American business leaders increasingly have been pulled into—or in some cases have dived willingly into—the hot cauldron of today’s political system. How’s that going? Consider events that unfolded within a matter of days recently.

Toyota Motor Corp. publicly defended its decision to keep giving money to Republicans who refused to certify the 2020 election results, only to reverse course a few days later under public pressure. Former President Donald Trump filed a lawsuit against big tech companies for banning him from their social media platforms, while a panel at the Conservative Political Action Conference railed against “woke corporations” and talked of a “patriotism index” to help conservatives decide which companies’ products to buy and which to boycott.

Meanwhile, on the Democratic side, President Joe Biden issued an executive order instructing government agencies to take 72 different actions to rein in big corporations and went after Facebook over its role in the spread of vaccine disinformation. His administration also engineered an international agreement establishing a global minimum corporate tax and made Lina Khan, a well-known antitrust crusader, the head of the Federal Trade Commission, much to the delight of progressives.

Anti-trust crusader Lina Khan, the new head of the Federal Trade Commission, at her Senate confirmation hearing on April 21.

Anti-trust crusader Lina Khan, the new head of the Federal Trade Commission, at her Senate confirmation hearing on April 21.

Photo: Graeme Jennings/Pool/Associated Press

Like other institutions, the U.S. business community is being buffeted by the angry partisan winds coursing through the country. But this rapid-fire series of hits illustrates an even deeper problem for corporate leaders: The Republican and Democratic parties are both undergoing a historic transformation, which increasingly makes the business community a political orphan, without a comfortable home in either party. Corporate leaders still have suitors in Washington, to be sure, but it’s not as easy as it used to be to get a date to the prom. One prominent business figure privately refers to his community’s place in the current political landscape as a “small and shrinking island.”

Corporate America needs a new political strategy, but it is having trouble developing one. Should it still consider its traditional allies in the Republican party the safest bet or shift to nurturing more Democrats and centrists in both parties? Does it heed calls from customers and employees to take stands on burning social issues, even though it sometimes gets only limited credit on the left for doing so? Could the business community simply opt out of politics entirely?

“ The business community’s predicament is rooted in the way that the tectonic plates of American politics are shifting. ”

The predicament is rooted in the way that the tectonic plates of American politics are shifting. The Democratic Party has moved to the left as a 79-year-old leftist, Sen. Bernie Sanders, and a wave of like-minded younger progressives become louder and more influential, pushing higher corporate taxes and, in some cases, the breakup of big corporations.

Moderate Democrats in Congress, who have maintained generally cordial ties with both large and small businesses, are dwindling in number and increasingly embattled. Even though the party is now led by President Biden, probably the most corporate-friendly major candidate in the Democrats’ large 2020 field, the balance of power has shifted to the left—and against many business interests.

Demand Progress, a liberal activist organization, earlier this year combined with more than a dozen other progressive groups to launch a “No Corporate Cabinet Campaign” to dissuade the Biden administration from appointing people from the business community to top government jobs; it later gave the White House a B- grade on its performance in heeding the call. More recently, many progressives reacted to this week’s space flight by Amazon founder Jeff Bezos with cries that his ability to pay for such a venture showed he and his company could afford to pay more taxes, complete with a #TaxTheRich Twitter campaign.

Bishop Reginald T. Jackson and other religious leaders in Atlanta call for a boycott of Coca-Cola and other Georgia-based companies for failing to vigorously oppose a controversial bill on state voting regulations, April 1.

Bishop Reginald T. Jackson and other religious leaders in Atlanta call for a boycott of Coca-Cola and other Georgia-based companies for failing to vigorously oppose a controversial bill on state voting regulations, April 1.

Photo: Alyssa Pointer/Atlanta Journal-Constitution/Associated Press

The business community’s newer and more perplexing problems are found on the right, among Republicans who traditionally provided solace and support. Since the rise of the Tea Party movement in 2009, and through the takeover of the party by Mr. Trump, the GOP has grown steadily more populist—and more hostile to big business and big finance—as its ranks have been filled with more working-class voters.

These new Republicans are more skeptical not only of what they view as the elites running America’s business and political institutions but also of the view that economic globalization has been broadly beneficial. One effect of this shift is seen in a new Gallup survey, which found that Republicans’ views of big business and big tech have turned from net positive to net negative in the last year. The share of Republicans expressing a “great deal” or “quite a lot” of confidence in big business declined by 12 points in the last year, to just 20%, while confidence in big tech declined even further.

