Activist "Procotts" and Boycotts Affect Corporate Reputation
By Michael McLaughlin (MBA’15)
Companies respond to boycotts by increasing their charitable giving. This is the key finding of Professor Mary-Hunter (Mae) McDonnell’s recent study of the impact activists can have on corporate decision-making. She joined the McDonough School of Business this year after finishing her doctorate in management and organizational theory at Northwestern University’s Kellogg School of Management. “Keeping Up Appearances” focused on corporations’ responses to over 200 boycotts between 1990 and 2005.
“Not only are companies donating more in response to boycotts, they’re going beyond philanthropy by acting like activists themselves. For the first time, we’re seeing companies like Starbucks and Chick-fil-A take political stances as a way of cultivating their brand identity,” McDonnell explained. Although some companies use monetary donations to insure themselves against future boycotts, some go further by partnering with activist organizations to burnish their image or even to hurt their competitors.
McDonnell cited the example of Nike joining forces with Greenpeace to boycott Brazilian leather, even though it did not use much of the material in the first place. Adidas, however, did.
The opposite of a boycott, also known as a “procott,” is a relatively new phenomenon stemming from the increased ability of activists to influence corporate activities. “This happens when, rather than avoiding a company’s products, people actually buy more from them because of a particular stance they’ve taken. Progressives who normally wouldn’t spend at Starbucks, for example, may have started doing so because of the public stance the company took on marriage equality,” said McDonnell.
McDonnell sees the increased responsiveness of companies to activists as a positive outcome because often it leads to corporations acting in more socially appropriate ways. Of companies traded on the S&P 500, 20% have formed a board committee dedicated to corporate social responsibility. This new governance structure is a response to activists hurting (by boycott or other political demonstration) a company’s public image or bottom line.
Another change McDonnell has seen is the rise of voluntary commitment to private regulatory consortiums. The UN, for example, has more than 10,000 participants in the United Nations Global Compact, which businesses can use as a platform to demonstrate their commitment to “a set of core values in the areas of human rights, labour standards, the environment and anti-corruption.”
Activists don’t focus only on “bad” corporations, McDonnell pointed out. “Activists target both extremes. Companies that have a bad reputation are equally as vulnerable to attack as those that cultivate a good reputation. The goal of this type of activity is to ferret out hypocrisy and keep companies honest.” In this way, activist challenges can serve as a mechanism of reputation fitness, making sure that companies live up to the positive images that they cultivate for consumers.