Corporate misconduct often goes unreported due to media interests

Photo: Jason Wong

Over the past few years, it’s felt like society has turned a corner in many respects. Organic movements for change like the #MeToo initiative in 2017 is just one of many examples. Young adults are more conscious than ever about environmental and ethical concerns, especially when it comes to the behavior and conduct of corporations and large businesses.

Disturbingly, a new study conducted at the University of Cologne and Tilburg University has found evidence that a significant portion of corporate misconduct goes unreported by the news media to protect their own interests. Examples of such misconduct encompass environmental offenses, workplace harassment and misconduct, general corruption, and insider trading.

Corporate or workplace scandals usually mean big business for news outlets. These stories always garner lots of clicks, views, and subscriptions. Why, then, would some choose not to run certain stories? According to the study’s findings, it often comes down to advertising partnerships.

When a scandal is exposed to the public it usually spells doom for the implicated company and its shareholders, or more specifically, a major loss of money. So, if a media outlet is presented with a scoop that may potentially do serious harm to one of their top advertising partners, it’s unsettlingly common for that story to stay on the shelf so to speak.

Besides advertising, researchers also discovered that media outlets, such as newspapers or magazines, are much more willing to report on the misconduct of foreign businesses operating within their country. When the scandal involves a home-grown corporation, however, editors are far more hesitant to run the story.

“Our results call into question the self-proclaimed independence of the media. Among other things, it was astonishing how much more frequently the misconduct of foreign companies is reported, while in comparison, domestic companies are less frequently the subject of CSI (corporate social irresponsibility) reporting,” comments Professor Dr. Marc Fischer in a press release.

“Besides politicians, who sometimes behave opportunistically, the media exert a great deal of pressure and demand compliance with the highest ethical standards and social norms from public figures and companies. Our research on CSI reporting shows that media companies themselves do not always adhere to the high ethical standards they demand of others,” Dr. Fischer adds.

Dr. Fischer and Dr. Samuel Stäbler took the lead on this research project and analyzed coverage of 1,054 CSI events by 77 leading media outlets across five nations (USA, France, Mexico, Great Britain, Germany). Their work was quite extensive, covering over 50,000 news articles.

More specifically, if a media outlet enjoys a close advertising partnership with a certain company, the probability of that source reporting on said company’s misconduct drops to less than 10%! Meanwhile, researchers also noted that twice as many newspapers report scandals involving foreign brands operating within their country.

It’s also worth mentioning that liberal news sources tend to report on corporate irresponsibility more often in general than conservative news outlets.

Another interesting finding: in many cases, the editors of these newspapers and outlets are either unaware or in denial of the situation. A number of high-ranking editors for German news outlets were interviewed for this study, and all of them claimed the highest of standards and integrity when it came to reporting on business scandals. Unfortunately, the researchers’ findings told a drastically different story.

These scandals, and the subsequent amount of news coverage they receive, have a significant trickle-down effect on the financial sector. According to the study’s calculations, the average U.S. stock market loss due to a corporate scandal is $321 million dollars. Most of the time, though, the market only reacts in this manner if at least four major news outlets pick up on the story. If the people in charge of these news sources own stock in some of these corporations, it doesn’t take a rocket scientist to figure out they probably won’t want to break a story.

In general, it’s hard to argue that corporations and big businesses aren’t being placed under a larger microscope these days. Still, this study makes it clear we have a long way to go before all major institutions are treated equally when it comes to respecting the environment, the law, and their employees.

The full study is set to be published this May in the Journal of Marketing.

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