Recently, the Netherlands-based travel agency Booking.com announced that it will lay-off around 25% of their global workforce due to the ongoing Corona crisis - despite having secured a $4 billion loan in bonds from investors to alleviate the crisis’ impact. Interestingly, Booking.com’s behavior stands in sharp contrast to its reputation of caring for its employees. The company was ranked by Forbes on the “World’s Best Employers” list and claims in its annual sustainability reports to engage in corporate social responsibility (CSR) focused on improving employees’ well-being. Consequently, the discrepancy between Booking.com’s socially responsible reputation and its socially irresponsible behavior towards its employees drew sharp criticism from Dutch officials and consumers, damaging the organization’s reputation in the process. In our ongoing research, we examine the public’s reactions to transgressions as a function of the organization’s prior CSR reputation and the stakeholder group that is harmed by corporate social irresponsibility (CSI).

Corporate Social Responsibility & Irresponsibility 

Many organizations engage in CSR activities in order to gain a favorable reputation with their stakeholders by making voluntary contributions to the well-being of others (1). Prior research commonly distinguishes between internal and external CSR actions. While external CSR actions focus on stewardship towards the local community, the environment or consumers, internal CSR actions focus on stewardship towards the organization’s employees (2).

Despite their widespread commitment to socially responsible behavior, organizations are often observed to act against the interest of society, for example by polluting the environment, violating human rights, or laying-off employees while making large profits at the same time, as shown in the example of Booking.com. Contemporary research (3) defines such actions as corporate social irresponsibility (CSI) and shows that the public is willing to punish organizations engaging in CSI, consequently causing significant reputational and financial damage (4). Importantly, previous research highlights a lack of evidence regarding how CSI harms corporate reputation and which companies are most affected.

 Ongoing Research

In our ongoing research, we address these gaps by distinguishing between external and internal CSI actions. While internal CSI harms internal stakeholders, such as employees, external CSI harms stakeholders external to the organization, such as consumers, activist groups, or governments. We consider the relationship between CSR and CSI by asking whether the public reacts differently to CSI depending on an organization’s internal or external CSR reputation and the nature of the CSI. In the example of Booking.com, the organization built a reputation for internal CSR actions and subsequently engaged in internal CSI, harming the same employees they built a reputation of caring for. Consequently, the public perceived laying-off employees as a hypocritical act and responded accordingly. We believe that the question of who is harmed by a particular CSI plays a major role in how the public interprets, and reacts to, CSI.

Our research highlights the need for organizations to gain a deeper understanding of the public’s perception of organizations’ CSR reputation. When organizations are aware of their specific reputation for internal or external CSR, they can direct additional resources to prevent possible CSI that could harm stakeholder groups that the organization built a reputation of caring for. In our working paper, we valuably extend CSI theory and discuss practical implications on organizational strategy and crisis response for practitioners.

Are you interested in updates on our research, or do you want to share examples of corporate CSI and CSR? Feel free to contact us!

Peer Stiegert (p.stiegert rug.nl) is a PhD candidate at the Department of Human Resource Management & Organizational Behavior at the University of Groningen. His research focuses on public perception of organizational scandals, attribution theory and decision-making.

References

1. Aguinis, H., & Glavas, A. (2012). What we know and don’t know about corporate social responsibility: A review and research agenda. Journal of management, 38(4), 932-         

2. Farooq, O., Rupp, D. E., & Farooq, M. (2017). The multiple pathways through which internal and external corporate social responsibility influence organizational    identification and multifoci outcomes: The moderating role of cultural and social Academy of management journal, 60(3), 954-985.

3. Chen, Z., Hang, H., Pavelin, S., & Porter, L. (2020). Corporate Social (Ir) responsibility and Corporate Hypocrisy: Warmth, Motive and the Protective Value of Corporate Social Business Ethics Quarterly.

4. Sweetin, V. H., Knowles, L. L., Summey, J. H., & McQueen, K. S. (2013). Willingness- to-punish the corporate brand for corporate social irresponsibility. Journal of Business Research, 66(10), 1822-1830.