e.g., in Finland) or from outside the government by threatening future electoral defeats (e.g., in Austria, the Netherlands, Belgium).

Researchers in business and management have only recently started to recognize the significance of these political challenges and their impact on firms. A growing literature has begun to emerge, drawing from existing research in political science to understand the nature of populism and then asking what this might mean for business. Specifically these debates have been linked to ongoing discussions regarding the characteristics of corporate political activity (CPA) (Hillman et al., 2004; Katic & Hillman, 2023) and nonmarket strategies (Blake et al., 2023) seeking to examine how CPA evolves in this new political context, dominated by populism. Building on this research, the central theme that has emerged is how the political uncertainties and risks generated by populism as a specific mode of governance influence firms’ CPA and nonmarket strategies.

Researchers have investigated how firms’ CPAs develop and transform based on the type of populism they encounter, the characteristics of the markets they operate in, and the level of influence exerted by populists (Devinney & Hartwell, 2019; Feldmann & Morgan, 2023; Moffitt, 2020; Sallai et al., 2023). Many of these risks and uncertainties lie in the economic sphere, such as the rise of protectionism and tariffs, the disruption of supply chains, the uncertainty over migrant labor, the implementation of populist taxation and redistribution policies, the influence over expansive monetary policy, and its implications for inflation. But the nature of populism also affects a range of societal values related to identity, family, nationalism, religion, and morality as well as the role of knowledge, science, and expertise in public discourse. Populism engages with these social issues in various ways, both serving as a strategy to mobilize support and to legitimate its relationship with and policies toward intermediary institutions such as the judiciary, the media, and civil service.

The focus of this special issue is to examine the effects on business of these broader challenges to societal norms and values. Populism increasingly challenges some of the shibboleths of the last few decades, such as the reputational importance for firms in demonstrating that they are acting in a socially responsible way in terms of the environment and climate change (see Gomes & Böhm, 2023, on the far-right and climate change governance), in terms of ensuring diversity and equal opportunity for the workforce (Cumming et al., 2020), in terms of supporting human rights as in the UN Global Compact and acting responsibly in relation to the rise of refugees and global migration trends (see Crane et al., 2008, on corporate citizenship; on the broader issue of capitalism, corporations and citizenship see Bakker et al., 2020). Over the last two decades, large multinational firms have adopted many of these values to gain legitimacy. While the effectiveness of these actions has been challenged, they have nonetheless become embedded in public–private agreements and highly publicized indices that influence investor policies. How, then, do businesses respond when populist leaders reject many of these policies and the values associated with them? We argue that firms that have been building on and developing their socially responsible business commitments face uncertainty and volatility. Thus, this special issue explores in more detail how populism has affected corporate social responsibility (CSR) and political strategy.

In this introduction, we first provide a framework for understanding the nature of the current populist upsurge and why in comparison to the previous period leading up to the 2008 Global Financial Crash, populist power introduces high levels of risk and uncertainty in the political sphere for business. In the second section, we briefly review how populism creates new levels of volatility in the environment in which firms operate and how they respond to this. Our third section focuses on the challenges that populism presents to firms engaged in CPA and engaged in broad social responsibility agendas. Finally, drawing on the articles in the special issue, we identify a range of possible firm responses to populist contexts.

Understanding Contemporary Populism

While there are many debates on the nature of populism, its different historical forms, and its variation across different national contexts (Kenny, 2017; Mudde & Kaltwasser, 2017; Müller, 2017), most theorists emphasize how such movements are premised on the idea that societies are divided between “the people” and “the elite.” Populism claims to speak on behalf of “the people” and against “the elites,” who are seen as corrupt, manipulative, and exploitative. These elites, populists, and their supporters claim (see Goodwin, 2023, on the United Kingdom); control the state, the courts, the media, the central bank, and the financial institutions for their own benefit; and ignore the impact of these policies on the mass of the people (e.g., the debate on immigration in Europe and the United States and its link to globalization, deindustrialization, and regional economic decline). Mudde describes this contemporary form of populism as a “thin-centered ideology” (Mudde, 2004, 2021; Mudde & Kaltwasser, 2017) built around the dichotomy of “corrupt elites” and “virtuous people” but lacking any detailed shared ideological framework, common political program, or agreed policies.

