Collective shaming on social media is crucial in reducing corporate misbehavior — and society would be significantly worse off without watchdog platforms.
Social media, once seen optimistically as a force for unifying communities across the globe, is in hard times. Platforms, including Twitter, Facebook, and TikTok are regularly vilified as doing just the opposite — sending users to their echo chambers for volatile discussions among themselves. Regulators are intensifying scrutiny on them, investors are unhappy with roller-coaster returns, and users are questioning the value of the products as never before.
So the results of our recent research might come as a surprise. The study, The Monitoring Role of Social Media, demonstrates that social media platforms (and specifically Twitter) play a critically important role in keeping corporations accountable to customers, employees, shareholders, and other stakeholders, especially in an era where newspapers and other institutional checkpoints have withered.
Here are two examples of the social media-corporation dynamic in action.
1. In 2021, the anonymous Twitter account Brands Getting Owned posted images of Chipotle workers protesting wages and working conditions. Almost 20,000 retweets and two days later, the restaurant chain announced it was raising employee pay by $2 per hour.
2. In 2017, as United Airlines forcibly removed a passenger from an overbooked plane, fellow travelers fired up their cell phones to document the man’s “de-boarding,” which involved police, blood spill, and shouts of concern from other passengers. The resulting videos went viral, eventually sparking an apology from United’s CEO. The airline eventually settled a lawsuit brought by the passenger. In the same year, Delta and American also changed their policies for removing passengers from a flight.
Social psychologist Takuya Sawaoka said, “The internet now allows hundreds or thousands of people to participate in collective shaming, in a way that wasn’t possible before.” Few firms want to be paraded like queen Cersei on a very public walk of shame.
It’s not too far a reach to conclude that the negative consequences to society would be severe if Twitter or other social platforms like it shutdown.
Our findings demonstrate that increased social media activity helps deter a wide range of corporate violations, particularly those that are nonfinancial in nature and potentially of interest to Environmental, Social, and Governance investors, such as violations of environmental, consumer-protection, and workplace-safety rules.
When we began this work, no prior research documented that the presence of Twitter or other social platforms proactively reduced corporate misbehavior. Sure, tweets could motivate a business to reimburse a customer or change its practices after an event, but nothing to suggest that digital watchdogs could motivate better behavior before an incident.
To study the question, we used 3G (third-generation) network expansion to test our hypothesis. 3G access increases the likelihood of using social media, the number of hours spent on social media, and the range of types of shareable content. We studied incidents of corporate misdeeds in areas where 3G was being installed and were able to infer that misdeeds decreased in areas where 3G became available.
We focused on Twitter because it is one of the most popular social media applications, with over 330 million monthly users. Twitter also makes detailed micro-data available, provided the ability to analyze large-scale data, and includes geotags that allowed us to track where Tweets originated.
Using misconduct data from Violation Tracker, here is what our analysis revealed: In terms of economic significance, our estimates indicate that social media coverage was influential in decreasing penalties for misdeeds at local corporate facilities by nearly 13%. (Penalties declined because the number of incidents declined.) Furthermore, social media attention was responsible for decreasing facility-level violations by 1.8%. The effects are more pronounced for visible firms, which face higher expected costs associated with misconduct.
These estimates likely underrepresent the actual deterrence power of social media because they are based only on observed misconduct and do not capture reputational costs. Overall these findings are consistent with the view that social media is an effective monitor of corporate malfeasance.
In addition, our findings suggest that social and traditional media play a complementary role in deterring corporate misconduct. Reporters are regular consumers of social media and often use it as a tip sheet for possible stories. Meanwhile, social media users regularly find conversation topics in the thousands of new stories generated daily.
Our results should interest policymakers and regulators in technology markets.
While the current public debate primarily focuses on the harms of social media, such as the spread of “fake news” and disinformation, our findings highlight a benefit: its ability to reduce corporate misconduct by, in part, empowering citizens to monitor firms’ behavior.
This finding should cause a pause in regulators and policymakers who are considering whether or how to punish or regulate social media companies. For example, if Big Tech were to be split up, our study suggests that a potential unintended consequence would be for regulators to harm an information ecosystem that monitors firms. The resulting loss could be significant due to the lack of other media available to do this job.
More broadly, any social media platform regulatory intervention must balance costs and benefits. Our study is a first attempt to highlight some of the benefits of social media, helping regulators make better-informed decisions.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
