Keeping Up Appearances: Reputational Threat and Impression Management after Social Movement Boycotts

August 05, 2013
In 2012, companies and foundations increased their charitable donations by more than twelve percent, according to the Giving USA 2013 Report. Despite challenging economic times, research shows that organizations invest heavily on corporate social responsibility initiatives to gain and maintain good reputations.  But what factors motivate firms to increase their charitable activity?
 
A recent study, Keeping Up Appearances: Reputational Threat and Impression Management after Social Movement Boycotts, finds that direct attacks from social activists are one cause of increased corporate philanthropy. Using contentious tactics like boycotts and protests, social activists pressure firms to reform by drawing negative media coverage that threatens a targeted firm’s reputation.  The study, whose lead author is Mae McDonnell of Georgetown University’s McDonough School of Business, provides evidence that firms react to counter this threat by attracting positive media coverage through increased charitable activities.   Ultimately, these findings suggest that activists can successfully spur firms to do more good for their stakeholders and communities.  
 
Sampling more than two hundred publically-traded firms that were targeted by activist boycotts between 1990 and 2005, the authors analyzed prosocial activity six months before and after a boycott’s announcement, examining corporate press releases and newspaper articles. The findings showed boycotted firms significantly increased their prosocial claims in the post-boycott period.  The extent of the increase depended upon media exposure, reputational threat and the firm’s level of pre-boycott charitable engagement. 
 
The Power of Media 
Social movement activists target organizations with highly visible platforms and will use the media to project negative claims about the firm in order to attract support for their social change agendas. The amount of media attention garnered by a boycott can predict the strength of the reputational threat and the extent to which the target will respond with increased corporate social activity.  The greater the threat, the more urgent it becomes for firms to demonstrate positive behavior to defend their pre-boycott reputations. 
 
Level of Reputational Threat
The bigger the firm and the stronger the reputation – the more likely the organization will be boycotted. In this study, reputational ranking was determined by firms ranked in Fortune’s Most Admired Index. Firms that achieved higher reputations – indicating more elevated field positions – were more motivated to take action and defend their reputations in response to a threat. Following a boycott, the extent of increases in charitable activity for firms in the highest tier of the Fortune ranking was 30 percent higher than firms in the middle tier of the ranking. 
 
Pre-Boycott Claims 
If an organization engaged in more charitable activity prior to a boycott, it tends to increase its charitable activity even more in the boycott’s wake. Threatened organizations will often resort to previously used impression management tactics when responding to threats. The study finds that firms that engaged in more prosocial activity before a boycott were likely to increase their charitable activity to a larger extent after a boycott.