Populism can adopt policies from left- and right-wing parties but, as it has no strong ideological foundations besides the elite/people trope, it can easily mix and drop policies from left and right without damaging its electoral base. This populism strategy has two key implications. First, centers its discourse on a fractured society split between elites and the people, which can be used to critique existing institutions, established businesses, and mainstream political parties, especially where trust in government is low. Second, while populisms all use the “elites versus people” framework, there is no coherent ideological program of interlinked policies.

The “thin-centered” ideology of populism compared with liberalism, conservatism, and socialism means it must be supplemented with other ideas, from these more comprehensive ideologies but in an ad hoc way. This allows populists to be eclectic and even contradictory in their policies without being held accountable. Populist movements are not held together by carefully constructed policy programs. Instead, they are often dominated by a strong leader who claims to represent “the will of the people” against the elites and is supported by a political party structure that is subservient to the leader and lacks independent policymaking power. The party basically acts as an endorsement of and a vehicle for the advancement of the leader (as the Republican Party in the United States did for Trump, especially in the 2020 election when it did not even produce a manifesto, relying instead entirely on Trump’s pronouncements). Thus, modern populism is “performative” (Moffitt, 2020). Leaders “perform” for their followers to demonstrate their “authenticity” as part of the people and not the elite (regardless of background or how “elite” they may have seemed). The leader typically evokes a coarse and provocative style in speech, social media, and public address, personalizing attacks on enemies and invoking forms of actual and symbolic violence. Policies are thrown out as tag lines with little detail and then repeated on social media ad infinitum regardless of “truth” (Guriev & Triesman, 2022).

Populist leaders perform with symbols of “the people” (e.g., guns, military attire, bibles; Lapper, 2021; Rachman, 2022). This style deliberately creates “wedge” issues that, through simplicity and directness, solidify support among the “base” and provoke non-populists (Klein, 2021). This fracturing and intolerance of opposition undermines liberal democracy’s pluralism, losers’ consent, and respect for opponents (Levitsky & Ziblatt, 2018; Muller, 2021; Runciman, 2018; Urbinati, 2019a; Walter, 2022). This destroys the middle ground and forces an “either you are for us, or you are against us” mentality. Institutions that might have been seen as above such high levels of political partisanship, such as independent central banks, the judiciary, the civil service, public service broadcasting, and experts in general, face the same challenge: either support the populists or find themselves accused of being “enemies of the people,” “anti-democratic,” elitist. Similarly, institutions such as electoral systems and legislatures are attacked when they delay or question the populist leader’s policies. Their procedures and processes are labeled by populists as being corrupt and fake, not representing the “will of the people.” Pluralist ideals of respect for election outcomes are undermined rhetorically, helped by populists exercising control over the media, thus spurring on populist governments to change electoral laws in ways that improve the chances of embedding populist majorities.

The populist leader claims the direct line to the people, and any intermediary institution standing in the way—especially if he or she gains power through elections—will be attacked or forced to change (e.g., by changing the composition of the judiciary, by weakening the independence of the media, by undermining civil service neutrality, by rejecting the advice of experts and replacing them with political appointees lacking technical skills and knowledge; see Sadurski, 2022). If the populist rule becomes entrenched, the effective implementation of such policies leads to forms of illiberal democracy in which the populist leader reshapes society’s institutions so that, despite elections and democracy, the populists cannot be defeated and one-party rule becomes embedded (Applebaum, 2020).

Business was particularly affected by this style of politics because it disrupted neoliberal governance that had dominated many countries since the 1990s. As many commentators have observed, there are variations in how neoliberalism was defined and implemented in different countries, but there were some commonalities from the 1980s onwards. Neoliberal economics dominated markets through regulation, deregulation, and privatization after trade union power was destroyed (Baccaro & Howell, 2017). A particular form of governance of relationships emerged, described as “network governance” (Stoker, 2019; for a critique of the network governance model, see Davies, 2011) to emphasize how different groups, including business, became an essential part of the policymaking processes. Governments sought private sector expertise to make markets work according to neoliberal economics. This involved incorporating business onto committees, using businesspeople as consultants in government projects, and creating a revolving door between government and business. The process necessitated building networks of companies and individuals that could be trusted to work together in the background, in what Culpepper (2011) described as the arena of “quiet politics” where issues important to business but not to voters could be resolved and settled with minimal scrutiny. The technocratic frame assumed that the main neoliberal economic system parameters—market primacy, deregulation, privatization, monetary stability, and low inflation—were agreed upon and implemented (Cahill & Konings, 2017; Peck, 2010). The experts ensured proper operation. If not adequately managed and bound by mutually agreed rules between business and government, large firms and their global supply chains’ creative destruction capabilities (Gereffi, 2018; Ponte et al., 2019) could disrupt markets and social order.

