Responding to a societal crisis: How does corporate social responsibility engagement influence corporate reputation?

Abstract

While both an “insurance” and “penance” effect of corporate social responsibility (CSR) has been discussed within prior literature, it is unclear how a firm’s CSR engagement in response to a societal crisis such as the COVID-19 pandemic impacts its short-term and long-term corporate reputation. Drawing from case examples of firms’ responses to the recent COVID-19 pandemic and from relevant aspects of crisis management theory, expectancy violations theory, and signaling theory, this paper presents a conceptual framework of corporate reputation change during and after a societal crisis that describes how the direction and speed of a firm’s visible CSR engagement during a societal crisis can change its corporate reputation. Specifically, this paper suggests that firms who exceed stakeholder expectations with lower pre-crisis levels of visible CSR engagement have greater opportunities for increasing their short-term corporate reputations while firms with higher pre-crisis levels of visible CSR engagement are at greater risk for experiencing a decline in their short-term corporate reputations. These changes in short-term corporate reputations are expected to diminish over time, though this depends upon whether firms return to their pre-crisis levels of visible CSR engagement. Finally, building on the case examples and conceptual framework presented, this manuscript concludes with practical guidelines for managers of firms preparing to navigate future societal crises and provides an alternative pathway for both qualitative and quantitative inquiry that has the potential to illuminate important insights for both organizational studies and firms.

Introduction

With the emergence of the global COVID-19 pandemic, firms were faced with difficult strategic choices regarding their corporate social responsibility (CSR) engagement, which is defined as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams and Siegel, 2001: 117). While some firms have been shown to reduce both tactical and strategic forms of CSR engagement during an economic crisis (Bansal et al., 2015) and adopt a retrenchment approach in order to survive (Wenzel et al., 2020), during the initial stages of the COVID-19 pandemic some firms responded through corporate donations or by producing high-demand products that were outside the scope of their traditional business models (Manuel and Herron, 2020). As might be expected, firms with high (i.e., top 25) Corporate Citizen rankings were actively engaged in CSR efforts in response to the pandemic (Mahmud et al., 2021); yet, active CSR engagement was not limited to only those that had committed to CSR engagement prior to the pandemic. For example, 2290 CEOs worldwide committed their organizations to being accountable for their firm’s CSR engagement by joining the United Nations Global Compact in 2020, which was a net increase of 19% of firms engaged in this initiative compared to 2019 (UN Global Compact, 2020). In addition, 14 firms were newly named to the top 100 Best Corporate Citizens rankings in 2021 (Armon, 2021), suggesting that some firms engaged in CSR at greater levels during the pandemic than their pre-pandemic CSR efforts.

Prior literature examining firms’ CSR engagement during crises has proposed both an “insurance” and “penance” effect. The “insurance” effect suggests that a firm’s CSR engagement can buffer the firm from negative effects of corporate irresponsibility or organizational crises (Godfrey et al., 2009). On the other hand, the “penance” effect suggests that firms seek to repair a firm’s image following a negative event through CSR engagement (García et al., 2020; Kang et al., 2016). However, while prior literature demonstrates that a firm’s culpability in causing an organizational crisis can interact with stakeholder expectations and generalized favorability to influence a firm’s reputation and value (Nardella et al., 2020; Wei et al., 2017), societal crises are unlike organizational crises in that stakeholders do not have to evaluate to what extent the firm contributed to developing the crisis. Furthermore, societal crises are “an inevitable reality that all societies face” (Al-Dabbagh, 2020: 2), uniformly have the potential to leave substantial damage in their wake including “the breakdown of firms and industries, massive job losses, social precarity, and natural damages” (Wenzel et al., 2020: V8) and “come in many forms, including pandemics, earthquakes and other extreme events, requiring collaboration among organizations because joint action mitigates uncertainty and time pressures to ensure safety (George et al., 2016; Van der Vegt et al., 2015)” (Netz et al., 2022: 408). Finally, the impact of firms’ responses to societal crises is important to investigate given that such crises are part of the organizational experience that firms must navigate as firms play an increasing role in responding to disasters (Ballesteros et al., 2017; Wenzel et al., 2020) and engage in crisis-driven innovation (Netz et al., 2022).

Given that enhancing a firm’s corporate reputation, which is commonly defined as the overall assessment of a firm as “good” or “bad” (Dowling and Moran, 2012; Lin-Hi and Blumberg, 2018; Roberts and Dowling, 2002), is often cited as one of the primary goals of a firm’s engagement in CSR (Axjonow et al., 2018; KPMG International, 2011), firms are likely motivated to engage in CSR during a societal crisis. While prior management literature provides evidence that firms who violate their own high standards experience a greater penalty (e.g., Rhee and Haunschild, 2006; Zachary et al., 2021), considering the impact of a firm’s CSR engagement during societal crises on its corporate reputation is especially relevant in light of the “increased demand for CSR activities in response to the [COIVD-19] pandemic” (Manuel and Herron, 2020: 236). As such, this paper considers the reputation consequences of firms’ changing CSR engagement levels in response to a societal crisis as well as firms’ speed in responding to a societal crisis. Furthermore, these relationships are considered in light of firms deviating from their stakeholders’ CSR engagement expectations during a societal crisis. Finally, consideration is given to how the reputational changes experienced by these firms during the societal crisis are impacted once the crisis is resolved. In doing so, this paper utilizes crisis management theory, expectancy violations theory, and signaling theory to propose a conceptual framework regarding how a firm’s CSR engagement in response to a societal crisis impacts both its short-term and long-term corporate reputation. In addition, this paper also utilizes case examples of firms’ responses to the COVID-19 pandemic by leveraging the annual “just business behavior” rankings of firms listed in the Russel 1000 index published by JUST Capital, a nonprofit organization that “tracks, analyzes, and engages with large corporations and their investors on how they perform on the public’s priorities” (JUST Capital, 2022a: 1). These rankings are aimed at “reflect[ing] the performance of America’s largest publicly traded companies on the Issues that matter most in defining just business behavior today” (JUST Capital, 2022b: 1) and, in their rankings released in October 2020, approximately 11% of the 339 data points JUST Capital utilized to rank companies were specific to firms’ COVID-19 pandemic responses related to four categories: “Benefits & Work-Life Balance, Livable Wage, Workforce Investment Training, and Workplace Safety” (JUST Capital, 2021a, 2022c: 72). Notably, the rankings released in October 2020 did not include a metric for the speed of a firm’s response to the COVID-19 pandemic.

