Playing the Boycott Game
by Ty Clauss | published Apr. 12th, 2017
There is one essential and uncomfortable truth behind boycotts. Money matters; it matters a whole lot. As much as many hate to admit it, money has a huge impact on our lives and the lives of the seven billion people on the planet. Financial security is a catalyst for opportunity, alleviates distress and is simply enjoyable. The power and influence of money, however, extends far beyond the person who possesses it.
Each day the aggregation of thousands of buying decisions decide which companies thrive, where bankers invest and possibly which companies lay off employees. Whether we like it or not, the dollars we spend shift the balance of the global economy, not just the balance of our bank account. Value is in the eye of the buyer. So as long as we have that power, why not wield it wisely?
This is essentially the argument behind boycotting. If organizations are truly so reliant on buyer behavior, then buyers do influence organizations. Research out of the Wharton School of Business at the University of Pennsylvania, found that boycotts were successful in changing corporate behavior in 24 out of 90 instances. On a more macro scale, boycotts have seen success as well. Shortly before becoming nominated as vice president, Mike Pence passed a “religious freedom restoration” bill in Indiana. The bill was seen by most major media outlets as an encroachment on LGBTQ+ rights. American Airlines, Apple and Angie's List were among the companies that protested the bill. Withdrawal of business by the many companies that protested resulted in an estimated $60 million dollar loss for Indiana. In reaction, Pence was forced to push through an additional bill that would help maintain the security of LGBTQ+ rights. On the other hand boycotts against the state of North Carolina for refusing to amend legislation on restroom laws have not been successful. Despite companies as large as the NBA — who moved All-Star weekend from Charlotte to New Orleans — expressing their distaste, there still has not been legislative action. Most recently the NAACP is threatening to suit the state in one last attempt to solicit a response.
It is worth pointing out why the financial ramifications of a boycott sometimes work and sometimes don’t. Leadership in organizations, especially in large organizations like the state of Indiana, often have a laundry list of stakeholders and priorities. Boycotts are only one pressure in a sea of forces that dictate both state legislature and strategic decisions within companies. If North Carolina reversed their legislation is it possible that they would simply have a different set of boycotters, or a different set of legal problems all together? If a company opted for a greener supplier would the difference in price affect their ability to remain competitive? These are reasonable concerns, if not satisfying excuses for lack of action. Add on a few dozen other concerns that are all inter-related and making a decision can be far more complex than it seems. Thus companies often opt for inaction and press-releases over large scale change.
Despite that fact, consumers may find comfort in research from Stephen Pruitt of the Henry W. Bloch School of Business. Pruitt found a correlation between market valuation and the occurrence of a boycott. Essentially, even if the company isn’t taking action, the analysts on Wall Street are. Furthermore, many boycotters end up as loyal customers for the competition as they search for substitute goods. Because companies invest so much money into branding and customer relationships, the effects of losing customers can be fairly significant, if not significant enough to create a shift in policy. Pruitt summed up the situation by comparing companies to bullies. If you can’t get them to change, at least you can “give them a bloody nose.”
While the notion of standing up to the bad guys is exciting, the approach certainly has its limits. A series of social justice apps that seek to give consumers information about the political leanings of executives might take things a little too far. Voting with your wallet is one thing, but making buying decisions based on the political tendencies of executives is a bid far-fetched. Unless, of course, the CEO in question happens to be running for the president. In general, it is safer to worry about the integrity of a product rather than the party a board member is registered in.
As with most things, there is a time and a place for boycotts. While not every boycott gains enough traffic to go mainstream, and not every mainstream boycott solves the problem it sought to resolve, boycotts can be a useful tool for holding companies accountable to a higher ethical standard.