Does Your Company Seem Socially Irresponsible?

There are significant differences between how company executives and the general public judge negative corporate behavior. Failure to understand and predict these differences can be costly to a business.

Public perceptions of corporate irresponsibility are formed from judgments of three core pieces of information: 1) a harmful effect, 2) an innocent victim and 3) a culpable organization. We have developed a model that describes how these perceptions of harm, innocence and culpability are shaped in subjective, yet predictable, ways. By explaining how these perceptions form, the model can be used to help predict and even influence perceptions. (Our model is described in greater detail in a paper we published in the April 2012 issue of the Academy of Management Review titled “Understanding Attributions of Corporate Social Irresponsibility.” See “Related Research.”)

The effect of a company’s actions may be perceived as more or less harmful than it actually is. An effect that is concentrated in time and space, or is unexpected, seems more harmful than an effect that is dispersed or typical. For example, quantitatively speaking, a death is a death. But from the public’s vantage point, multiple people dying in a single car accident seems far worse than the same number dying in multiple accidents spread out over several months. Dying in an unusual crash, such as a car plunging over a cliff, seems much worse than dying in an ordinary collision.

Every year in the United States, there are about 30,000 deaths caused by motor vehicle accidents. These commonplace occurrences are so spread out geographically and throughout the year that they seldom hold the public’s attention. But when a commercial airplane crashes, that usually grabs headlines and in some cases, could affect the stock price of the airline or the airplane manufacturer, even though such airplane accident deaths are comparatively rare.

Victim innocence is also subjectively perceived. Observers make judgments about victims and whether they helped bring about or could have prevented the harm they suffered. In general, stronger victims seem more complicit, weaker victims more innocent. A child is more likely to be deemed the victim of corporate irresponsibility than a competent adult. Other factors such as victim attractiveness, likeability and whether or not the public can identify with the victim also affect perceptions.

Public perceptions of the innocence of a particular victim group can evolve over time. Depending on the latest scientific studies on addiction and alcoholism, for example, drinkers may seem more or less in control of their situation. The same goes for cigarette smokers. Labels warning of health dangers have decreased the perceived innocence of smokers. Scientific evidence of the power of addiction, on the other hand, increases smokers’ perceived innocence.

The perceived culpability of a corporation also figures into perceptions of corporate social irresponsibility. If a company seems to have had foreknowledge of a harmful effect and had the power to prevent it, the company is perceived as more culpable.

Perceptions of corporate culpability are also influenced by the existence of plausible alternative causes. If there are other explanations for the harmful effect, such as driver error in the case of automobile crashes, or if other organizations are also believed to be at fault, then the perceived culpability of the initial corporation decreases.

While a disconnect between corporate actions and public perceptions can result in perceptions of corporate irresponsibility that exceed reality, it can also allow actual corporate irresponsibility to evade public notice. If a harmful effect is dispersed over time and space and does not seem very dramatic, if a victim does not elicit empathy, or if it is difficult to pinpoint the culpable corporation, then harmful and irresponsible behavior can persist.

For example, there have been thousands of oil spills in the Niger Delta over the past 50 years. But unlike BP’s 2010 Gulf of Mexico oil spill, which was concentrated and dramatic, the individual Niger Delta spills have been smaller and spread out over a long period of time. As a result, while the total amount spilled in the Niger Delta may be much greater than the BP spill, public reaction has been more subdued. Also, in contrast to the BP spill, the spills in the Niger Delta are sometimes attributed to sabotage and theft, making the victims seem somewhat complicit. Finally, it was easy to identify and link BP to the Gulf of Mexico oil spill, while many different oil companies have contributed to the spills in the Niger Delta, making it difficult to identify a central culprit.

People like tidy stories with a clear villain. We lose interest when there are too many factors, extra complexity or too much ambiguity.

Implications for Businesses and Stakeholders

Our model can help businesses as well as stakeholder groups understand and influence the development of irresponsibility perceptions. Perceptions of harmful effects, innocent victims and culpable corporations can be fortified or weakened, depending on the type of information presented and how that information is framed.

So even though oil in the Niger Delta has been spilling out slowly over several decades, activist groups could work to create an aggregated picture of the spills, transforming the dispersed effect into a concentrated one by helping observers understand the full impact all at once. Activists could also present information that highlights the dramatic damage caused to innocent victims — such as children and families who are not employed by the oil companies or involved in sabotage or theft. Finally, rather than lobbing general accusations at the industry, activists could target one prominent organization. If activist groups were to coalesce around this model, an aggressive public response to the Niger Delta oil crisis would be more likely.

Corporations, meanwhile, should be aware that once they have been linked to a harmful effect and innocent victims, a powerful negative image is created that can have serious long-term financial implications. Once a story takes hold, it may be too late for a company to respond effectively. To return to the example of the Niger Delta, if activist organizations were to be successful in awakening public ire, oil companies that could demonstrate a history of aggressive efforts to mitigate the oil spills would have the advantage. Instead of waiting for accusations to flare up, companies can use this model to predict and address potential problems before they surface.

The model has public policy implications as well. By better understanding the types of perceptual biases that exist, policy makers can be aware of and help correct skewed public perceptions of corporate social irresponsibility. Serious problems, even if they are dispersed over time or geography, ought to receive proportionate attention and resources. If irresponsible practices exist industry-wide, the entire industry should be held accountable rather than a single prominent corporation. The irresponsibility of harmful business practices should not be minimized simply because the victims are not likeable or easy to identify with.

Who Is Vulnerable?

Not every company is equally susceptible to public judgments of corporate irresponsibility. For most observers, it is easier to believe that a large, prominent company has the foreknowledge and ability to prevent harmful effects. Blaming a small, niche clothing company for unfair labor practices in a developing country is not nearly as compelling as suggesting that a well-known brand is culpable of such abuses. Consequently, influential companies are more often the target of corporate irresponsibility accusations even if other, less prominent businesses are engaging in the same behaviors.

A company’s reputation and image also affect whether it is likely to be accused of irresponsibility. This works two ways. First, companies with reputations that are already tainted are easy targets. The public may be less willing to believe that companies with solid reputations as good corporate citizens have behaved irresponsibly, so they may be less susceptible to initial attacks. Yet even a company with a squeaky clean image must be aware of the danger of corporate irresponsibility perceptions. If public perceptions are swayed by a persuasive collection of negative evidence, even a reputable company’s image is vulnerable, and the company has much to lose.