04 May 2012  Working Papers

No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events

Executive Summary — This study examines the gatekeeping role of the media in determining which negative corporate events reach a broader audience. Jiao Luo, Stephan Meier, and Felix Oberholzer-Gee test the idea that investments in corporate social responsibility (CSR) create public good will, leading the media to treat companies with a superior CSR track record in a favorable manner. They find the opposite. Newspapers are more likely to report negative news about companies if the companies invested heavily in CSR. For example, oil companies that invest in clean energy face a greater risk of media coverage in the event of an oil spill. An analysis of the tone of media coverage shows that news reports are no more positive for CSR leaders than for the average company. Key concepts include:

  • As expectations about a company's performance rise with past investments in CSR, the cost associated with negative corporate events increases.
  • News editors favor two types of stories: surprising incidents and events that conform to widely-held beliefs.
  • Executives who wish to minimize the risk of media attention to negative events need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. Being in the middle of the pack generates the least amount of coverage.

 

Author Abstract

One of the benefits of Corporate Social Responsibility (CSR) programs, it has been argued, is that they build up a reservoir of public good will, shielding companies in times of trouble. In this paper, we test the view that CSR provides protection from public ire by analyzing the media's response to corporate crises. Our application is spills in the oil industry. We find the media far more likely to report accidents if they occur at a company with a superior CSR record. Rather than acting as an effective form of insurance, our results suggest that a strong CSR record can be a liability. Moreover, the tone of coverage is no less critical for organizations with a greener reputation. At the same time, firms with substantial past environmental problems are also more likely to find their corporate failings broadcast in the news. Companies hoping to minimize the risk of media attention to accidents need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. This result has important implications for thinking about CSR and the privately optimal level of such activities.

Paper Information