Protests and Publicity Impact Business Norms

The voices of activists booming from megaphones on the picket line have a significant impact on big-name corporations and investors, according to a recently released study by Prof. Sarah Soule, sociology. In the report, “Social Movements as Extra-institutional Entrepreneurs: The Effect of Protest on Stock Price Returns,” Soule examines how media outlets help both businessmen and their outspoken, sign-wielding opponents.
“What entrepreneurship and social movements have in common is that they’re both trying to change the status quo,” said Brayden King, Assistant Professor of sociology at Brigam Young University, who collaborated on the study with Soule. King said that by nature, both protesters and entrepreneurs are attempting to change the norms of business.
“In the literature on social movements there’s a burning question on how protests matter, and whether or not they matter,” said Soule. She explained that the study focuses on the impact of social protest on corporations.
The research for the final report involved pouring over thirty years’ worth of New York Times articles and matching up instances of social demonstration with the corresponding stock price of the targeted corporations. Over a decade ago at the University of Arizona, Soule began collecting data on social protests between 1962 and 1990, which she eventually combined with King’s dissertation on how corporate acquisitions effect stock prices.
“We originally wanted to choose a paper from every region of the country, but considering that we’re still working on updating the data just from the New York Times, that didn’t work out,” Soule said.
Due to time and money constraints, the researchers used the New York Times, which Soule referred to as “the gold standard,” to represent all forms of media. The study did, however, refer to the Washington Post and the Wall Street Journal as a way to double check information. The study claims that the extent of the decline in stock price depended on the space allotted to the protest on the pages of the newspaper.
“If it was just a small mention of the protest in the back pages of the New York Times, there wasn’t much effect. Generally, the more paragraphs in the paper, the greater the effect,” King explained.
Despite the fact that the data ranges from 17 to 45 years old, some believe the study speaks to a current phenomenon in the relationship between American investors and social activists.
“This data captures the time period that many describe as rampant corporate greed in America; it’s not a time period that you’d think corporations would be worried about their image,” said Prof. Wesley Sine, management, who specializes in social protest and industry evolution.
Sine considers the study’s findings more compelling due to the time period of the data. He said image-consciousness in the business world is a modern trend, which might have skewed the results and masked the effect that protests have on investors.
“In the late 1960s people really began to find their voice,” Sine explained.
One of the demonstrations cited in the study occurred in 1970, when 18 teenagers from an anti-war group known as the “Yippies” protested at Disneyland, causing the park to shut down for a number of hours on the night of Aug. 6.
“The youths, who were participating in what was called a Yippie ‘invasion’ … were arrested, mostly on charges of disturbing the peace,” according to the New York Times.
The study found that on the day of the protest, however, the stock price of Walt Disney dropped 4 percent below its expected return based on the market at that time.
Another instance of social activism mentioned in this report happened at UC Berkeley, when students protested in 1989 because General Dynamics, a military contractor, was recruiting on campus. On the day of that protest, the stock price of General Dynamics dropped one percent.
“A one percent decline translates to millions of dollars. These numbers are not thousands of dollars — they’re millions in lost capital,” King explained.
In the abstract, the study asserts that social protests appeal to “a wider audience than the decision-makers operating ‘behind closed doors,’” by reaching the public through the pages of newspapers across the country like the New York Times. On the other hand, however, the report points out that the media has the power to either cripple a corporation or shield it, preventing picket signs from translating into lost dollars.
“The media is a very important communicator of corporate image. If the company has had a lot of media coverage prior to the protest, it’s not likely to be as effective, and the companies are less vulnerable to attacks,” King said.
Soule plans to use the findings from the study in her next social movements class for undergraduates. Currently, both she and King are working on expanding the data to bring it up to date and include more recent social protests.
“Right now there’s a movement in the investment world to not invest in companies that are doing bad things…in today’s world, people are becoming very careful about demonstrating that they’re ethical corporations and good citizens,” Sine said.