Through the mud or in the boardroom: Examining activist types and their strategies in targeting firms for social change
| Author | Michael Lenox,Charles Eesley,Katherine A. Decelles |
| Published date | 01 December 2016 |
| Date | 01 December 2016 |
| DOI | http://doi.org/10.1002/smj.2458 |
Strategic Management Journal
Strat. Mgmt. J.,37: 2425–2440 (2016)
Published online EarlyView 5 January 2016 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2458
Received 4 March 2015;Final revisionreceived 10 July 2015
THROUGH THE MUD OR IN THE BOARDROOM:
EXAMINING ACTIVIST TYPES AND THEIR
STRATEGIES IN TARGETING FIRMS FOR SOCIAL
CHANGE
CHARLES EESLEY,1*KATHERINE A. DECELLES,2and MICHAEL LENOX3
1Stanford Technology Ventures Program, Management Science & Engineering
Department, Stanford, California, U.S.A.
2Rotman School of Management, University of Toronto, Toronto,Ontario, Canada
3Darden Graduate School of Business, University of Virginia, Charlottesville,
Virginia, U.S.A.
Research summary: We examine the variety of activist groups and their tactics in demanding
rms’ social change. While extant work does not usually distinguish among activist types or their
variety of tactics, we show that different activists(e.g., social movement organizations vs. religious
groups and activist investors)rely on dissimilar tactics (e.g., boycotts and protests versus lawsuits
and proxy votes). Further, we show how protests and boycotts dragcompanies “through the mud”
with media attention, whereas lawsuits and proxy votes receiverelatively little media attention yet
may foster investor risk perceptions. This research presents a multifaceted view of activists and
their tactics and suggests that this approach in examining activists and their tactics can extend
what we know about how and why rms are targeted.
Managerial summary: The purpose of this study was to examine how different types of activist
groups behave differently when targeting rms for social change. We nd that traditional activist
groups rely on boycotts and protests, whereas religious groups and activist investors rely more
on lawsuits and proxy votes. Additionally, we nd that protests and boycotts are associated with
greater media attention, whereaslawsuits and proxy votes are associated with investor perceptions
of risk. Copyright © 2015 John Wiley & Sons, Ltd.
INTRODUCTION
Activists frequently attempt social change by
using tactics to try to inuence organizations’
social practices (Baron, 2005; Eesley and Lenox,
2006). Given that activists lack formal power
to change corporations, and that organizations
are often unresponsive to activists’ requests
(King, 2008), scholars have been especially
curious about how activists successfully inuence
Keywords: activism; social movements; stakeholder the-
ory; extra-institutional; sustainability
*Correspondence to: Charles Eesley, Huang Engineering Center
Rm 355, Stanford, CA 94305, U.S.A. E-mail: cee@stanford.edu
Copyright © 2015 John Wiley & Sons, Ltd.
corporations to attend to social issues (such as
racial diversity or environmental sustainability,
e.g., Davis and Zald, 2005; Eesley and Lenox,
2006; Rojas, 2006, 2007; Walker, Martin, and
McCarthy, 2008). Research has found that social
movements can indeed affect a rm, including its
social practices (Eesley and Lenox, 2006; King,
2008; King and Soule, 2007) and stock prices (King
and Soule, 2007). Recently, scholars demonstrated
that activists can also impact analysts’ perceptions
of environmental risk, which are a professional
assessment of a rm’s environmentalvulnerabilities
(i.e., a potential liability due to awed environ-
mental practices), and resultant potential economic
consequences (Vasi and King, 2012). Risk analysts
2426 C. Eesley, K. A. DeCelles, and M. Lenox
perceive that shareholder activists’ interests are
potentially aligned with those of the rm and its
shareholders; as such, shareholder activism is
believed to send a strong signal to investors about
the potential liabilities of ignoring rm environ-
mental behavior (Vasi and King, 2012). Thus,
analysts’ ratings of rms’ environmental risk can
indirectly have a negativeimpact on rms’ nancial
performance (Vasi and King, 2012) via changing
the perception of risk among potential investors.