This paper contributes to the existing CSR, crisis management, and corporate reputation literature and provides insights to corporate managers in several ways. First, through integrating crisis management theory, expectancy violations theory and signaling theory to develop a conceptual framework of corporate reputation change during and after a societal crisis, this paper adds to a recent stream of literature examining how a firm’s CSR engagement interacts with stakeholder expectations (e.g., Nardella et al., 2020; Nason et al., 2018). By presenting a conceptual framework suggesting that some firms can greatly benefit from largely deviating from stakeholder expectations in response to a societal crisis and by utilizing case examples to practically demonstrate the conceptual framework, this paper offers a boundary condition to the recently developed behavioral theory of social performance, which concludes that “a firm’s ideal position is close to a social performance reference point (i.e., either just above or just below)” (Nason et al., 2018: 275). Furthermore, this paper builds on prior examinations of corporate irresponsibility interacting with stakeholder expectations to influence a firm’s reputation (e.g., Nardella et al., 2020) and corporate wrongdoing interacting with a firm’s reputation to influence stakeholder support (e.g., Zavyalova et al., 2016) by considering how an external event in which the firm had no role in causing, such as a societal crisis, can be an opportunity for improving a firm’s reputation for low pre-crisis CSR engagement firms but a weight of expectation for high pre-crisis CSR engagement firms. Second, this paper contributes to the literature examining visible CSR engagement during a crisis by incorporating a firm’s response speed to a societal crisis as an important construct in the conceptual framework presented in this paper. Given that the speed with which aid is provided during and after a crisis is important in limiting its damage and the unique capabilities that firms possess to respond to disasters (Ballesteros et al., 2017; DeLeo, 2013), considering how a firm’s response speed to a societal crisis is necessary to more fully understand the implications of a firm’s response to a societal crisis on its reputation. Finally, this paper introduces implications and guidance for managers regarding crisis management decisions and the potential short-term and long-term corporate reputation consequences of maintaining or changing CSR engagement levels during and after a future societal crisis. In doing so, it also provides a pathway for future empirical research regarding how CSR engagement impacted corporate reputations during recent societal crises, such as the COVID-19 pandemic, and how subsequent post-crisis CSR engagement levels impact a firm’s corporate reputation.

Literature review

Corporate social responsibility, crisis management, and corporate reputation

Corporate social responsibility actions can be either external or internal (Hawn and Ioannou, 2016) and may include “giving to charities, supporting community activities, treating their workers and customers decently, abiding by the law, and generally maintaining standards of honesty and integrity” (Campbell, 2007: 947). As noted by Aguinis and Glavas (2012) and Orlitzky et al. (2017), considerable research has investigated potential drivers for firms engaging in CSR at various levels of analysis, including institutional, industry, and stakeholder pressures such as the sensitivity of shareholders or religion in a country (Campbell, 2007; Flammer, 2013; Jamali et al., 2020; Jeong, 2021), firm-level characteristics such as strategic orientation or corporate governance (Brower and Rowe, 2017; Jain and Jamali, 2016; Ji, 2015; Zhang et al., 2018), and individual-level characteristics such as CEO incentives or CEO values (Chin et al., 2013; Sajko et al., 2021; Velte, 2019). In addition to examining the drivers of CSR engagement, prior literature has also examined a variety of outcomes of CSR engagement, including firm performance (Hossain et al., 2016; Jeong, 2021; Úbeda-García et al., 2021), corporate reputation (Lai et al., 2010; Lin-Hi and Blumberg, 2018; Singh, 2021), and organizational attractiveness (Belinda et al., 2018; Lis, 2018).

A subset of CSR scholarship focuses on the relationship between CSR engagement, crisis management, and a firm’s corporate reputation. Corporate reputation is important as it can be key to a firm’s value creation (Money and Hillenbrand, 2006) and is a form of corporate social capital (Luoma-aho, 2013; Preston, 2004) that is based on the relationships a firm has with its customers (Terblanche, 2009). It is also associated with a number of important outcomes for firms, including brand likeability and goodwill from customers (Nguyen et al., 2013), employee turnover intentions (Helm, 2013), and employee commitment (Dögl and Holtbrügge, 2014).

In the context of crises, prior literature has proposed an “insurance” effect of CSR engagement. The “insurance” effect suggests that greater pre-crisis CSR engagement serves as a buffer for a firm when crises occur (Godfrey et al., 2009; Muller and Kräussl, 2011). In support of the “insurance” effect, prior studies have demonstrated that firms with greater engagement in environmental CSR efforts experience less negative stock market reaction when the firm publicizes eco-harmful actions (Flammer, 2013), and greater pre-crisis CSR engagement can help firms overcome an economic crisis quicker (Sajko et al., 2021). Yet, Godfrey et al. (2009) find that only firms engaged in institutional CSR activities prior to an organizational crisis seem to experience the “insurance” effect while those engaged in technical CSR do not. Furthermore, Kang et al. (2016) find no support for the “insurance” effect.

Related to the “insurance” effect is the “penance” effect, which suggests that firms seek to “offset past corporate social irresponsibility” and “improve the image of the company” through CSR engagement (García et al., 2020: 4; Kang et al., 2016: 60). In support of the existence of this effect, Muller and Kräussl (2011) find that firms with lower pre-crisis CSR reputations are associated with greater decreases in stock price valuation following a natural disaster, and these firms are more likely to engage in corporate philanthropy following the disaster (Muller and Kräussl, 2011). Likewise, Kotchen and Moon (2012: 3) find evidence that “when companies do more harm, they also do more good,” and this effect is heightened within industries that experience more public attention; however, such penance efforts do not necessarily improve firm performance (Kang et al., 2016).

