Protests Matter to Companies

(Illustration by Brian Stauffer) 

How do companies learn what issues matter to the communities where they are based, and what do they do with that information? A new study examines the connections between street protests near companies’ headquarters and the companies’ actions regarding issues targeted by protesters.

From 2017 to 2020, the Women’s March brought large and headline-grabbing protests to American cities, as crowds assembled to show their support for feminist causes and against the alleged misogyny of President Donald Trump. Three business-school researchers—Muhan Zhang, a PhD student at Penn State’s Smeal College of Business; Forrest Briscoe, a professor of management there; and Mark DesJardine, an associate professor of business administration at Dartmouth’s Tuck School—decided to analyze how companies reacted when Women’s March protests took place close to their headquarters. Specifically, did they name new female directors to their boards?

The three measured the scale of the protests by how many people attended and looked at the board compositions of all public companies in the S&P 1500 index to see how companies added female directors in the months after a march near their home offices. These protests weren’t anti-corporate in nature, and they didn’t single out particular companies, so their influence on corporate decision-making was not direct.

The study found that companies used the information they gained from the presence of Women’s Marches to favor nominating new female directors to their boards. The national attention to gender diversity within corporate leadership and on boards in particular led to an uptick in women being nominated to public-company boards: While 30.5 percent of S&P 1500 new director nominees in 2017 were female, in 2020 the percentage reached 44.1 percent. This trend particularly held in communities where Women’s Marches took place, the researchers found, with a relatively larger-scale protest positively correlating with public companies headquartered nearby nominating new women to their boards after the protests had come through town.

To determine the ways in which protests informed company officials about how the local community viewed an issue, the researchers also looked at the area’s existing political orientation. They hypothesized that in areas that had long been conservative, a feminist protest that brought demonstrators into the streets would be more surprising, and it would therefore jolt executives into realizing that they needed to do something about gender diversity on their board. They found that companies were in fact more likely to nominate new female directors if the presence and scale of Women’s March protests diverged from the community’s social orientation or from the company’s own previous orientation.

The research comes at an opportune time for corporate governance. In some states, such as Texas, companies that the government deems “too woke” are prohibited from doing business with the state government. For companies caught in this maelstrom, the lesson for managers is to consider how the company interacts with its stakeholders, from customers and employees to community members. If the community thinks the company doesn’t stand for what residents believe in, it could be difficult for the company to recruit new employees, retain its existing staff, or attract customers. That’s what companies are doing when they respond to protests, Zhang says.

“Our study does not provide any evidence that companies are stepping beyond this basic logic of business to somehow dole out corporate resources from the pockets of shareholders to those of stakeholders,” Zhang says.

One interesting finding of the Women’s March research is the degree to which board members focus on the company’s own headquarters location as a source of information for how people in the community are thinking about social movements and causes, even when the company has operations that are more geographically distributed, says James Westphal, a professor of business administration and strategy at the University of Michigan’s Ross School of Business.

“An important contribution of this study is to show that firms—even relatively large firms—are surprisingly responsive to protests in their local communities (i.e., the location of their headquarters),” Westphal says. “Given that many of the firms in their sample have stakeholders that cover a much larger area (larger regions, multiple regions, and even multiple countries), it suggests a kind of myopia in how firms make inferences about the social issues of concern among their stakeholders.”

Find the full study: “Corporate Boards with Street Smarts? How Diffuse Street Protests Indirectly Shape Corporate Governance” by Muhan Zhang, Forrest Briscoe, and Mark R. DesJardine, Administrative Science Quarterly, vol. 68, no. 4, 2023.

Read more stories by Chana R. Schoenberger.