Scholars in this area have examined the ques-
tion of which rms are more likely to be targets of
stakeholder activism (King, 2008; Rehbein, Wad-
dock, and Graves, 2004), and found that activists
tend to target larger, consumer-oriented, and more
visible rms in order to draw media attention
to the cause (King, 2008; Rehbein et al., 2004).
In addition to choosing which rms to target,
activist groups also choose from a number of tac-
tics (Frooman, 1999), including letter-writing cam-
paigns (Smith and Cooper-Martin, 1997), share-
holder resolutions (Frooman, 1999), and boycotts
(Paul and Lydenberg, 1992), which have the poten-
tial to inict different operational costs via public
relations expenses, legal fees, and managerial atten-
tion (Lenox and Eesley, 2009). Such tactics may
attract more or less attention and scrutiny from gov-
ernment regulators, and may also impact a rm’s
reputation and thus its ability to attract and retain
customers, employees, and shareholders. Further-
more, we know that the wide array of tactics used
against companies often vary in their level of effec-
tiveness (Eesley and Lenox, 2006; Giugni, 1998;
King, 2008). However, we know little about what
factors might guide an activist group’s choice of
tactic to use against a rm. In recent years, schol-
ars have suggested that rms can prot by reducing
costs from interference by activist groups through
greater attention to the impact of their operations
on society (Hart, 1995; Jones, 1995; Rowley and
Moldoveanu, 2003). Furthermore, research shows
that within an industry, managerial perceptions
about different stakeholders’ abilities to inuence
the rm on social issues vary widely (Henriques and
Sharma, 2005). Yet without greater knowledge of
rms’ likelihood of facing particular activists’ tac-
tics, it is difcult to ascertain more precise implica-
tions for rm strategy.
Moreover, not all activist organizations are the
same (Eesley and Lenox, 2006). Religious groups
and activist investors may use tactical inuence
tools to shape corporate approaches to social issues
(Eesley and Lenox, 2006; Vasi and King, 2012), but
their targeting behavior of rms has neither been
explicitly examined, nor compared to other activist
groups about which we know more (e.g., social
movement organizations). These different types
of stakeholders are growing in number and power
(Bhagat, Bizjak, and Coles, 1998), and might vary
signicantly in key variables, which are known to
affect the activism process, such as opportunity
structures, ability to effectively target corporations
for social change, or their sources of inuence over
the rm (Frooman, 1999; Henriques and Sharma,
2005). Thus, it is important to understand not
only whether rms are at risk of being targeted by
activist, and with what tactics, but also what types
of activists are likely to initiate particular targeting
behavior.
While previous research has been important in
establishing how activists successfully initiate cor-
porate social change and which rms they are likely
to target, we argue that this research is limited in
two fundamental ways: Scholars have generally not
empirically differentiated, rst, between the types
of activist groups involved, and second, between
their varied tactics. In fact, theory development
(e.g., den Hond and de Bakker, 2007; Frooman,
1999; Rowley and Moldoveanu,2003) has outpaced
empirical work examining the variety of activist
groups and their tactical choices. This oversight
by prior work may be due to disciplinary dif-
ferences; while social movement scholars tend to
focus on social movement organizations, and their
protests and boycotts (King, 2008; King and Soule,
2007), scholars in governance and nance litera-
tures are more likely to examine shareholder res-
olutions (e.g., Dimson, Karaka¸s, and Li, 2014).
Furthermore, methodological limitations exist for
scholars seeking to study such diverse phenom-
ena, such as lack of availability of comparable data
across stakeholder groups and across their tactics.
Importantly, some scholars have started to exam-
ine the managers’ varied perceptions of their dif-
ferent stakeholders (Henriques and Sharma, 2005;
Sharma and Henriques, 2005); however, there is
currently no empirical scholarship that examines the
various, objective actions taken by many different
stakeholder activists, and with a large database of
various actions across industries and rms in one
social movement. We seek to remedy these issues.
We examine these elements of the multifaceted
nature of stakeholder activism against rms.
We ground our inquiry in the recent scholarship
Copyright © 2015 John Wiley & Sons, Ltd. Strat. Mgmt. J.,37: 2425–2440 (2016)
DOI: 10.1002/smj
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