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Election Season: How do Businesses react?

Updated: Aug 30, 2022

By Ġorġ Vella

March 19, 2022 at 12:00pm


As the 2022 General Election looms closer it is important to understand the uncertainty that comes along with it, in all facets of life. In Malta, the month leading up to the General Election is very popular, or rather notorious, as this period is often tainted with populous proposals and partisan disputes that may cause division and uncertainty. However, election day is just that, one day, after which everything is expected to fall into place.

This paper shall focus on election season within private businesses and organisations, such as initiatives taken to avoid political quarrels in the workplace and to determine whether elections generate uncertainty amongst businesses and investment.

Published Research: How do markets react to elections?

Elections bring along a period of uncertainty, in the months leading up to election day, and the weeks that follow - from the Opposition, or the administration voted out conceding the defeat, to the initial stages of implementation by the administration voted into government. These unsure times stifle investment and business and risk bearers attempt to calculate how their proceedings may be affected by the change, thereby limiting activities of a risky nature such as capital investment or a new business venture.

However, there is an opposing notion that states that business and investment are not wary of elections, even when a drastic change in administration may be imminent, since good businesses find ways to adapt, and this too shall be explained.

Amore & Corina (2021) investigated the relationship between corporate investment and political elections. The results of their studies, which consisted of global data and not just that of a singular country, yielded that during elections firms reduce investment, the extent of which depends on that country’s political system (Plurality vs Majority systems), where firms operating in a country that uses a Plurality system are less likely, or reduce less investment during elections. It is worth noting that multi and transnational firms slow investment when a host country is holding an election. Durnev (2011) applied global data from 1980 to 2006 to determine whether elections bring about political uncertainty, and how this affects investment and company performance. The results showed that during election years, investment is less sensitive to stock prices making it more uncertain. Durnev went on to state that this is more prevalent and results in less certainty in countries where there is considerable state ownership, distrust in government and regulatory institutions and corruption.

However, and as stated initially, there are counter-arguments to these claims. Kurt Hoefer, Chief Strategy Officer at Summitry who offers wealth management and advisory services, used statistical data derived from the CBOE Volatility Index (VIX) - which is a real-time market index representing the market's expectations for volatility over the coming 30 days - pointing out election dates from 1991 up to the present to determine a relationship between elections and investment. Hoefer conveys how different elections in the United States since 1991 have had little to no effect on the VIX and stated that “businesses learn to cope with whatever tax regimes and regulations are thrust upon them”. It is worth noting that this is data derived solely from the United States, that have 2 main political parties, like Malta, but have a free market as regards to government interventions to settle when required.


Workplace morale and managing relationships at the place of work during an election can be a tricky time for HR Managers and other management. To this extent, many places of work seek to prohibit or at least advise to avoid conversing about politics if it does not have to do with work, so as to avoid conflict. This may seem like a drastic and undemocratic practice, however, every person’s opinion is based on their subjective experience and ideologies, thus conflicts that may arise during political discussions tend to become passionate and heated, hence the pressure to avoid such debates.

On the other hand, political involvement and participation are fundamental rights of the citizen and something that should be encouraged, not stifled. This may range from campaigning (on behalf of a candidate), contesting (as a candidate), and also volunteering (electoral duties, counting calls). Usually, companies have policies in place that provide clarity on the implications of political involvement with respect to the profession, such as the Malta Public Service which has all positions Scale 5 (out of 20 salary scales) and upwards as Politically Restricted Persons.

Bob Feldman, vice-chair of ICF Next, a global marketing, communications, and digital transformation agency published an insightful piece in the Harvard Business Review ahead of the 2020 Presidential Election in the US, which saw President Joe Biden replace Donald Trump after serving for 1 term (4 years). In the brief article, “Don't let Election Passions ruin your Workplace”, Feldman conveys some statistics which depict that a quarter of voters think contesting candidates will cheat to win and that more than half stated that Russia sought to meddle, he also points out that after election day, all these very different persons will go back to work together, and tensions would have been high.

Afterwhich, Feldman introduces the Dialogue Project, a global coalition of corporations, academic institutions, and think tanks, including Google, which is a project seeking to identify how business leaders may contribute to improving civil discourse and how to reduce polarisation. The argument behind this project was to move away from branding political conversations and debates as taboo and avoiding them, to promoting healthy, civilised, and evidence-based debates. Moreover, as more people withdraw from political debates and discussions, more persons with extreme views make their voices heard. Additionally, Feldman also mentions other initiatives aimed at improving political discourse such as the Better Arguments Project and the Courageous Conversations Series. (Feldman, 2020)

Media, and reactions to the Media.

During any time of anxiety or unrest, the media plays a crucial role in delivering the truth and keeping the public, or their subscribers, aware of what is going on, and the chain of events that have led up to the status quo. However in Malta, for better or for worse, the major political parties have their own media stations, where the administration in government depicts a perfect and ideal scenario, and the opposition focuses mostly on the grim aspects. This can range anywhere from click-bait articles, misinformation, to propaganda.

The weeks leading up to an election being called are crucial, as there are few ways in which this can happen, either if an electoral mandate (according to the Constitution) nears the end of the term, or if a government is no longer seen as adequate to lead during its tenure. If it is the latter, this period is rather more anxious and may cause the market to be unpredictable and unstable. Here the media plays an important role to convey the state of things in a true and to the point matter. Yet, there are situations when this is seen as an opportunity to instil panic, and to place blame.

A case in point was the reporting that a snap election could have been called last November in Malta when a papal visit was rescheduled supposedly due to increasing concerns regarding the pandemic. The Prime Minister and the Deputy Prime Minister avoided answering questions asking whether or not the election would be called right before Christmas, allowing for some to come to their own conclusions and assumptions, and the actions that entail those decisions.

Given the time in which this was happening - a little less than 2 months before Christmas - many businesses feared that this would pose a hurdle to the usually hectic shopping period leading up to Black Friday, Cyber Monday and the first weeks of December, so much so that Abigail Mamo, the director of the Malta Chamber of SMEs, called for clarity and prompt communication, as this uncertainty keeps businesses from taking certain decisions, especially during that busy period. Her calls were sustained by Marisa Xuereb, President of the Chamber of Commerce, who said that such suspense was unfair for businesses, particularly after having endured a political and health crisis over these past years (Malta Today, 16th October 2021).

From this brief compilation of published literature, it can be derived that uncertainty during election season is subjective, and this varies from industry to country, and many other determinants, so a definite answer stating elections as disruptive to investment and business, or not, is inconclusive. What can be confirmed is that political unrest resulting from a shady election procedure is troublesome and that no matter who is in power, strong businesses find a way.

As regards the individual within an organisation, it is important to adhere to professional codes of ethics, commitments, and policies, yet the individual’s rights of active political participation and other rights are to be protected, whilst showing the utmost respect to the other individuals who form part of the organisation.

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