Sarah Soule: How Activism Can Fuel Corporate Social Responsibility

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Sarah Soule: How Activism Can Fuel Corporate Social Responsibility

Activism has catalyzed progress, but companies can be slow to evolve. How can activists know that their efforts matter? And what is the evidence that their work makes a difference?

History shows that social movements can shape our society. In the United States, things would be very different without the campaign for women’s suffrage, the public outcry that led up to the Civil Rights Act of 1964, or the environmental protests that preceded the ban on DDT and the creation of the Environmental Protection Agency.

Activism targeting companies like Walmart, Nike, and BP has catalyzed progress, too. But companies can be slow to evolve, and it is often hard to know which strategies are most likely to get companies to change their ways. In some cases, activists may not see any results for years. So how can activists know that their efforts matter? And what is the evidence that their work makes a difference?

Recent research by my colleague Sarah A. Soule, the Morgridge Professor of Organizational Behavior at Stanford GSB, sheds new light on the ways that activism can encourage firms to become more responsive to social and environmental needs. The research conducted by Soule and her colleagues, Professors Brayden King (Kellogg) and Mary-Hunter McDonnell (Georgetown), shows that when people put pressure on firms, firms adopt measures that lead them to be more open to subsequent public pressure.

For activists frustrated by the slow nature of progress, this research is encouraging. It suggests that even a small shift in corporate communications or company structure opens the door for greater responsiveness to activists in the future.

Soule and her collaborators analyzed the behavior of a randomly selected sample of 300 firms that were included in the Fortune 500 at some point between 1993 and 2009. Their data look specifically at two types of activism: boycotts directed at firms and proxy proposals.

Boycotts are a familiar, high-profile “external” form of activism, which often results from a breakdown in the firm’s ability to manage contentious stakeholders and social issues. Building on previous research that shows boycotts generate negative media attention and threaten the reputation of the targeted companies, Soule found that firms often respond to boycotts by establishing a corporate social responsibility (CSR) board committee. These committees usually include nonprofit and civil society representatives that improve the company’s capacity to engage with activists, reduce the likelihood that future grievances will threaten the company’s reputation, and strengthen the company’s ability to recognize and respond to emerging problems in ways that pacify activist stakeholders.

A less familiar form of activism are proxy proposals, or shareholder resolutions, which are written proposals that are voted upon at a company’s annual meeting. Proxy proposals can be used by shareholders to bring a wide range of social issues to the attention of a company’s management. This form of “internal” activism can shake investor confidence in a company and is so effective that many social movement organizations now operate activist investing units, buying stakes in a company so that they will be able to submit a proxy proposal to draw attention to the issues they care about. Soule’s paper cites the example of People for the Ethical Treatment of Animals (PETA), which reports holding stock in more than 80 companies that they have targeted with animal rights campaigns. In more adversarial cases, shareholder resolutions can be publicized as a way to generate media attention and galvanize public pressure to get social concerns on the corporate agenda. Soule’s research found that firms are likely to respond to proxy proposals by instituting CSR reports into their external communications practices, which can help alleviate investor uncertainty about a firm’s social and environmental behavior by more proactively communicating the company’s perspective.

Figure 1: Percentage of sample that has adopted a CSR committee or provided a CSR report
Percentage of sample that has adopted a CSR committee or provided a CSR report

Though neither the creation of CSR board committees nor the institution of CSR reports provides a clear “yes” to activist demands, such shifts in corporate practices indicate that the door to change is cracked open. Both actions provide a platform for increased discussion of issues internally and make a firm more vulnerable to future activism, according to Soule’s findings.

Soule and her colleagues cite Nike as one example of how a firm’s response to activism – in all its forms, from protests to boycotts to social proxy proposals – changes over time. Soule’s book Contention and Corporate Social Responsibility details Nike’s experience from the 1970s to the 1990s. During this time, Nike was targeted by numerous protests concerning labor practices in the overseas factories where its shoes are manufactured, and for years the company turned a deaf ear. As Todd McKean, then Nike’s director of compliance, stated in a 2001 interview, “Our initial attitude was, ‘Hey, we don’t own the factories. We don’t control what goes on there” (Heckel 2001). But by the late 1990s, following high-profile protests at over 40 universities that held contracts with the company, Nike began to change its approach. In 1999, Nike adopted a code of conduct to govern its suppliers and over the next five years it conducted more than 600 factory audits to assure that its standards were being met. Today, Nike is ranked at the top of its industry in Fortune’s Most Admired Companies list and may be the most activist-receptive company in the retail industry. Over the past 20 years, Nike has voluntarily agreed to all but two of the social proxy proposals submitted by its shareholders and now collaborates with organizations like Greenpeace.

Over time, activism and incremental shifts in corporate practices have changed the private sector’s approach to activist challenges, and research confirms that social movements are indeed capable of influencing corporate behavior, ranging from curbing harmful toxic emissions to granting employees same-sex domestic partnership benefits to divesting from politically risky countries. Progress continues, but it doesn’t come easily.

“If there is no struggle, there is no progress,” Frederick Douglass once said. For those who are advocates and activists, it is encouraging to know that even small steps of change – like a CSR report or formation of a CSR committee – are vital to future efforts to bring about change.

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