Thus, markets needed rules which were monitored and policed non-elected intermediaries (e.g., courts, governmental agencies, central banks, private regulators and business; Vogel, 2018). Some were national, controlled by democratic institutions but many were international and deliberately hidden from the scrutiny of electors (Slobodian, 2018). This contributed to a growing “democratic deficit” that became apparent after the 2008 Global financial crash in Italy and Greece, where in response to the demands of financial markets and international institutions like the IMF, World Bank, WTO, and NAFTA, later the USMCA, governments were removed, replaced, or forced to adopt certain policies despite their electoral commitments and without popular consent (on the EU, see Schmidt, 2020; for the broader global context, see Gerstle, 2022).

These institutions’ democratic deficit and their role in shaping key national policies (facilitating global offshoring, selective regional deindustrialization, and developing austerity programs after the 2008 Global Financial Crash) fed populists concerns about democracy and national sovereignty. In the 1990s and 2000s, mainstream parties lost votes to abstentions or populist parties that rejected the neoliberal consensus and embraced nationalism (Crouch, 2004; Mair, 2012).

By contrast, neoliberal think tanks funded by large businesses continued to develop policy ideas and rules and to develop cadres of insiders to these networks from government, business, the media, universities, and think tanks (Medvetz, 2014; Mirowski & Plehwe 2015) reinforcing the idea that a “new elite” had taken control of society and politics (Goodwin, 2023). Populist called this new elite metropolitan, cosmopolitan, intellectual, liberal, out-of-touch “citizens of nowhere” (as the British Prime Minister, Theresa May, labeled anti-Brexiteers in 2016; Goodhart, 2017).

At the same time, businesses became more involved in the sphere of lobbying and influencing legislators. The decline of constraints on businesses using funds to support policies and politicians, and the increasing emphasis on shareholder value led firms to focus on their own profitability rather than mobilizing for a more collective voice on the big social issues of the day (Mizruchi, 2013). Elected assemblies everywhere were surrounded by lobbying groups, among which business was the most powerful due to its funds and legitimacy in the era of neoliberal governance as the central actor in economic growth (Cave & Rowell, 2014; Leonard, 2019; Mayer, 2016; Wedel, 2016). Other lobby groups, such as labor and environmentalists, were not kept out of these networks but incorporated at the periphery and with limited power compared to the power of business (Davies, 2011; Davies & Chorianopoulos, 2018).

Populists increasingly described this mode of governance as the establishment elite controlling government and making decisions and policies based on its interests, ignoring “the will of the people.” Despite causing the 2008 Global Financial Crash and prolonged austerity, this governance model was able to recover its legitimacy (Crouch, 2011; Schmidt & Thatcher, 2013). However, underlying this resilience many societies were experiencing anger, disillusionment, and the growth of anti-system politics (Crouch, 2020; Hopkin, 2020).

From the early 2010s, the rise of a new wave of populism in Europe and the Americas changed the electoral composition of legislatures and elected executives. As mainstream parties lost their legitimacy and support due to their failure to deal with the extended consequences of 2008 (Thompson, 2022; Tooze, 2018; Wolf, 2023), populist leaders sought to rally disillusioned electors into a new movement to purge the elite and revivify politics by establishing a more direct and personal relationship with “the people.”

Most populists have sought to overthrow this neoliberal network governance once they gained power as this was home to the “elite” and its supporters. They have sought to replace it by centralizing power and initiatives around the populist leader who claims to speak for the people. Leaders make announcements through speeches, tweets, Facebook, and Instagram and tend to create an inner circle of trusted advisers, because their fate is so intertwined with the populist leader that they cannot oppose him or her without threatening their own defenestration.

