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Much of the day-to-day criticism aimed at organizations on the internet and in the mainstream media may seem relatively innocuous. Yet new research suggests organizations would be wise to pay attention. Such criticism may well signal early strategic maneuvering as activists identify their targets for far more damaging actions, such as boycotts and campaigns.

 5 min read 

Jean-Philippe Bonardi is a professor of Strategic Management. In his research, he looks at firms’ nonmarket activities and at the relationship between business and public policies.

Dealing with a social or environmental responsibility related campaign run by activists can be an expensive, time-consuming, reputation damaging affair, as many multinationals have discovered to their cost. Fortunately, new research reveals that it may be possible for companies to detect communication signals in the mainstream media and on the internet, forewarning them of possible activist campaigns. This enables targeted firms to take proactive steps in an effort to avoid a lengthy confrontation that could potentially destroy firm value.

It may be possible for companies to detect communication signals in the mainstream media and on the internet, forewarning them of possible activist campaigns

In their paper ‘Private Politics Daily’, business academics Jean-Philippe Bonardi and Dominik Breitinger, from the World Business Council for Sustainable Development, investigate an increasingly important aspect of a firm’s nonmarket activities – private politics. This is where activists, NGOs, and other pressure groups, directly target firms in order to persuade them to change their practices (as opposed to public politics where activists and other interest groups compete with firms to lobby for public policy changes).

The private politics chain

Seen as an effective and visible way to achieve their goals and put pressure on companies to self-regulate, the use of private politics by activists has become more widespread and sophisticated. Tactics range from letter writing and criticism via comment in print and television media, and on the internet, to consumer boycotts and well-orchestrated and protracted public campaigns.

Understandably, corporations could benefit from understanding which firms are more likely to be targeted. To date research has focused mainly on large-scale visible activist activities such as boycotts and campaigns, revealing a number of factors that make a corporation more likely to be targeted. For example, research suggests activists are more likely to target large, visible and financially successful companies with strong brand names. This raises the profile of the activist, while at the same time making it more likely the targeted firm has sufficient financial resources to undertake any actions requested.

Additionally it appears that firms that are more transparent about CSR and environmental activities are more willing to respond to critics and therefore more likely to be targeted. Activists may also target businesses operating in certain industries, oil and gas and mining firms being obvious examples, and firms that are close to the customer where consumers can easily ‘punish’ the firm by switching to an alternative product or service.

But activists do not confine their activities to boycotts and public campaigns. Much of the day-to-day work of activists is less high-profile, using the mainstream media and internet to engage in the (generally anonymous) criticism of various corporations’ behavior, for example. Less visible and quieter than public campaigns, such criticism may be relatively insignificant to firms, part of the broad monitoring activities that pressure groups engage in.

Initial criticism might signal a later public campaign, all part of the same attention grabbing, reputation boosting, legitimacy building, activist strategy

But what if the criticism and full-blown campaigns are part of the same activist continuum – maneuvers and skirmishing preceding the main battle? In this case initial criticism might signal a later public campaign, all part of the same attention grabbing, reputation boosting, legitimacy building, activist strategy, suggest the authors. The activist begins by selecting countries where they are likely to receive a sympathetic hearing, industries likely to attract attention, then selecting firms to be targeted, criticizing those firms, and finally mounting public campaigns against some of those firms. The authors describe it as the “private politics chain”.

If internet and media criticism and full campaigns are part of the same strategic private politics chain, then it might be expected that both would be driven by similar factors. So the authors set out to investigate what role particular firm specific and industry factors, relevant when targeting corporation for full-blown campaigns, play in the targeting of corporations with criticism. To do this they used a dataset of the world’s most admired firms, as featured in Fortune magazine, together with observations of CSR related criticisms made about these firms between 2006 and 2009.

For firm specific factors the authors used firm assets, cash flow, and return on assets to gauge a firm’s wealth and profitability, sales to determine size, the presence of leading brands to assess visibility, and a presence in the Dow Jones Sustainability Index and disclosure of carbon footprint information to indicate CSR and environmental performance.

The authors’ also introduced a novel component to their investigation of the “private politics chain”, at a country and institutional level. Activists are more likely to target firms in countries where the audience is more receptive to activists’ messaging, the authors suggest. This ties in with socio-economic factors such as the level of education, employment rate, and standard of living, assessed using education index, and standard of living indicator scores, plus GDP and unemployment rates, and (obtained from the United Nations’ Development Program (UNDP) database). They also expect the institutional quality of a country to make a difference, as determined by the Worldwide Governance Indicators of voice and accountability, political stability, and control of corruption.

Criticism matters

Larger, more visible, financially successful firms with a greater degree of transparency and disclosure regarding CSR and environmental data, are more likely to be targeted

Overall, the findings suggest that activists’ targeting of firms with media and internet criticism (whether general or severe) depends on many of the same factors that drive the targeting of firms with full campaigns. The individual impact of each factor may be small, but cumulatively they are very significant. Larger, more visible, financially successful firms with a greater degree of transparency and disclosure regarding CSR and environmental data, are more likely to be targeted, for example. Industry effects and closeness to the consumer also matter, notably in terms of attracting more severe criticism.

The impact of countries and institutions on targeting is more mixed. Targeting is more likely in countries with a higher environmental consciousness and where corruption is more under control. These support the idea of criticism being part of a strategic approach to activism. However, the data also suggests that activists prefer to target criticism at countries where institutions are less open and more politically unstable, pointing to an additional role for criticism, monitoring firms in countries where issues are more likely to happen.

Corporations must not take such criticism lightly, as it may signal the start of a chain of private politics actions that eventually culminate in a campaign or boycott that could damage the firm

The message for firms is that they need to pay attention to this type of criticism, no matter how apparently small and innocuous it appears. In their research the authors highlight a range of factors corporations can use to assess whether a firm is more likely to be targeted by activist criticism. More important still, though, they show that corporations must not take such criticism lightly, as it may signal the start of a chain of private politics actions that eventually culminate in a campaign or boycott that could damage the firm. Instead, companies should view this type of activist criticism as an opportunity to proactive measures, it engage with stakeholders and address issues, before the situation becomes costly and damaging.

Read the original research paper: Private politics daily: What makes firms the target of internet/media criticism? An empirical investigation of firm, industry and institutional factors by Dominik Breitinger and Jean-Philippe Bonardi. Advances in Strategic Management (2016)

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