Theory and proposition development: a conceptual framework of reputation change during and after a societal crisis

Crisis management theory, expectancy violations theory, and signaling theory

Crisis management theory “stresses the importance of advance planning and the formulation of a comprehensive program to direct action” in response to a crisis (Henderson, 1999:177), and it can be used to develop an understanding of how firms can navigate difficult situations (Pongsakornrungsilp et al., 2021). Within the crisis management literature, three common phases of crisis management have been identified: pre-crisis, crisis, and post-crisis phases (Coombs and Laufer, 2018). In the “pre-crisis” phase, a firm’s managers need to prepare for potential crises in order to more effectively respond to a crisis (Ritchie, 2004). During the “crisis” phase, a firm’s “managers need to understand the situation and the capacity of the business in order to reorganize services to sustain the business during the crisis” (Pongsakornrungsilp et al., 2021: 6690). Finally, during the “post-crisis” phase, managers need to recognize the new capabilities that are needed to compete following the crisis (Nayal et al., 2022). Applied to this study, crisis management theory serves as a foundational lens to examine how a firm’s reputation can change across these three phases of a crisis.

While crisis management theory focuses on how firms can respond to a crisis, expectancy violations theory considers how expectations frame one’s perception of an occurrence (Burgoon, 1993). Expectations, defined as “enduring cognitions about the behavior anticipated of others,” emerge from social norms and “any individuating information that one actor has about the other” (Burgoon, 2015: 2; Burgoon and Walther, 1990). Expectancy violations theory suggests that when the behavior anticipated of others substantively deviates from expectations, this deviation draws attention “toward the violator and violation” (Burgoon, 1993: 35). This deviation from expected behavior is then judged positively or negatively based on the receiver’s interpretation and the appeal of the behavior (Burgoon and Walther, 1990). Expectancy violations theory has thus been recently utilized to better understand several management phenomena, including firm impression management (e.g., Graffin et al., 2016; Jin et al., 2021), communication with investors (e.g., Zachary et al., 2021), and corporate or organizational irresponsibility effects (e.g., Nardella et al., 2020).

Unlike the focus of expectancy violations theory on how another individual or firm’s behavior resonates with expectations, signaling theory focuses on the way a firm communicates with its stakeholders and how external stakeholders intuit information about the firm. Given that internal firm characteristics are difficult to observe from outside the firm, in order to reduce uncertainty about a firm, external stakeholders may look for signals to provide an indication of the strength of the firm’s internal characteristics (Daily et al., 2003). To be considered a useful signal, actions by the firm must be both observable and costly to the firm (Connelly et al., 2011). For example, many firms pivoted their operational capabilities to focus on producing urgently needed products, such as ventilators, respirators, and N95 masks, quickly following the emergence of the COVID-19 pandemic (Manuel and Herron, 2020). Undergoing this operational transformation was both costly to the firms and visible as many news outlets made public these operational transformations. Signals such as this one provides information to external stakeholders about the firm’s commitment to the public good during a time of crisis (Figure 1).

Figure 1.

A conceptual framework of corporate reputation change during and after a societal crisis.

Corporate social responsibility engagement during a societal crisis and corporate reputation change

When a disruptive event such as a societal crisis occurs, organizations must choose whether and how to strategically respond to it (Argyres et al., 2019). Organizations typically attempt to adapt their strategy in a way that counteracts the constraints produced by the disruptive event (Ring and Perry, 1985) while limiting their adjustment costs (Argyres et al., 2019). For example, in response to the COVID-19 pandemic, the then CEO of Patagonia, which is a privately-held company in the United States that is well-known for its values based approach, stated “We’re going through the process [of reimagining the business post-COVID] right now and all of the people in our company are looking at each of the functions that they do and they’re saying, ‘How can I reimagine this given everything that I’ve learned from COVID, and given the values of the company, which is to save our home planet?’” (Roth, 2020: 3). By acknowledging the need to change while emphasizing the CSR values that remain their guide, Patagonia’s CEO demonstrated how they were seeking to reposition their organization in response to the COVID-19 pandemic. Likewise, in response to the September 11 terrorist attacks that led many US airlines to cut costs and some to file for Chapter 11 bankruptcy (Ito and Lee, 2005), Southwest Airlines remained committed to their strategy of “taking care of their people” and did not layoff a single employee (Gittell et al., 2006: 317). These strongly committed employees “foster(ed) organizational resilience,” which helped the organization overcome the difficult industry environment following the September 11 terrorist attack (Gittell et al., 2006: 318).

Given the substantial impact a societal crisis can have at both the individual and societal levels (Välikangas, 2020; Wenzel et al., 2020), a firm’s CSR response likely communicates both its attunement to the challenges its stakeholders face and its willingness to help. Thus, the corporate reputations of firms that increase their CSR engagement in response to a societal crisis likely improves while the corporate reputations of firms that decrease their CSR engagement during a societal crisis likely declines. However, signaling theory suggests that a change in reputation is only likely to occur if the signal is viewed to be costly and visible to stakeholders (Connelly et al., 2011). Given that societal crises can produce large strains on industries, societies, and firms (Wenzel et al., 2020), increased levels of CSR spending in the face of economic challenges is likely to be costly; in addition, only the firms whose CSR engagement is publicly visible are likely to experience a reputational benefit from their positive CSR response to a societal crisis, such as those firms listed in JUST Capital’s annual rankings. For example, in March 2020, Target Corporation (Target), a well-known US retailer that was ranked 101st overall out of 922 firms by JUST Capital in November 2019 (JUST Capital, 2020a), issued several press releases announcing their multi-tiered response to the onset of the COVID-19 pandemic, which included decreasing their store hours, dedicating reserved store hours for more vulnerable shoppers, increasing employee pay, expanding employee paid leave options, financially rewarding store team leads, and donating $10 million towards pandemic relief efforts (Target Corporate, 2020a, 2020b). Correspondingly, in their October 2020 announcement of the America’s Most JUST Companies rankings, JUST Capital highlighted Target as making “one of the larger leaps, rising 86 rank positions, in part thanks to the strength of its response to COVID-19” (JUST Capital, 2021a: 1). This example demonstrates how a firm’s strong and visible response to a societal crisis can positively impact their short-term perception. Formally:

Proposition 1

Firms that increase (decrease) their visible CSR engagement during a societal crisis will experience an increase (decrease) in short-term corporate reputation, ceteris paribus (Table 1).

Table 1.

Case example of proposition 1 with managerial implications.