Family members surround the populist leaders and are entrusted with roles for which they lack technical capacity or competence other than their willingness to do whatever they are told, as demonstrated by Trump and Bolsonaro, whose sons, daughters, and spouses took up important roles that were normally reserved for professional politicians, skilled administrators, and diplomats and technical experts. Thus, populist leaders often destroy or weaken the institutions of network governance. Trump’s attack on the “deep state” drove many public servants away and eroded institutional expertise. Trump appointed cabinet secretaries or CEOs who had actively campaigned against the goals of the departments and agencies they were supposed to lead (Parshall & Twombly, 2020; Skowronek et al., 2021).

Intermediary non-majoritarian institutions such as the judiciary, the civil service, central bank, and scientific expertise were similarly undermined (Canovan, 1981, 2005; Chatterjee, 2020; Urbinati, 2019b; Weale, 2018). Climate change, trade and monetary policy, migration, COVID death rates, gender, identity, and the family were all issues affected by the populist leaders’ wisdom and intuition and the devaluation of expert advice (Hartwell & Devinney, 2021; Ringe & Renno, 2023). Businesses no longer had automatic access to decision-making processes, and their influence over what the populist leader said or did became increasingly uncertain and reactive, rather than proactively guiding government policy (see the Brexit campaign: Feldmann & Morgan, 2021; Grey, 2021). In Brazil, Bolsonaro closed his inner circle and ostracized experts in all sectors, except the economy, relying on Paulo Guedes to win over the financial elite with his narrow deregulation and privatization agenda (Doering et al., 2023).

From the point of view of business, populism, therefore, creates a number of uncertainties and risks:

1. The populist leader comes without a clear set of policies and programs making it hard to predict future changes and adapt accordingly.

2. Populist leaders seek authenticity and immediate contact with their base, by presenting multiple ideas and suggestions, that are often outrageous and impossible to implement, knowing they will empower the base and incite enemies to anger and protest (which in turn serves to reinforce the base). Predicting policy outcomes from this ferment are difficult for business.

3. Populist leaders undermine the capacities of the state to develop, implement, and monitor policies. The populist leader often sabotages the state by appointing people without the political commitment or technical skills to run part of the state.

4. Populists tend to destroy network governance and replace expertise and the process of negotiation with their inner circle, making decisions on “instinct” and personal interests.

5. Populists attack intermediary institutions designed to provide the stability that business requires.

6. Populists criticize international institutions that stabilize trade and manage international relations, by labeling them as restrictions on national sovereignty.

7. Populists are willing to attack businesses in the name of “the people” if they perceive companies as undermining their policy goals such as reshoring jobs. Ad hominem attacks on business leaders reinforce populist support. Instruments of the state may be called upon to deal out the revenge of the populist on companies that challenge him or her.

In all these ways, therefore, populism creates an environment of volatility, risk, and uncertainty for business.

CPA and Risk and Uncertainty in the Populist Era

The idea that firms undertake CPA and nonmarket strategies to manage political risk and uncertainty has become increasingly important in the field of business and management and is increasingly being applied to the relations between business and populism. In this section, we focus on three key sets of issues:

• What kind of risk and uncertainty are created by the different varieties of populism?

• Which firms are particularly affected by risk and uncertainty under different forms of populism?

• How do businesses adapt, and mitigate risk and uncertainty under populism?

We consider each of these in turn with a particular emphasis on the social challenges populism creates for business.

What Kind of Risk and Uncertainty Are Created by the Different Varieties of Populism?

Left- Versus Right-Wing Populism

Left-wing populism draws the boundary between the people and the elite primarily in economic terms and in terms of the extent of inequality in society. It, therefore, primarily promotes redistributive policies that tax the rich and corporations to support the poor in various ways. It tends to be inclusive in terms of its definition of the people (the 99% vs. the 1%), drawing on forms of left-wing nationalism to articulate class solidarity in the population against the capitalist enemy, which in turn is often linked to the power and influence of the United States inside the key institutions (in Latin America, the Bolivarian tradition carries elements of this nationalism and anti-Yanqui ideology into its “inclusionary turn”; Kapiszewski et al., 2021). This form of populism, most obviously present from the Peron era into the current period in Latin America (De La Torre & Arnson, 2013), has historically tended to lead to the decline of private investment, particularly Foreign Direct Investment (FDI), phases of nationalization, particularly of resource-based industries and the rise of inflation as governments have sought to redistribute through cash transfers supported by the printing of money as currency values have plummeted due to foreign exchange imbalances.

