Reputation, boycotts and share price

February 16, 2012

Reputation, boycotts and share price

Just was forwarded an interesting study out of Northwestern’s Kellogg school. It found that the share price of a company that is being boycotted drops nearly one percent for EACH day of national print media coverage. Ever wondered what happens when those protesters zero in on your company and tell people not to buy your products? Often I will hear the response, “The boycott is not affecting our sales so let’s not worry too much about this.”  However, the research uncovered that perhaps your sales are not being affected, but watch out for your reputation and stock price. Assistant Professor Brayden King found that Day One may not be as much a problem (decline of one half of one percent in share price) but there is an average decline in share price of 0.7 percent for EACH day afterwards that the company remains in the national print media spotlight.  After looking at 177 firms who were boycotted over several years (1990 to 2005), King concludes that there is a clear link between reputation and media coverage. And when you think of today with the Internet, whoah.
I liked this fact — about 25% of those companies generated a concession from the targeted company.  What does that say about the other 75%? Perhaps there are some behind the scenes negotiations that we are not privy to. And clearly companies stuck to their position if they felt they were right.

Also liked this fact. King used the Fortune Most Admired Companies ranking (one of my favorites) and found that boycotted firms with a high reputation ranking generated 4.4 times the coverage generated by boycotted firms that were unranked, three times the coverage of those in the lower quartile and six times those in the middle ranking group. Essentially, the bigger you are and the more admired, the greater the coverage when boycotts land on your door. Like I often say, when you make it to the top of your industry in the Most Admired, you might as well paint a bulls eye on your back (or logo).

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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