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Boycotts Convince Highly Reputable Companies to Increase Giving

Mary-Hunter McDonnell  "Companies, especially when they have good reputations, are really worried about losing that very valuable and tangible asset, so they respond defensively when they see something as threatening it," said Mary-Hunter McDonnell, assistant professor in the McDonough School of Business.

September 6, 2013 – Social boycotts and protests generally convince large companies deemed highly reputable to increase their corporate philanthropy by up to 30 percent, according to a Georgetown business professor’s recent study.

“It’s about reputational threat,” said Mary-Hunter McDonnell, an assistant professor in the McDonough School of Business. “Companies, especially when they have good reputations, are really worried about losing that very valuable and tangible asset, so they respond defensively when they see something as threatening it.”

In the study, “Keeping Up Appearances: Reputational Threat and Impression Management after Social Movement Boycotts,” recently published in Administrative Science Quarterly, McDonnell sampled 221 publicly traded firms that were targets of publicized boycotts over a 15-year period between 1990 and 2005.

Motivated to Act

Companies investigated in McDonnell’s database came from Fortune magazine’s “Most Admired Index” and included General Motors, Wal-Mart and Starbucks.

After analyzing the targeted companies’ philanthropic activity six months before and after boycotts, the study found that the firms significantly increased public statements highlighting positive work and achievements by as much as 12 percent.

Firms that had higher reputations based on the Fortune index were also found to be more motivated to take action and defend their reputations, and increased their charitable activity by as much as 30 percent.

Indirect Impact

McDonnell says such responses by boycotted companies suggest that social activists can gain ground on their issues while having an indirect impact on a corporation’s charitable contributions.

“The charitable activity that the companies were doing wasn’t necessarily in the same domain as the activists that were protesting,” she said. “But I think the activists would still consider it a positive.”

She notes that today’s activists also have advanced social media tools to spread a protest movement outside of traditional journalistic media.

Social Media Effect

“The extent to which Twitter and Facebook and all these social media tools that we have can allow activists to reach a larger platform, they … increase the changes that we see in newspapers,” the professor says.

McDonnell said the idea for the study came when she noticed social movement activity against large companies ramp up during the 2008 recession.

More Permanent Shifts

“I was really interested in regulation and how we can make companies better social actors,” she said. “It was almost as if activists recognizing the futility of going through formal channels were drawing on these informal strategies like boycotts and protests.”

McDonnell is now looking closely at other indirect effects of reputational threat, including the impact on social responsibility board committees within companies.

“If companies do something permanent like adopt a new board committee, then whatever effect that has in the way a company channels social issues is not transient,” she said. “So it may lead to more permanent shifts [in charitable contribution].”

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