Case example: Target Corporation’s response to the COVID-19 pandemic	Reputation change for Target Corporation	Implications for managers of firms responding to a societal crisis
Target Corporation acted as a leader in the retail industry by implementing a wide “range of policies and practices…to support its workers,” including decreasing their store hours, dedicating reserved store hours for more vulnerable shoppers, increasing employee pay, expanding employee paid leave options, financially rewarding store team leads, and donating $10 million towards pandemic relief efforts in March 2020 (JUST Capital, 2020b: 3; Target Corporate, 2020a, 2020b)	Target Corporation’s JUST Capital rankings increased from 101st overall and 3rd in the retail industry in November 2019 to 15th overall and 1st in the retail industry in October 2020 (JUST Capital, 2020a, 2021b).	• Managers need to recognize that a societal crisis presents an opportunity to demonstrate their commitment to their stakeholders.
		• Managers must anticipate the opportunity to respond to a future societal crisis and consider positioning their firms to respond in a comprehensive way that meets the needs of all stakeholder groups. To do so, firms may need to prioritize both financial and supply-chain agility (Nayal et al., 2022).
		• Managers may find it useful to allocate a portion of their CSR budget each year to prepare for the extra spending needed during a societal crisis with the anticipation that such efforts have the potential to benefit the firm’s corporate reputation.

Response speed to a societal crisis and corporate reputation change

In addition to the extent with which firms visibly invest in a CSR response to a societal crisis, the speed of the response is also critical to mitigating the crisis’ negative effects (Bessant et al., 2015; Carroll, 2021). While startups or smaller firms are more adept at innovating and responding quickly (Dahlke et al., 2021), larger and more established firms can also quickly respond to societal crises by engaging in corporate philanthropy (Zhong et al., 2021), which is an important aspect of CSR (Carroll, 1991) and is seen by many as “the most important [category of CSR] because it represents businesses taking voluntary initiatives to help society on their own by spending or engaging company resources” (Carroll, 2021: 325). Thus, regardless of the size or age of a firm, there are a number of potential avenues for firms to quickly engage in relevant CSR activities in response to a societal crisis. Yet, the speed at which firms responded with CSR engagement during the beginning stages of the COVID-19 pandemic varied widely. For example, in a study of 3227 Chinese firms at the beginning of the COVID-19 pandemic, nearly 15% of the firms made a corporate donation between 20 January 2020, the date “Chinese authorities confirmed person-to-person transmission,” and 20 March 2020, with the median date of the firms’ initial donation being 29 January 2020 (Zhong et al., 2021: 3).

Given the urgency and demand for a quick CSR response and the potential for a first-mover advantage during a societal crisis (Manuel and Herron, 2020), firms are likely incentivized to quickly engage in visible CSR activities in response to a societal crisis; however, given that industry norms for responding to the societal crisis are not yet established, a quick response also comes with risk. For example, prior research suggests that deviating too much from the industry norms of CSR investment can cause a firm to be seen as engaging in “resource misallocation” (Jeong, 2021: 222). Yet, a firm’s quick response to help society respond to a crisis while facing these potential risks and opportunity costs likely sends a strong signal of its commitment to its stakeholders and the public. For example, The Allstate Corporation (Allstate), which ranked 123rd overall out of 922 firms and ranked seventh of 44 firms in the insurance industry by JUST Capital in November 2019 (JUST Capital, 2020a), was a first mover in the automobile insurance industry as they were “the first, along with American Family, to offer rebates on premiums…Progressive and others followed their lead” and was subsequently highlighted by Newsweek Magazine for their notable response to the COVID-19 pandemic (Renzulli et al., 2020: 15–16). Firms like Allstate that more quickly engage in visible CSR activities relative to their competitors following the onset of a societal crisis will likely experience short-term gain in corporate reputation while those that visibly respond more slowly than their competitors likely experience a short-term decline in corporate reputation. Formally:

Proposition 2

Firms that visibly engage in relevant CSR activities more quickly (slowly) than their competitors during a societal crisis will experience an increase (decrease) in short-term corporate reputation, ceteris paribus (Table 2).

Table 2.

Case example of proposition 2 with managerial implications.

Case example: The Allstate Corporation’s response to the COVID-19 pandemic	Reputation change for The Allstate Corporation	Implications for managers of firms responding to a societal crisis
On 6 April 2020, The Allstate Corporation announced a Shelter-In-Place Payback, which gave customers a 15% refund to customers on their auto insurance policies. This offering was “the first, along with American Family, to offer rebates on premiums…Progressive and others followed their lead” (The Allstate Corporation, 2020a; Renzulli et al., 2020: 15–16).	The Allstate Corporation was recognized by Newsweek Magazine as one of the 50 US Businesses That Stood Out During The Pandemic for their industry leading Shelter-In-Place Payback initiative (Renzulli et al., 2020).	• Managers need to recognize the specific needs that their stakeholders have during a societal crisis. Thus, managers must establish strong relationships with all relevant stakeholder groups prior to the onset of a crisis.
		• Managers need to identify unique and creative ways that their firm can be a first mover in response to a societal crisis.
		• Managers need to strategize how to best position their firm to respond quickly to a societal crisis. At minimum, firms need a reservoir of cash that can be deployed quickly when a crisis occurs.

Stakeholder expectations and short-term reputation change during a societal crisis

While both a firm’s change in CSR engagement as well as its speed in responding to a societal crisis are likely to influence short-term corporate reputation, prior literature suggests that stakeholder evaluation of a firm’s response to a disruptive event, such as the firm’s engagement in corporate irresponsibility, can be framed by the firm’s prior CSR behavior or reputation (e.g., Nardella et al., 2020; Rhee and Haunschild, 2006; Zavyalova et al., 2016). Likewise, even though societal crises differ from acts of corporate irresponsibility, stakeholders are likely to base their expectations for CSR engagement during a societal crisis on the firm’s history of CSR engagement. In contrast, stakeholders of firms that had low pre-crisis CSR engagement likely expected little notable CSR engagement by such firms during a societal crisis. In sum, a firm’s prior CSR engagement informs stakeholders’ expectations such that (1) stakeholders of a firm with relatively high pre-crisis CSR engagement are likely to expect the firm to meaningfully respond to a societal crisis, and (2) stakeholders of a firm with relatively low pre-crisis CSR engagement are likely to expect the firm to maintain the status quo in regards to their CSR engagement.

