corporate social responsibility, reputation, and activist targeting

My paper with Mae McDonnell about the relationship between CSR, reputation, and activist targeting has been spotlighted on the Harvard Law School Forum. The paper shows that contrary to conventional wisdom, firms that have positive reputations and that do a lot of socially responsible actions are not less likely to become targets of anti-corporate activists. Just the opposite is true. Companies that have built positive reputations and that engage in a lot of CSR activities are actually more likely to become the focus of activist campaigns.  Why is that? Well, because social movement activists thrive on media attention – that’s how they shape the public agenda and put pressure on companies to change their behaviors – and high reputation companies that are known for doing good are more likely to attract media attention when activists expose their less-than-virtuous practices. Thus, developing a positive reputation has a big downside.

Reputation, in this sense, has become an important liability for firms. Once a firm develops a positive reputation, they are obligated to maintain it. From the activist perspective, there is much to gain by forcing firms to defend their reputations. Not only do they generate more attention to their cause by targeting high reputation firms (King 2011), but the net social impact is also positive. As these firms do more prosocial activities to renovate their image after the boycott, they subsequently dedicate more resources and strategic focus on CSR. A virtuous circle, at least from the perspective of the activist, follows. More CSR practices leads to an improved (or at least maintained) reputation, which causes the firm to continue to be a target of activism, the consequence of which is more commitment to CSR. From the point of view of the company, however, having a good reputation can be a “double edged sword” or at least a potential liability when facing activists who seek the public limelight (Rhee and Haunschild 2006).

You can download the complete paper now on SSRN.