Trump administration policies both reflected and accelerated these trends. They explicitly rejected traditional Republican reverence for free markets and free trade and favored interventions on both fronts to advance what were perceived as the interests of the party’s growing band of populist voters. The former president himself fed the perception that U.S. companies were complicit in job migration overseas, particularly to China, for their own benefit.

Republican Senators Marco Rubio of Florida (left) and Josh Hawley of Missouri (right).

Republican Senators Marco Rubio of Florida (left) and Josh Hawley of Missouri (right).

Photo: Michael Brochstein/ZUMA PRESS; Evelyn Hockstein/Pool/REUTERS

Such populist views now are prevalent, perhaps even dominant, in the party. Some of the most vocal congressional crusaders for breaking up big tech companies—like Missouri Sen. Josh Hawley —sit on the Republican side of the aisle. In a notable instance of ideological whiplash, Sen. Marco Rubio, a conservative Republican, recently wrote a piece for the liberal American Prospect magazine blasting American financial firms for their ties with China and, along the way, calling for a re-examination of his party’s relationship with business: “Politicians in my own party have too often been reluctant to intervene over concerns about the ‘free market,’” he wrote. “But things are changing. Faced with the catastrophic impacts of deindustrialization, which has choked opportunity for the American working class, and a growing reliance on an authoritarian regime [in China], more of my colleagues in the GOP have awakened to the dangers of economic policy-making that prizes short-term economic efficiency over all else.”

The business community’s estrangement from the Republican Party has accelerated as business leaders have spoken out in recent months on a series of political and social issues, including racial justice, former President Trump’s refusal to accept the 2020 election results, the Jan. 6 riot by Trump supporters at the Capitol and Republican efforts to pass new laws tightening voting rules. Business leaders say that they see speaking out on these issues as important to the health of the broader society in which they operate, though they also are responding to demands from consumers, employees and potential hires that they take a stand.

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Conservatives see these positions as a cave-in to pressure from the progressive left and as part of a longer-term betrayal of the GOP, which has been the historic defender of business interests. “Big business divorced the Republican party a decade ago, and we just found the paperwork in a drawer last week,” proclaimed Justin Danhof, executive vice president of the conservative National Center for Public Policy Research, at the CPAC gathering of conservatives this month.

Alfredo Ortiz, head of the Job Creators Network, a conservative group that champions small businesses, argues that these business-world nods toward progressive priorities show that, while small business still can find a home in the Republican Party because of its tilt toward low taxes and deregulation, big business no longer does. “There used to be more of a political balance in the corporate boardroom between the left and the right,” he says. “It’s clear now that they really don’t care what the right thinks. They don’t care what the Republican Party thinks.”

The corporate sector’s estrangement from the right would appear to represent an opening for Democrats to step into the void and build more ties to the business world—and for business leaders to use those ties to dampen some of the more hostile impulses among Democrats. “I think there is an opportunity,” says Sen. Mark Warner of Virginia, a moderate Democrat who made a fortune in the technology industry before turning to politics. He says that, among business leaders he knows, Republican support for the Trump argument that the 2020 election was rigged, and the reluctance among Republicans to condemn the Jan. 6 riot at the Capitol, has “shocked them to their core.”

Democratic Sen. Mark Warner of Virginia at a meeting of the Senate Intelligence Committee, Feb. 23.

Democratic Sen. Mark Warner of Virginia at a meeting of the Senate Intelligence Committee, Feb. 23.

Photo: DEMETRIUS FREEMAN/POOL/AFP/Getty Images

At the same time, he says, the new willingness of corporations to speak out on social issues raises the prospect of creating “a more responsible capitalism, or inclusive capitalism…That was kind of a fringe idea three or four years ago, but I really do believe it is a serious debate that’s taking place inside the C-suite all across the country. A lot of it is driven by business leaders’ own desire to have a voice in policy. If you want the best employees and you want to keep your customers, you can’t ignore these issues.”

Yet some business leaders are concluding that they aren’t getting the credit and support they hoped for from the progressive left for taking such stands. As they see it, on issues like taxes, regulation and antitrust, they remain in the crosshairs of liberals.