These policies have led to economic crises caused by rising inflation, debased currencies and the management of state resources to serve direct political purposes leading to poor management of state enterprises, their use as sources of corruption, and a consequent lack of technological investment and upgrading. Such policies often necessitate IMF loans that require in theory populist policies to be abandoned and austerity imposed (De La Torre & Arnson, 2013). Argentina, for example, has been trapped for decades in cycles of populism (internally generated) and phases of neoliberalism (enforced as a condition of international loans) (Levy, 2017).

By contrast, right-wing populism is exclusive and exclusionary, based on strong ethnic, nationalist, and sometimes religious definitions of the people and identifying the “corrupt elite” with support for globalization, immigration, cosmopolitan values, and international institutions to the detriment of national sovereignty. Right-wing populism is highly eclectic in its choice of economic policies as in the case of Trump, advocating protectionism and tariffs while also supporting neoliberal deregulation and low taxes.

Hartwell and Devinney’s (2023) article in this special issue posits that these varieties of populism affect business differently. Business is more directly threatened by left-wing populism than right-wing populism due to nationalization, increased taxation for rich individuals and corporations, inflation, and the role of trade union and worker control. The left-wing populism’s anti-elite rhetoric (and policies) may also view firms’ CSR investments as “greenwashing,” which could actually make CSR a net negative for a firm. Businesses who tried to use CSR as a covert form of political activity under such a regime may risk losing influence and drawing unwanted attention from the authorities (Hartwell and Devinney, 2023). Right-wing populism is generally friendly to business; governments that are focused on expanding the economy may view successful business investments that result in growth and increased employment as satisfying populist responsibilities. However, the ruling party may also turn against business when pursuing its populist agenda (see Boris Johnson’s aggressive response to business concerns about Brexit; Anderson, 2019).

Degree of Political Institutionalization

In highly institutionalized environments, where rules and norms have been established for some time and are embedded in the normative, cognitive, and regulative practices, the ability of populists to disrupt or shift the rules is constrained. Courts, civil services, central banks, and domains of expertise in science, economics, and technology that have been established over decades create an inertia to change. Populists may identify this as “the establishment,” the “blob,” “the swamp,” and use their powers to change it (e.g., as Trump, Orbán, Erdogan, Modi, and other populists have done elsewhere to change judiciaries in their favor) by replacing independent civil servants with political supporters. Nevertheless, where institutions are more strongly entrenched, the power of populists to effect change may be limited or require long-term planning as to how to overcome these obstacles. Opponents may also be able to use institutions to stop the forward march of populists (Campbell, 2023; Rothkopf, 2022). By comparison where institutions are weaker or contested, populists may find it easier to apply their rhetoric to policy areas and create their own institutions. Whether business can rely on the support of the existing institutional order to protect itself against the uncertainty and volatility of populism depends on the nature, durability, and adaptability of broader social and political systems.

Time, Maturity, and Contingency

How long populist regimes are influential varies. In the early stages of a populist government, when momentum and enthusiasm for the populist leader are likely to be strong, there will be high volatility and uncertainty as populists seek to use the instruments of state to establish their dominance against potential opponents, deepening fractures between populists and the rest, challenging existing institutions, and mapping out new directions for society and for politics. This may be tempered where electoral victory is narrow, but where populists have achieved super-majority as in Orbán’s Hungary, this may lead rapidly to major institutional change (Sallai & Schnyder, 2021). The challenges for business are different depending on whether populists are still insurgent forces or have won power and are leading a majority government or a coalition. Business has many choices to respond to populism, but when populists have become so dominant and mature in government that there are no foreseeable alternatives, business options narrow.