When encountering a societal crisis, firms will either confirm or violate their stakeholders’ expectations in regards to the firm’s CSR response to the crisis. When stakeholder expectations are confirmed, a firm’s corporate reputation is likely to remain unchanged; however, when behavior conflicts with expectations, the expectations violation is likely to draw attention (Burgoon, 1993), suggesting that stakeholders are likely to be aware of positive or negative changes in visible CSR engagement during a societal crisis. Furthermore, stakeholder reaction to a violation of expectations is likely to be informed by both the direction and extent of the expectancy violation (Burgoon, 2015; Jin et al., 2021). If a firm’s CSR response to a societal crisis goes beyond what stakeholders expect based on the firm’s pre-crisis CSR engagement, stakeholders are likely to respond favorably and the firm’s short-term corporate reputation will improve. On the other hand, if a firm does not meet stakeholder expectations in their CSR response to a societal crisis, stakeholders are likely to be disappointed and their short-term corporate reputation will suffer. Furthermore, the intensity of the stakeholder response is likely proportional to the extent of the expectancy violation (Zachary et al., 2021) such that the more positively a firm’s CSR response to a societal crisis extends beyond stakeholders’ expectations, the more the firm’s short-term corporate reputation will improve. Likewise, the more negatively a firm’s CSR response to a societal crisis falls short of stakeholders’ expectations, the more the firm’s short-term corporate reputation will suffer.

To demonstrate the above argument, consider two firms that compete within the insurance industry, Prudential Financial, Inc. (Prudential) and AXIS Capital Holdings, Ltd (AXIS), and their responses to the COVID-19 pandemic. In JUST Capital’s annual rankings released in November 2019 prior to the onset of the COVID-19 pandemic, Prudential, which had 51,511 employees and associates at the end of the 2019 calendar year (Prudential Financial, 2020), ranked 37th overall out of 922 firms and ranked third out of 44 firms in the insurance industry (JUST Capital, 2020a). Notably, Prudential has a history of responding to external crises as a combination of grants, philanthropic donations, and their employee’s contributions resulted in a total of $3.6 million provided towards disaster relief and support in 2017 (Prudential Financial, Inc., 2017) and a commitment of $1 million in grants and an employee giving campaign in response to Hurricane Florence in September 2018 (Prudential News, 2020). Thus, according to the theoretical argument presented above, given Prudential’s high ranking and past history of strong responses to external crises, their stakeholders likely expected the firm to meaningfully respond to the COVID-19 pandemic. In alignment with these expectations, Prudential initially committed $1.5 million in philanthropic funding, donating approximately 153,000 respirators and face masks, and 300 hand sanitizer bottles in March 2020 (Prudential News, 2020). Despite this meaningful response, in JUST Capital’s rankings released in October 2020, Prudential’s overall ranking fell moderately to 175th overall out of 928 firms and ranked sixth out of 44 firms in the insurance industry (JUST Capital, 2021b). While Prudential’s rankings still remained relatively high, their CSR response to the COVID-19 pandemic did not enable the firm to maintain as high of an overall or industry ranking as the previous year. In contrast, in JUST Capital’s annual rankings released in November 2019 prior to the onset of the COVID-19 pandemic, AXIS, which had 1667 employees in February 2020 (AXIS Capital Holdings, Ltd., 2020a), ranked in the bottom 10% overall of the 922 firms ranked and was ranked 41st out of 44 insurance firms (JUST Capital, 2020a). Unlike Prudential, AXIS did not have a history of robust CSR engagement in response to external crises. Dating back to its IPO in 2003, AXIS had not issued a press release mentioning a corporate donation in response to an external crisis until 14 April 2020 when they announced a $1 million commitment to supporting the COVID-19 response effort (AXIS Capital Holdings Ltd, 2020b). This press release followed an announcement on 19 March 2020 in which AXIS disclosed that many of their global employees had transitioned to remote work and the company had halted all business travel due to the emergence of COVID-19 (AXIS Capital Holdings Ltd, 2020c). This unexpected meaningful response likely contributed to AXIS’ substantial rise in JUST Capital’s rankings released in October 2020 in which AXIS ranked 422nd overall of the 928 firms ranked and improved by 23 spots to a ranking of 18th out of 44 insurance firms (JUST Capital, 2021b). Thus, while AXIS’ initial response to COVID-19 was less substantial than Prudential’s initial response, the theoretical argument presented above suggests that AXIS’ strong, positive violation of its stakeholders’ expectations contributed to its notable improvement in JUST Capital’s rankings.

In sum, due to differing stakeholder expectations based on a firm’s pre-crisis CSR engagement, the positive change in corporate reputation of firms with low levels of pre-crisis CSR engagement that increased their CSR engagement in response to the societal crisis will likely be proportionally greater than firms with high levels of pre-crisis CSR engagement that increased their CSR engagement in response to the societal crisis. Likewise, the decrease in corporate reputation of firms with high levels of pre-crisis CSR engagement that decreased their CSR engagement in response to the societal crisis will likely be proportionally larger than firms with low levels of pre-crisis CSR engagement that decreased their CSR engagement in response to the societal crisis. Formally:

Proposition 3A

When a firm’s visible CSR engagement during a societal crisis increases, firms with low pre-crisis visible CSR engagement levels relative to competitors will experience a disproportionately larger increase in short-term corporate reputation than firms with high pre-crisis visible CSR engagement levels, ceteris paribus;

Proposition 3B

When a firm’s visible CSR engagement during a societal crisis decreases, firms with high pre-crisis visible CSR engagement levels relative to competitors will experience a disproportionately larger decrease in short-term corporate reputation than firms with low pre-crisis visible CSR engagement levels, ceteris paribus (Table 3).

Table 3.

Case example of proposition 3 with managerial implications.