“It’s probably a positive thing that businesses have taken postures on certain questions of rights,” says David Segal, executive director of Demand Progress, a progressive group focused on tech and corporate power that claims 1.5 million affiliated activists around the country. “But whenever they do so, one is right to ask to what extent it’s about earnestly held beliefs and a desire to move society in a good direction, versus to what degree it’s about business interests, questions of being able to hire the people they want to hire” or as part of a public-relations campaign aimed at fending off government regulation.

Mr. Segal, a former state representative who once ran for Congress from Rhode Island, adds: “Fundamentally we think the economy is structured in a way that we need to break up some of these big companies. That’s sort of a fundamental aim right now, and there’s no position companies can take on an issue, no matter how important, that is outside of that realm.”

With rising populists on the right and ascendant progressives on the left, the question for corporate leaders is how to respond.

One option is to stick with a general allegiance to Republicans, on the theory that even a more populist version of the party is still more likely to deliver lower taxes and less regulation. But that approach would sidestep issues of similar importance to many companies, including a commitment to economic globalization, higher levels of immigration for skilled workers and action to combat climate change, a problem on which many business leaders think they eventually will need help from Washington as they take difficult steps.

Another option is to step off the political playing field. Mr. Ortiz of the Job Creators Network gives this counsel: “Focus on what you are supposed to be doing,” he says. “Let the politics be handled by the people who are actually voted by the American citizens to handle that.”

Some corporate leaders tried to move in this direction when they suspended donations from their political-action committees after the Jan. 6 Capitol riot. Yet that step hasn’t proven as simple as it sounds.

While some companies and industry groups withheld contributions across the board, others chose to suspend donations specifically to Republican lawmakers who challenged the 2020 presidential election results. They found themselves under pressure from the left to act in opposition to the events of Jan. 6—and subsequently to speak out against Republican-sponsored voting laws—but came under immediate attack on the right for doing so, including in an advertising campaign against them launched by the conservative Consumers’ Research advocacy organization. Amid this no-win crossfire, some of the companies recently resumed political donations, including to Republican lawmakers who voted against certifying the election results.

The U.S. Chamber of Commerce, headquartered in Washington, D.C., moved away from its traditional lopsided support of Republican candidates in 2020.

The U.S. Chamber of Commerce, headquartered in Washington, D.C., moved away from its traditional lopsided support of Republican candidates in 2020.

Photo: Getty Images

Neil Bradley, executive vice president of the U.S. Chamber of Commerce, argues that abandoning the political process isn’t a viable option. “If you check out of the process, you’re essentially ceding to the extremes, a populist extreme and a progressivism extreme. And both of those are bad for free enterprise and the American business community.” He says that today’s difficulties stem largely from the political system’s current “intense polarization” and that the solution lies in finding and supporting lawmakers who endorse significant parts of the business agenda wherever they happen to sit on the partisan spectrum. “The business community has to continue working with those elected officials who they find agreement with on a particular issue or a particular problem, irrespective of which party they belong to,” he says.

Josh Bolten, president of the Business Roundtable and a former White House chief of staff for President George W. Bush, agrees: “One thing we can do, and are doing, is feed shoots of bipartisanship,” most notably at the moment by pushing lawmakers in both parties to agree on a big plan to improve the nation’s infrastructure.

But there are complications with nurturing bipartisanship. In the 2020 election, the Chamber shifted away from its traditional lopsided support for Republican candidates to endorse 32 House Democrats for re-election, including 23 freshmen. Fifteen of those freshmen won and may give the organization a bigger foothold among the Democrats who control Congress. But the strategy has stirred controversy within the Chamber and the business community, particularly as some of the Chamber-supported Democrats have voiced support for Biden administration tax and regulatory policies that the Chamber opposes. Mr. Bradley says that such votes against the Chamber’s preferences will be reflected on scorecards the organization keeps and could result in a loss of Chamber support for these Democrats in future elections.

Scott Reed, who oversaw political strategy for the Chamber of Commerce before a falling out over political strategy, counsels a different approach. He advises business leaders to stay in the political game but to look outside Washington for support and build their influence closer to headquarters. “My advice is: Play the long game,” he says. “Don’t react to the daily news of wokeism, and work with your friends and grow your partnerships in the community back at home. I’d double down back at home because that’s where you have real influence, with your employee base and with your impact on the community.”

Write to Gerald F. Seib at jerry.seib@wsj.com