As with all governments, populist governments face challenges beyond their control, such as the global economy’s volatility, the COVID pandemic’s sudden emergence, the unexpected use of military power in the invasion of Ukraine, increasing numbers of climate events, natural disasters, and floods. Such moments often affect electoral choices undermining the support for populists in power. For instance, populist performative politics was ineffective in addressing the pandemic in the medium term (Ringe & Renno, 2023). Erdogan’s weak response to the February 2023 earthquake in southeast Turkey, which killed more than 50,000 people, nearly derailed his re-election chances, particularly as it became clear that he was complicit in allowing substandard building construction in the area. Populism may therefore fail to deliver economic and social benefits to the people over the medium to long term. At such moments, populism may fade and either collapse or return to mainstream politics.

Which Firms Are Particularly Affected by Risk and Uncertainty Under Different Forms of Populism?

Big business, whose investments may be long term, can assess populism’s weaknesses and decide whether to take action. Depending on their size and other characteristics, many companies may prefer to ride out the volatility in the hope that risks and uncertainties will become more visible and subject to control. Others may need to be more proactive (Feldmann & Morgan, 2022).

Rising populism therefore challenges domestic and global businesses differently, particularly on whether or not their business objectives align with the populist government’s long-term agendas (Stevens et al., 2016).

Legitimacy

While populism poses a risk for business in some cases, other aspects of right-wing exclusionary populism may benefit certain industries and thus enjoy business support. Corporations that support the government’s long-term goals may perceive less political risk (Henisz & Zelner, 2005). The populist regime may view an international firm that creates new jobs, recruits local people to reduce unemployment, or invests in local infrastructure, as more legitimate than one that provides services, where significant investments are more limited (Sass, 2017). However, firms seen as “outsiders” or “enemies of the people” by populist leadership may quickly face unfavorable governmental interventions and economic nationalism (both under left- and right-wing populism). In this way, manufacturing multinationals that are considered to contribute to the government’s goals in relation to employment, taxes, and exports may operate relatively securely, while those that provide services for the domestic markets in retail, banking, energy, or media may more easily become the targets of populist policies (Sallai et al., 2023). In Hungary, for example, Orbán targeted foreign banks and services for Magyarization while positively encouraging foreign manufacturers to stay and grow (Bohle & Regan, 2021). Consequently, how a business is perceived in terms of its political legitimacy (Bitektine, 2011) by the populist leadership could directly affect not only a subsidiary’s exposure to risk in the host country context but also the policies that affect them adversely (Sallai et al., 2023).

Authoritarian Control

In countries, where populist leaders have a controlling majority in government, and where the degree of authoritarianism is higher, firms are exposed to more adverse policy interventions (Sallai et al., 2023). When taking office, populist leaders often first attack traditional interest representation structures, and quiet politics (Culpepper, 2011). The gradual decline of corporatist forms of interest group representation, the marginalization of social dialogue, and a shift toward particularistic state-firm relations create a new context for businesses. As Zena Al-Esia et al. (2023) show in this special issue, populism affects political CSR strategy in autocratic and hybrid systems more than in democratic regimes. In these contexts, corporations rely on populist state actors for policy information and either gradually or overtly align with populist agendas due to poor information quality. In authoritarian or hybrid political systems, the private sector may take a more submissive position toward populist influence due to manipulation or coercion than in democratic systems. In authoritarian contexts where information environments are more significantly impaired, populist governments may push corporations to support populist goals by disguising them as CSR activities that benefit the public. Authoritarian governments may also cherry-pick, promote, or embellish issues that serve government agendas or are considered politically neutral and at the same time, minimize salient yet politically charged policy areas. As a result, firms’ screening abilities will be significantly hampered unless accurate alternative information signals are used to discern genuine public will. Due to the degraded quality of information in these contexts, businesses become reliant on populist state actors for policy-related information and gradually or completely align with populist agendas. In the latter scenario, populism could transform political CSR into a short-sighted and irresponsible approach, resulting in “unintended” (negative) consequences (Al-Esia et al., 2023).

How Do Businesses Adapt and Mitigate Risk and Uncertainty Under Populism?

