The COVID-19 pandemic, beyond taking hundreds of thousands of lives in the United States and upending large swaths of the economy, has accelerated the debate over the role of corporations in society.

Chicago Booth’s Emanuele Colonnelli and Niels Gormsen find that this could pose a risk for companies. The researchers document a dynamic relationship between corporate behavior and economic policy, in which public support for regulations or bailouts is tied to what the researchers call “big business discontent.” If Americans across the political spectrum believe large companies aren’t doing enough on behalf of workers, communities, and the environment, they will return the favor by not supporting corporate-friendly policies. Indeed, that’s what the research suggests is the case now.

“Large corporations undoubtedly have power. Citizens vest this power in them in the hope that doing so is economically efficient but also under the expectation that corporations not misuse their power and work to support society as a whole,” write Colonnelli and Gormsen. “If corporations fail to meet public expectations, they will be in breach of the social contract and will face public opposition.”

The 2008–09 financial crisis, Great Recession, and widening inequality have contributed to public discontent. So now, how close or far are companies from breaching the social contract? The researchers studied how public perceptions of large companies influenced support for corporate bailouts during the first wave of the COVID-19 crisis, when the stakes and public engagement were high. On May 5, 2020, they surveyed about 6,700 US citizens with a broad range of backgrounds and political views—over 90 percent responded within a week—and asked questions that touched on a number of environmental, social, and corporate governance areas, from executive pay to corporate tax rates.

Respondents shared what they thought corporate policies were, versus what they thought they should be—with the difference being the level of big-business discontent. For example, respondents believed that 70 percent of large companies donate to political campaigns, though less than 30 percent, the respondents felt, should make such contributions; likewise, respondents thought only 40 percent of companies now disclose their carbon emissions but believe fully 70 percent should do so.

A measure of big-business discontent

Survey respondents indicated that companies should improve their performance across several environmental, social, and corporate governance areas.

While all respondents perceived that corporations were falling short on various ESG fronts, liberals expressed “significantly stronger” levels of discontent than conservatives, the researchers observe; older, white, and female respondents tended to be more aggrieved too. When people are unhappy with corporate America, there is less public support for bailouts and more demand for tougher terms that come with financial assistance, Colonnelli and Gormsen add.

To establish a causal link between discontent and distaste for bailouts, the researchers showed the respondents a professionally scripted control video defining specific corporate policies, followed by additional pairs of treatment videos illustrating those policies in either a negative or positive light. For instance, while one video emphasized that there are fewer women relative to men in executive and board positions, another stressed that the number of women in those positions has been on the rise in recent years.

Both sets of videos elicited a greater level of big-business discontent—as well as less support for corporate bailouts—among liberals and conservatives, the researchers find. “Any video that talks about the nexus of big business and its impact on society acts as a trigger, leading to a strong negative reaction expressed through policy preferences,” says Colonnelli. “Simply put, you make people think about something they dislike, and that thought influences their choices.”

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The researchers also showed a subset of respondents a separate treatment video in which leading economists, of all political views, professed support for bailouts during the crisis. While respondents expressed more support for bailouts after watching the video, the size of that positive effect was less than half the size of the negative effects produced by the previous negative treatment videos. A follow-up survey with one-third of the respondents a week later yielded similar (though less pronounced) overall results, the researchers find.

Recognizing that self-reported beliefs don’t always reflect a person’s actual behavior, the researchers ran a final test, in October 2020, asking nearly 1,700 new respondents if they would participate in various activities in support of corporate bailouts—from signing a petition (on the website to sending a ready-made email to their senator of choice. In this experiment, half the respondents watched the control video, and half watched a negative-treatment video. Those who watched the negative-treatment video were less likely to sign petitions and send emails than those who watched the control video.

The findings could help explain some of the policy challenges that companies are currently facing, including politicians’ increasingly tougher stance on large technology companies such as Amazon, Facebook, and Google, argue the researchers. And they suggest that companies might want to fortify the social contract by taking such actions as reducing carbon emissions, fostering workforce diversity, and reducing wage inequality. The researchers suggest that such actions would be an investment of sorts in future policy: “Corporations’ investment in environmental, social, and governance initiatives, and in the marketing of such initiatives, might be driven by the importance of keeping a good relationship with society that can prove valuable in a time of crisis.”

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