With large budgets and high media profiles, corporations have the power to model change on issues such as workplace bias and environmental impact. When social activists want to pressure companies to make certain changes, they may utilize tactics such as boycotts, public protests and lawsuits.

Corporate social performance (CSP) refers to how well a firm’s corporate citizenship and social responsibility satisfies its stakeholders. A new study says understanding a firm’s CSP can help social activists determine which firms are most likely to respond to their demands. 

David Gras, assistant professor of management and entrepreneurship at the University of Tennessee, Knoxville’s Haslam College of Business, along with Abhijith G. Acharya (Singapore Management University) and Ryan Krause (Texas Christian University), examined to what extent corporations are receptive to and need to comply with social activist demands. They theorized that social activist stakeholders can identify firms to target by looking at how businesses direct CSP toward two different types of stakeholders: primary (those central to the company’s operations, such as employees and customers) and secondary (those less essential to company operations, such as communities and the government). 

After analyzing eight years’ worth of CSP and shareholder proposal data from 992 public U.S. firms, the authors found that these two types of CSP independently affect the likelihood of activists targeting an organization. In general, directing socially responsible actions toward primary stakeholders makes a company a more attractive target for social activism.

“When a company shows corporate social responsibility for primary groups, they get ‘on the radar’ of social activists who demand more, often costly, socially responsible activities from the company,” Gras said. “However, doing good for secondary stakeholders makes social activists back off a bit more.”

The Unexpected Costs of Social Responsibility

The research showed that the authors’ theory about the importance of CSP holds particularly true at companies that have built up cash reserves for a rainy day or future projects. When such organizations have a record of socially responsible activities directed toward their employees and customers, social activists often see an opportunity to persuade the firms to invest in their causes, which can lead to increased demands and expenses.

“Perhaps your company decides to adopt a sexual orientation anti-bias policy,” Gras said. “That’s great, but it also may increase the likelihood that social activists demand that you stop working with suppliers that don’t have such an anti-bias policy. That may be great too, but it’s more work and effort, and perhaps more costs that you weren’t prepared to deal with.”

On the other hand, the researchers discovered, if businesses demonstrate good corporate citizenship toward people and entities that are not heavily involved in company operations, those actions may appease social activists and prevent their expectations and the accompanying costs from escalating.

“For example,” Gras said, “donating to the Doctors Without Borders initiative to fight COVID in Africa could buy you some space with regard to further social activism demands.”

“Socially Oriented Shareholder Activism Targets: Explaining Activists’ Corporate Target Selection Using Corporate Opportunity Structures,” published in spring 2021 in the Journal of Business Ethics, is available online.

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CONTACT: 

Stacy Estep, writer/publicist, sestep3@utk.edu