Case example: AXIS Capital Holdings Ltd. Response to the COVID-19 pandemic	Reputation change for AXIS Capital Holdings Ltd.	Implications for managers of firms responding to a societal crisis
AXIS Capital Holdings Ltd. announced a $1 million donation to support relief efforts for the COVID-19 pandemic on 14 April 2020. This announcement was the first time AXIS issued a press release announcing a corporate donation in response to an external crisis (AXIS Capital Holdings Ltd, 2020b).	AXIS Capital Holdings Ltd. JUST Capital ranking increased from the bottom 10% overall and 41st out of 44 insurance firms in November 2019 to 422nd overall and 18th out of 44 insurance firms in October 2020 (JUST Capital, 2020a, 2021b)	• Managers must recognize that firms are expected to engage in CSR efforts when a societal crisis occurs and that the stronger the firms CSR related corporate reputation before the societal crisis, the greater the expectations for a strong CSR response to a societal crisis.
		• Managers of firms with relatively low pre-crisis visible CSR engagement should focus on implementing visible CSR efforts during a societal crisis even if it is only a moderate increase in their CSR spending.
		• Managers of firms with relatively high pre-crisis visible CSR engagement should focus on minimizing corporate reputation decline by highlighting their consistent CSR engagement and communicate to stakeholders how the firm’s ongoing CSR efforts will help society emerge from the crisis or choose to reallocate or increase some of their CSR spending to temporarily address needs created by the societal crisis and publicize this decision.
		• Managers of firms that are unable to engage in a strong CSR response to a societal crisis should consider engaging in a rebranding effort to rehabilitate its reputation post-crisis (Amujo and Otubanjo, 2012; Pongsakornrungsilp et al., 2021).

Given the need for rapid CSR engagement following the onset of a societal crisis, stakeholders are likely to anticipate a quick response from firms that previously demonstrated a strong CSR commitment while having lower expectations for a timely response by firms with weaker pre-crisis CSR engagement levels. As such, applying the previously described logic from expectancy violations theory and signaling theory, it is likely that firms with relatively low pre-crisis CSR engagement levels that respond quickly to a societal crisis will make larger gains in short-term corporate reputation than firms with high pre-crisis CSR engagement levels that respond quickly to a societal crisis due to differing stakeholder expectations based on each firm’s pre-crisis CSR engagement. For example, both PepsiCo Inc. (Pepsi), which was ranked 57th overall out of 922 firms and was ranked first out of 34 firms in the food, beverage, and tobacco industry in the JUST Capital rankings published in November 2019, and The Coca-Cola Company (Coca-Cola), which was ranked 320th overall out of 922 firms and was ranked 13th out of 34 firms in the food, beverage, and tobacco industry in the JUST Capital rankings published in November 2019, engaged in rapid CSR responses to the onset of the COVID-19 pandemic (JUST Capital, 2020a). Pepsi made an initial donation of five million yuan (approximately $721,000) in support of “disinfection in Wuhan, Xiangyang and Xiaogan, and provided meal subsidies for front-line staff in 19 medical institutions in the city of Huangshi in Hubei province” on 27 January 2020 (Shenggao, 2020: 2), and this donation was followed by a second donation on 6 March 2020 in the amount of three million yuan (approximately $423,760) (Shenggao, 2020). Similarly, on 10 February 2020, Coca-Cola announced that its foundation had provided $500,000 to MedShare in addition to $500,000 previously provided to Shenzhen One Foundation to help support the COVID-19 response effort in China (The Coca-Cola Company, 2020a). As the pandemic continued to emerge in the spring of 2020, both Pepsi and Coca-Cola made substantial CSR responses. However, given that Pepsi’s JUST Capital ranking was substantially higher than Coca-Cola’s ranking prior to the COVID-19 pandemic, stakeholder expectations for the speed of the response to the societal crisis were also likely higher for Pepsi. Thus, Coca-Cola’s reputation likely benefited more from responding rapidly to the crisis than did Pepsi’s reputation. For example, Coca-Cola was the only soft drink company recognized by Newsweek Magazine as one of the 50 US Businesses That Stood Out During The Pandemic for giving “more than $47 million in grants and donations to organizations in more than 75 countries to fight coronavirus” (Renzulli et al., 2020: 41). In summary, this example demonstrates the following proposition:

Proposition 4A

When the speed of a firm’s visible CSR response during a societal crisis is quicker than stakeholders expected, firms with low pre-crisis visible CSR engagement levels relative to their competitors will experience a disproportionately larger increase in short-term corporate reputation than firms with high pre-crisis visible CSR engagement levels, ceteris paribus.

Proposition 4B

When the speed of a firm’s visible CSR response during a societal crisis is slower than stakeholders expected, firms with high pre-crisis visible CSR engagement levels relative to their competitors will experience a disproportionately larger decrease in short-term corporate reputation than firms with low pre-crisis visible CSR engagement levels, ceteris paribus (Table 4).

Table 4.

Case example of proposition 4 with managerial implications.

Case example: the Coca-Cola Company’s response to the COVID-19 pandemic	Reputation change for the Coca-Cola Company	Implications for managers of firms responding to a societal crisis
The Coca-Cola Company was a rapid responder to the COVID-19 despite being ranked 320th overall and 13th out of 34 firms in the food, beverage, and tobacco industry in the JUST Capital rankings published in November 2019; these rankings were much lower than their chief rival PepsiCo Inc, which was ranked 57th overall and first out of 34 firms in the food, beverage, and tobacco industry in the JUST Capital rankings (JUST Capital, 2020a). By 10 February 2020, The Coca-Cola Company had made 2 donations totaling $1 million to support the COVID-19 response effort in China (The Coca-Cola Company, 2020a).	The Coca-Cola Company was recognized by Newsweek Magazine as one of the 50 US Businesses That Stood Out During The Pandemic for giving “more than $47 million in grants and donations to organizations in more than 75 countries to fight coronavirus” (Renzulli et al., 2020: 41).	• Managers need to understand that a rapid response to a societal crisis is crucial to maintain or increase its corporate reputation and prepare accordingly.
		• Managers of firms with relatively low pre-crisis visible CSR engagement should focus on responding to a societal crisis that impacts its stakeholders as quickly as its industry peers to maintain their pre-crisis reputation; to improve its reputation, such managers should aspire to be a first mover in the industry.
		• Managers of firms with relatively high pre-crisis visible CSR engagement should prepare to be a first mover in response to a societal crisis that impacts its stakeholders in order to maintain its pre-crisis reputation; to improve its reputation, such managers should aspire to be a first mover overall.

