Politician-director Appointments as Strategic Responses to Organizational Legitimacy Threats

Prior studies have mostly understood the appointment of politicians on corporate boards as a means for firms to manage their governmental dependencies. In this study, we develop a complementary understanding that draws on politicians’ roles as community leaders to position their appointment as a corporate strategic response to organizational legitimacy threats emanating from the public at large. Furthermore, we shed light on the contingencies that make such politician-director appointments more likely by examining differences in the perceived power and legitimacy of community constituents across different contexts. Using a unique, hand-compiled panel dataset of all director appointments in the largest 1,063 firms in 14 OECD countries over the period 2001-2010, we find that firms appoint politician-directors in response to community-based but not shareholder-, customer-, or employee-based legitimacy threats. We also document that such responses to legitimacy threats are especially likely the more firms rely on sales to the public sector, suggesting that politician-director appointments can be strategically and conjointly leveraged to appease both political and social stakeholders. Our findings contribute to the literature on the phenomenon of politician appointments on corporate boards, documenting its prevalence as a specific community focused strategic response; as well as to the growing research at the intersection of interest group and social movement theory that aims to uncover the conditions under which societal actors can successfully -albeit indirectly- exercise influence over corporate behavior through the role of the state.