Social movements like #MeToo and #BlackLivesMatter, powered by social media, have given rise to heightened corporate activism on social issues. While these movements have drawn attention to the importance of addressing diversity issues for the workforce rather than simply at the board or even management level, corporate responses to these movements have unfortunately been short-sighted. As I argue in a recent paper, when companies play to the gallery and make decisions to address social media criticism in the moment, they might make temporary reputation gains, but open themselves up to future, more serious issues. While the conventional narrative of short-termism, i.e. activist investors (typically, institutional investors like hedge funds) pressure management to maximise profits in the short-term and prevent the corporation from pursuing long-term goals that benefit all stakeholder, is well recognized, short-termism in equity issues is something that we need to pay more attention to.

Whether companies fire an executive who is the target of social media pressure or issue a statement in support of some cause or condemning some action in response to demands of the online crowd, such actions are not likely to help the company do better on diversity issues in the long term. On the contrary, it may be counter-productive. For instance, such actions can result in an environment where employees are afraid to voice a view that is different from the majority view, or cause employee dissatisfaction when they see that the company is not following through on its promises. Companies need to recognise that in most cases, the social media outcry only reflects the views of a small but vocal minority. Instead of catering to this group, which is probably only interested in the company for a short period of time, the company should work towards addressing its internal issues in a manner that addresses the concerns of its employees. Using tools like employee surveys to identify issues of firm culture and then introducing measures to address these issues will be far more helpful. Such measures will bear rewards over a period of time by ensuring that misconduct of any sort can be addressed ex ante, and by promoting talented employees.

Beyond working on improving firm culture, boards and management should be prepared for social media activism on various issues. While these external pressures cannot be controlled, what companies can control is their own conduct. Clearly stating some guiding ethical principles and acting accordingly will be important in an environment where corporate actions are susceptible to online criticism that can prove costly. Such a statement of what social issues the corporation will prioritise and address will be firm-specific. Take the example of SkyUp Airlines, a Ukrainian Airline which announced in October 2021 that it would replace the old uniform for flight attendants with a comfortable alternative that includes trainers instead of high heels. This decision was based on a survey of its employees which revealed that female employees were fed up with the previous uniform which included tight blouses, pencil skirts, and high heels. Such tailored solutions would allow companies to distinguish themselves from their competitors. The competition could even lead to innovative solutions to social problems. This may still not prevent antagonising some individuals who are not well-informed and whose views may be coloured by their distrust of corporations. However, in the long run, those stakeholders that are regularly interacting with the corporation, employees and suppliers, will spread positive information about the company.

From the perspective of social movements, it is more helpful to their broader causes if corporations genuinely work towards the goals sought to be achieved, rather than simply bowing to social media pressure. Insincere corporate initiatives on social justice issues are not uncommon, and have come to be known as woke-washing (similar to greenwashing in the context of environmental action).

 

Akshaya Kamalnath is a Senior Lecturer at the Australian National University College of Law and blogs at The Hitchhiker’s Guide to Corporate Governance.