Social media was abuzz last week with three big missteps by major corporations. Pepsi unveiled a failed television advertisement intended to render homage to the social protest movement in the U.S. but that instead trivialized the protests and appropriated their imagery for financial gain; the New York Times revealed allegations of sexual harassment against Fox host Bill O’Reilly and that the host and Fox paid out nearly $13 million to five women in exchange for their silence; and United airlines dragged a boarded passenger, David Dao, off a plane in order to allow its staff to catch a flight to Louisville. It is tempting to think that the moral outrage expressed on social media was a fleeting fit of slacktivism with little purpose. But, it is more than that.
Consumers are demanding that these corporations do the right thing. Even though United acted within the legal limits of its contract of carriage, and Pepsi’s ad was within the realm of artistic expression, consumers are calling out corporations for putting profit-making ahead of all else. The moral outrage indicates that consumers understand the social purpose of corporations to extend beyond pure profit-making and include a moral obligation to corporate social responsibility.
Corporate social responsibility (CSR) encompasses the social and moral obligations that the business sector has to the community in which it is embedded and involves the consideration of a triple bottom-line of economic, environmental and social accountability. Since the 1990s multi-national corporations (MNCs) have voluntarily formulated codes of conduct that regulate their performance. MacLeod demonstrates how the idea of CSR spread in the business sector and how now most businesses, governments and global consumers take-for-granted the expectation that MNCs should demonstrate that they behave in an ethical manner.
The consumer outrage directed at United was an expression of this expectation that United should behave ethically; just because it can eject a paying passenger from his seat does not mean that it should. A clever experiment conducted by Morning Consult, suggests that this moral outrage translates to consumer behavior. The experiment presented participants with two identical flights, individuals who said they had heard about the United news in recent weeks strongly preferred flying with another airline even when the flight cost more and included a layover. Participants who had not heard about the dragging incident chose the cheapest flights with no layover. The experiment suggests that consumer moral outrage affects calculation of self-interest.
What’s more, companies themselves are voluntarily holding themselves to ethical standards. Over 52 advertisers have voluntarily pulled their advertisements from O’Reilly’s show and their public statements use moral reasoning to justify their decisions. This morning’s news suggests that O’Reilly is losing support from the top echelons at Fox News and its parent company, 21st Century Fox, will discuss his fate at a board meeting on Thursday. In the week since the dragging incident, United, American and Delta have voluntarily changed their policies regarding passenger compensation and deboarding in the event of overbooking.
Self-regulation is not uncommon when firms anticipate government regulation. Last week, the Department of Transportation announced that it was looking into the United incident, so these airlines might be pre-empting government regulation. However, the Trump administration’s deregulatory stance and the 2013 mega-merger of American and US Airways suggest that the federal government will not regulate the industry any time soon.
Firms also self-regulate to differentiate themselves from “bad apples,” in a competitive marketplace. However, four airlines, including United, American and Delta, operate as a virtually unregulated cartel, as Kuttner argues, with little competition and solid monopolies in “fortress hubs.” This oligopoly is so strong that even though United stock lost value as the public relations debacle unfolded, it rapidly recovered. Despite the bad publicity, United shareholders understood that with little to no competition, consumers have nowhere to turn. The timing of the policy changes announced by United, American and Delta is therefore notable; these policy changes were enacted after United’s stock rebounded and it seemed to have escaped financially unscathed.
Of course this voluntary regulation doesn’t mean that all of a sudden corporations are putting morality before profits or becoming altruistic, but it does show that conforming to ethical expectations and norms is important to MNCs’ legitimacy.