While many companies engage in misconduct, only a few garner the kind of media attention that produces big scandals. Why does it happen to some firms but not others? Jung-Hoon Han, Tim Pollock and Scott Graffin write that misconduct by leading companies produce scandals when peers of the same industry have committed similar acts. When the same misconduct comes from equally large companies, but in other industries, scandalisation is less likely.

Although there is a common perception that the media acts as a watchdog, rooting out and reporting on corporate misconduct, much corporate wrongdoing goes unreported. But this is not due to journalistic laziness. Journalists face constraints that limit the number of stories they can cover at any given time. This means they focus on covering what they think are the most newsworthy topics.

What fuels journalists’ perceptions of newsworthiness? In our recent paper, we argue that journalists expect readers to be interested in high-status firms’ wrongdoing – whether due to their feelings of betrayal, or the guilty pleasure of watching the highly-placed fall from grace. The wrongdoer’s high status makes them significant; and since we hold them to a higher standard, their behaviours – especially their negative behaviours – are of general interest. Thus, high-status firms attract more attention for the same misconduct others may engage in and are blamed to a greater extent. This helps explain why we frequently observe esteemed companies at the heart of corporate scandals.

However, not all high-status firms’ misconduct is scandalised, and it’s not because some of them are better than others at “managing” the media. Rather, it’s because of situational factors that create the easiest story for the media to tell.

The nature of status perceptions

The scandalising effect of status depends on the context in which the misconduct occurs – specifically, who is engaging in the same misconduct. Status perceptions are relational, and we tend to believe that elites share some common traits, values and practises. When it comes to negative evaluations, we are also quick to accept the trope that corrupt elites conspire to cause societal harm for their own benefit. Other large firms’ behaviours provide the context for audiences to evaluate the current misconduct of focal high-status companies.

Further, journalists do not merely report facts – they are storytellers. And they want to write stories that attract and intrigue large audiences. Crafting a convincing and interesting narrative requires building on their audiences’ tastes and beliefs. When a rash of high-status firms’ misconduct occurs, the public is likely to be interested, and it’s easy to tell an engaging story based on their similarities as elites.

However, although they share some similarities as elites, they may be high-status in very different contexts, and thus for different reasons. This makes a story based on their commonalities harder to tell. If, however, the high-status actors share other similarities and operating behaviours, as do firms in the same industry, the story becomes much simpler and clearer.

For example, if a bunch of large tech companies like Google and Meta engaged in the same misconduct as Twitter and Walmart, the media would be more likely to report on and scandalise Twitter’s misconduct than Walmart’s. It’s easier to tell a story based on high-status tech companies’ all doing the wrong thing than to also try and lump a retail firm into the story. The same is true if the misbehaving firms are in a lot of different industries. The harder it is to identify a pattern or set of similarities that lets journalists tell a simple story, the lower the likelihood that any one firm’s misconduct will be scandalised.

Scandalising data breaches

Our data consisted of all data breaches involving publicly traded US firms disclosed during 2015-2018. Data breaches have given birth to some of the largest corporate scandals in recent years, including the 2016 Yahoo! breach, the 2017 Equifax breach, the 2018 Facebook-Cambridge Analytica scandal, and the 2018 Marriott breach. Despite the seemingly weekly proliferation of data breaches exposing thousands and sometimes millions of customer accounts, most data breaches (62.5 percent in our sample) were not publicised.

Our analysis revealed that while the media is more likely to scandalise data breaches in high-status (versus non-high status) firms, the risk of being scandalised is almost tripled when other large companies within the same industry had also been breached. This means that when large hotels like Hilton and Hyatt experienced data breaches, for instance, the risk of Marriott’s data breach being scandalised is much elevated. However, the effect of being high-status was wiped out when the other equally high-status firms experiencing data breaches were in other industries. That is, a series of large hotel chains’ data breaches could result in neglecting the data breach involving a high-status retailer or tech company because it did not fit into the emergent industry-oriented narrative.

Implications

Our goal, of course, is not to advise firms on how to avoid having their bad behaviour scandalised. Understanding what attracts scandalising media attention, however, can provide some insights into whether negative publicity is likely, and how to handle it. Firms may be able to alleviate the public’s concerns by elaborating on how they differ from other misbehaving industry leaders and why their misconduct is not indicative of an industry-wide failure. And if other high-status wrongdoers are in other industries, their best course of action is likely to say nothing, so as not to attract more attention. From a more preventative perspective, firms should be cautious about adopting other high-status firms’ practices, which they often do, and make sure they are not carelessly engaging in potentially damaging behaviours just because “the cool kids” are doing it.

• This blog post is based on Now You See Me: How Status and Categorical Proximity Shape Misconduct Scandalization, Academy of Management Journal.
• The post represents the views of its authors, not the position of LSE Business Review or the London School of Economics.
• Featured image provided by Shutterstock
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