Post-crisis reputation effects of CSR engagement during a societal crisis

Given the theoretical arguments presented above, a societal crisis offers an opportune time for a firm with relatively low pre-crisis CSR engagement looking to positively alter its corporate reputation but also places pressure on firms with relatively high pre-crisis CSR engagement to continue or increase their already high levels of CSR engagement. However, at some point the societal crisis will be resolved, and these firms will need to make decisions about their CSR engagement moving forward. Will the firms return to their pre-crisis CSR engagement levels or will they make an intentional choice to maintain their recent (i.e., during the societal crisis) levels of CSR engagement and refocus them into CSR activities that are meaningful beyond the resolution of the societal crisis? A firm’s answer to this question is important as the firm’s actions during the societal crisis have likely set a new standard of expectations for their stakeholders.

According to expectancy violations theory, an entity that maintains an “expected and favorable” act receives a positive evaluation while an entity that maintains an “expected and undesirable” act receives a negative evaluation (Burgoon et al., 2016: 27). As such, it is likely that firms who make an intentional choice to maintain their recent (i.e., during the societal crisis) levels of CSR engagement and refocus them into CSR activities that are meaningful beyond the resolution of the societal crisis are likely to maintain the reputation gained during the crisis because they are acting consistently with their stakeholders revised expectations. On the other hand, for those firms that revert to pre-crisis CSR engagement levels, the passage of time following a crisis is an important consideration because it influences how firm behavior and actions are viewed. For example, prior literature suggests that the positive attitudes associated with an organization’s rebranding efforts fade over time (Hankinson et al., 2007). Likewise, former government officials experience a deterioration of status over time (Lester et al., 2008), and the stigma that corporate elites experience when connected to a corporate failure is also assumed to fade over time (Rolf, 2018; Wiesenfeld et al., 2008). Notably, this decline of the effects of re-branding efforts, status, or stigma is not immediate; rather, they diminish over time. Given that attention to CSR engagement following resolution of the societal crisis may be less salient to some stakeholders, firms reverting back to their pre-crisis CSR engagement levels following the resolution of the societal crisis will likely experience a residual effect of the reputational benefits or decreases gained during the crisis for a period of time. Formally:

Proposition 5A

Firms that experienced a short-term corporate reputation increase during a societal crisis due to exceeding stakeholders’ CSR engagement expectations and maintain their crisis level visible CSR engagement following resolution of the crisis will also maintain the corporate reputation improvements experienced during the societal crisis following resolution of the crisis, ceteris paribus.

Proposition 5B

Firms that experienced a short-term corporate reputation decrease during a societal crisis due to not meeting stakeholders’ CSR engagement expectations and maintain their crisis level visible CSR engagement following resolution of the crisis will also maintain the corporate reputation declines experienced during the societal crisis following resolution of the crisis, ceteris paribus.

Proposition 6A

Firms that experienced a short-term corporate reputation increase during a societal crisis due to exceeding stakeholders’ CSR engagement expectations and return to pre-crisis visible CSR engagement levels following resolution of the crisis will experience residual effects of the reputational increase obtained during the societal crisis, but these residual effects will diminish over time, ceteris paribus.

Proposition 6B

Firms that experienced a short-term corporate reputation decrease during a societal crisis due to not meeting stakeholders’ CSR engagement expectations and return to pre-crisis visible CSR engagement levels following resolution of the crisis will experience residual effects of the reputational decrease obtained during the societal crisis, but these residual effects will diminish over time, ceteris paribus.

Discussion and implications

Drawing from crisis management theory, expectancy violations theory and signaling theory, this paper responds to a call for a better understanding of how corporate reputation influences a firm during a societal crisis (Coombs and Laufer, 2018) by presenting a conceptual framework of reputation change during and after a societal crisis. In particular, utilizing both Target and Allstate as case examples, this conceptual framework proposes that firms who increase their visible CSR engagement during a societal crisis or more rapidly respond to a societal crisis than their competitors have an opportunity to improve their corporate reputation. Notably, both Target and Allstate acted as leaders in their particular industries, though in different ways. In its March 2020 response to the COVID-19 pandemic, Target acted as a leader in the retail industry by implementing a wide “range of policies and practices…to support its workers” (JUST Capital, 2020b: 3). In contrast, while Allstate also introduced policies to support its workers (The Allstate Corporation, 2020b), it was recognized by Newsweek Magazine as one of the 50 US Businesses That Stood Out During The Pandemic for prioritizing its customers by initiating a premium refund program that industry competitors then mimicked (Renzulli et al., 2020). These two examples provide important implications for firm’s managers. First, during the pre-crisis phase, firm managers need to recognize that leading an industry’s response to a societal crisis is helpful in improving a firm’s reputation so that they can adequately prepare to be a first mover when a crisis occurs. Second, during a crisis, it is crucial for firms to consider the specific needs of their stakeholders and how the firm is uniquely equipped to respond to the crisis. To do so, the firm’s managers must have developed strong relationships with each stakeholder group during the pre-crisis phase.

The conceptual framework presented in this paper also proposes that firms with low levels of pre-crisis visible CSR engagement can improve their corporate reputation by exceeding their stakeholders’ expectations in regards to the magnitude or speed of their response to the societal needs that emerge during the crisis. Though firms’ engagement in visible CSR “penance” efforts following engagement in socially irresponsible activity can be ineffective (e.g., Kang et al., 2016), a firm’s response to a societal crisis is likely to be viewed as an act of goodwill since the firm did not cause the crisis. This implies that firms with low pre-crisis levels of visible CSR engagement may benefit more from quickly and robustly engaging in visible CSR during a societal crisis than increasing visible CSR during a non-crisis time period. Notably, both AXIS’ and Coca-Cola’s CEOs made it clear in their responses to the COVID-19 pandemic that they understood the challenging nature of the crisis for many individuals and communities, and their priority in responding to the COVID-19 pandemic was to help people rather than to increase their profits. For example, in their press release announcing their $1 million donation toward the pandemic’s relief efforts, AXIS’ President and CEO Albert Benchimol stated, “As a purpose-driven organization, we feel a deep commitment to do our part to give back and help support the relief efforts that are underway globally, as well as in our local communities” (AXIS Capital Holdings Ltd, 2020b: 1). Likewise, in a press release on 23 March 2020, Coca-Cola’s Chairman and CEO James Quincey stated, “We are prioritizing safety – whether for our system associates or for our customers and consumers” (The Coca-Cola Company, 2020b: 1). These examples imply that, during a crisis, organizational leaders must communicate and demonstrate to their stakeholders that their firm’s stronger than expected CSR response to a societal crisis aims to genuinely help their stakeholders and communities. Furthermore, for the firm to be in a position to rapidly respond to a societal crisis, a firm’s managers may need to prioritize both financial and supply-chain agility (Nayal et al., 2022) as a normal course of action during the pre-crisis phase so that they are prepared for the onset of the next crisis.