The national economic policy objectives of populist administrations may open up lobbying opportunities in the realm of quiet politics for individual corporations (Bohle & Regan, 2021). In “policy instability,” foreign companies co-investing in projects where the state holds a minority stake can help mitigate investment risk (James & Vaaler, 2018). In the presence of prolonged political uncertainty, the efficacy of market-based political strategies reduces, while social and political connections become more important (Dang et al., 2020; Oh & Oetzel, 2017). According to some studies, when operating in high-risk situations, international firms will adopt and employ a non-engaged approach to CPA, demonstrating loyalty to the host market by remaining but not actively engaging in political activities (Puck et al., 2018; Villa et al., 2019). Other firms opt to engage but face challenges, especially if they operate across borders. Indeed, international firms need to develop political strategies that both “fit” the needs of the parent company and the host country’s institutional setting, which, under populist leaders, increasingly becomes informal and network-based (Schnyder & Sallai, 2020). During the consolidated phase of populism, when earlier and more transparent formal channels of interest representation weaken, firms develop new strategies to adapt to the changed institutional requirements. They lobby directly through well-connected domestic consultants, CEOs, or ambassadors, or if they are more vulnerable to political attacks, they may use government-related suppliers, pay tax relief to selected sports clubs, or restructure (Sallai, 2023, p. 298).

Articles in the Special Issue

The articles in the special issue expand our understanding of the range of firms’ responses to populist regimes. Hartwell and Devinney (2023) examine the correlation between different varieties of populism and CSR. They find that an increase in populism is associated with a decrease in firms’ CSR activities. Moreover, when considering the discourse surrounding various forms of populism, they note that companies reduce their CSR activities even more in countries governed by anti-business populist regimes. This suggests that combining conventional left-wing ideologies with populist rhetoric may lead to a paradoxical outcome of reduced CSR in general.

Al-Esia et al. (2023) further investigate how the depreciation of information transparency under populism affects the political context of a firm’s CSR and nonmarket strategies. They find that the internal values of a corporation serve as a mechanism for assessing policy matters and subsequently influence the response of firms to populist policies. The degree of congruence or incongruence between a company’s core values and a populist policy initiative can therefore affect the company’s response. If there is congruence between the values upheld by a firm and the policies advocated by the populist political leadership, the firm’s policies will likely align with said policy. By contrast, in the event of a misalignment, CSR may serve as a countermeasure against populist policies. However, in a populist political climate, the distortion of information frequently impairs businesses’ capacity to identify value (mis)alignment, thereby impeding their ability to develop a response that is consistent with their values (Al-Esia et al., 2023). Indeed, they conclude that the lack of independent information sources within populist contexts poses a challenge to the private sector’s capacity to gauge the true public sentiment accurately. Consequently, this situation often leads to the adoption of “comply” and “calibrate” CSR activities by private sector actors, which are likely to strengthen populist agendas (Al-Esia et al., 2023).

By applying a discourse analytic approach developed by Laclau (2005), Johnsen et al. (2023) further explore how corporations navigate contested social issues affected and polarized by populist sentiments. Focusing on the 2015–2016 refugee crisis in Europe, their study shows how emerging hostile populist political sentiments about the migration of asylum seekers led corporations to adjust their communication strategies without endorsing anti-migration beliefs voiced by far-right politicians. Their data demonstrate that corporations find ways to talk about refugee migration even when the populist rhetoric is centered on the stark opposition to accepting refugees or promoting the idea of closing national borders. Indeed, they find that corporations have addressed the migration crisis by adjusting their operations rather than adopting a political stance on the issue. These findings suggest that businesses adapt to the increasingly polarized political context by carefully limiting their pronouncements and seeking to avoid engaging actively with the fractious political debate. Whether that is feasible in the longer term is unclear and likely to be dependent on how the populist regime itself develops over time.

Conclusion

In conclusion, this special issue illustrates the significance about the relationship between businesses and populism. These processes have profound implications for senior decision-makers in business. As geopolitical rivalries intensify, uncertainties and risks increase, and challenges over fundamental values become more strident and polarizing, businesses face a much more complex and conflictual environment than was the case up to the Global Financial Crash when the hegemony of neoliberal democratic capitalist institutions seemed assured. Under the threat of populism as well as the rise of global challenges such as the climate crisis, the advance of technology and artificial intelligence (AI), and the rise of China as a serious geopolitical player, senior managers face a new environment in which a much more detailed and nuanced understanding of the nature of politics and the relationship between government and business needs to be looked at with renewed urgency, building on democratic and liberal values which businesses have long espoused in rhetoric but which now require that they be put into practice in much more uncertain, dangerous, and disorderly times (Thompson, 2022).