How Bad Publicity Changes Companies’ Behaviour

Bad publicity — “shaming” — can lead to dramatic improvements in companies’ sustainability behaviour. But stakeholders need power to push the change.

Pollution. Safety violations. Workplace discrimination. Laws may exist to reduce these behaviours by companies, but often government has limited ability to enforce them. Monitoring and fines are typical government interventions, but lack of funding often limits their reach. In the United States, for example, the Occupational Safety and Health Administration inspected less than 1% of the workplaces required to comply with its regulations in 2016.

An alternative approach comes more from the worlds of activism and advertising. This is public “shaming”: publicizing negative behaviour. “Increasingly, technology and social media have enabled customers, former workers and other stakeholders to expose companies’ actions,” researcher Matthew Johnson (Duke University) explains.

What happens when government adopts this “shaming” strategy? Johnson studied this by looking at the impact of press releases issued by the Occupational Safety and Health Administration (OSHA) after facility inspections. During an inspection, an OSHA employee reviews a facility’s paperwork and tours operations to assess hazards and compliance with occupational safety and health standards. From 2009-2013, if OSHA found violations resulting in more than $40-45,000 in fines, the agency sent a press release to newspapers near the facility and industry trade publications.

The press releases often resulted in articles and additional negative publicity for the facility. In one case, a newspaper reported:

Federal officials are proposing a $73,275 fine against Fieldale Farms Corp. following a January inspection that turned up 22 violations…..”To prevent workplace injuries, companies must incorporate good safety practices into their culture and not leave safety to chance,” Gei-Thae Breezley, director of OSHA’s Atlanta-East Area Office, said in a statement…. Serious violations alleged include the company’s failure to annually train employees on hazards related to blood-borne pathogens and to make the Hepatitis B vaccine available to employees exposed to blood-borne pathogens.

Press Releases Can Change Practices

These OSHA press releases had a huge impact. In the three years following a press release, there were 73% fewer violations at “peer” facilities — those in the same sector as the inspected facility and within a 5 km radius. Facilities in the same sector within a 50 km radius also showed improved compliance: up to 30% fewer violations.

A typical OSHA inspection has been found to reduce future violations by 48%. Press releases — bad publicity — thus improved compliance 50% more than if OSHA inspected each peer facility.

Why does the impact only reach facilities within the same sector and region? Firms usually tend to learn from the experiences of firms in the same industry. In this case, OSHA’s standards and inspection frequency are quite specific to industry, so the press release content was likely most relevant to facilities in the same sector. OSHA distributed its press releases to local rather than national news outlets, contributing to the regional impact.

Stakeholders Push Companies to Respond

Bad publicity alone isn’t enough to create change, however. Companies shift behaviour when stakeholders are able to use the information to advocate for change.

In the OSHA case, organized labour was the key stakeholder group. After a press release was issued, facilities in areas with strong unions improved their compliance. But facilities in areas where unions are relatively weak showed no improvement. “Workers need to be able to use the information about employers’ safety record to respond in costly ways,” explained Johnson. “If workers lack bargaining power, they may have little scope to leverage a press release to make demands from their employer.”

OSHA press releases likely provided valuable new information for workers. “There’s a lot of evidence that workers are not fully informed about how hazardous or dangerous particular employers are,” Johnson explained.

A different study illustrates shows how information can drive performance improvements when stakeholders have power. Researchers Artur Kalnins and Glen Dowell (Cornell University) studied the Toxics Release Inventory (TRI), which requires U.S. facilities to report the toxic chemicals they release into the environment. The TRI led to much larger reductions in toxic releases for facilities located in higher-income areas. “In richer communities, residents can put more pressure on companies to clean up,” the researchers said. “Lower-income communities don’t always have the resources to push back effectively.”

For Change, Share Information and Empower Stakeholders

Information matters. Companies learn from the experience of their peers. An intervention at one company can spark action in others, as has happened in the MeToo and Black Lives Matter movements. Publicity – from any source – can be a valuable, and relatively cheap, tool for driving change across an industry.

Stakeholders make the difference.  Bad publicity alone may not get managers to undertake needed change. Active stakeholders make the difference, and perhaps no stakeholder is as central as employees. Giving them a genuine voice can ultimately bring the company to a better place.

Read the research: Johnson, M.S. 2020. “Regulation by shaming: Deterrence effects of publicizing violations of workplace safety and health laws.” American Economic Review, 110 (6): 1866-1904.