In addition to highlighting the potential opportunity for firms with low levels of pre-crisis visible CSR engagement, the proposed conceptual framework suggests that firms with high levels of visible CSR engagement prior to a societal crisis experience high stakeholder expectations during a societal crisis. As such, even though firms tend to face difficult economic conditions during a societal crisis (Muller and Kräussl, 2011), those firms with greater pre-crisis visible CSR engagement face greater reputational penalties if they fail to meet or exceed their stakeholder expectations for a strong CSR response during the crisis. For example, even though Prudential had a stronger initial CSR response to the COVID-19 pandemic than AXIS, Prudential dropped in the JUST Capital rankings while AXIS substantially increased their ranking. This difference may be due to differing stakeholder expectations between the firms given Prudential’s history of CSR engagement and strong JUST Capital rankings in comparison to AXIS. This idea provides an alternative viewpoint to prior literature suggesting that greater CSR engagement prior to a firm’s socially irresponsible actions (Flammer, 2013) or a systemic shock (Sajko et al., 2021) can buffer or help a firm recover more quickly following the event. Given that societal crises can increase external demand for CSR engagement (Manuel and Herron, 2020) and may be seen as “a once-in-a-generation moment” (Owens, 2022: 2), the argument presented in this paper implies that firms that have established a strong corporate reputation for their CSR engagement must be prepared to bear a burden of great expectations during a societal crisis. This has substantial implications for managers of new venture firms deciding to what extent they will incorporate CSR engagement as part of their firm’s strategy. New venture firm leaders, in addition to weighing the unique cost and benefits of engaging in CSR activities as an emerging firm (Wang and Bansal, 2012), must also carefully consider whether the firm will be equipped to rapidly and meaningfully respond to a societal crisis in the future should one arise.

Finally, this paper’s conceptual framework proposes that firms’ visible CSR response to a societal crisis will have lingering effects on their corporate reputations even if firms return to pre-crisis visible CSR engagement levels following the resolution of the crisis. Given that firms may experience challenging decisions as they seek to navigate contributing to the societal good and/or protecting their firm’s financial health during a societal crisis (Manuel and Herron, 2020), the assertion that a firm’s visible CSR response to a societal crisis will have lingering effects on their corporate reputation has several important implications for firm managers. First, the possibility that the change in corporate reputation that occurs during a societal crisis will have a residual effect should prompt serious consideration by organizational leaders to increase their engagement in CSR during a societal crisis. While it is costly to do so, the benefits regarding potential customer and employee outcomes of a stronger corporate reputation are considerable (Dögl and Holtbrügge, 2014; Helm, 2013; Nguyen et al., 2013). Alternatively, if a firm’s visible CSR response to a societal crisis does not meet its stakeholders’ expectations, the firm’s managers should consider engaging in a rebranding effort to rehabilitate its reputation (Amujo and Otubanjo, 2012; Pongsakornrungsilp et al., 2021). Second, it is important for any firm that prioritizes its corporate reputation to be prepared to quickly respond to a crisis with appropriate CSR engagement because a quick response, which is difficult to achieve without advance preparation, may have lingering beneficial reputational effects. Finally, when a crisis is resolved and firms move into the post-crisis phase, a firm’s managers may benefit from developing a “Business Process Revaluation Team” as suggested by Nayal et al. (2022): 375) that serves to “predict the possible business model changes and suggest the strategy along with immediate projects that organization must take on to succeed in the future.” Such a team can help the firm’s managers decide to what extent CSR engagement should be included in the firm’s short- and long-term strategies. Specifically, it is crucial for managers of firms that have historically engaged in relatively high levels of visible CSR engagement to carefully consider and forecast whether their firm would be able to sustain, and possibly increase, its visible CSR engagement levels during a societal crisis. If a firm is unlikely to be able to sustain its typical CSR engagement levels during a societal crisis, firms are risking the potential for sharp declines in their corporate reputation that can linger even after the crisis is resolved.

Boundary conditions and future research

While the conceptual framework presented in this paper provides an important step in considering how a firm’s CSR engagement during a societal crisis impacts its corporate reputation both in the short-term and long-term, it should be considered in light of several boundary conditions that offer future avenues for research. First, given that societal crises vary in regards to their nature, size, and scope (Netz et al., 2022; Wenzel et al., 2020), some societal crises are likely to have a clear beginning and ending, such as a natural disaster, while others, such as a pandemic, may have longer residual effects on society. Thus, future qualitative and quantitative research building on the conceptual framework presented in this study needs to consider the type of societal crisis that takes place when examining how a firm’s visible CSR response to the crisis influences its long-term reputation. Second, given that prior research suggests that a firm’s local presence to natural disasters can impact its response (Ballesteros and Gatignon, 2019; Ballesteros et al., 2017), stakeholders may have different expectations for firms that are more proximal to a crisis than those that do not have a local presence. Thus, future research needs to account for whether firms have a local presence near the affected geographic area(s). Finally, prior literature demonstrates that firms engage in impression management to protect their corporate reputation (Highhouse et al., 2009; McDonnell and King, 2013) and, when positive expectancy violations occur, a firm may simultaneously “release negative strategic noise in order to avoid creating separate negative expectancy violations in the future” (Jin et al., 2021: 5). As such, given that firms may utilize strategic noise during a crisis, future research should account for this possibility when empirically examining the conceptual framework presented in this paper.

Conclusion

In light of the COVID-19 pandemic and the increasing expectations for CSR engagement by firms, the goal of this paper is to provide both a theoretical framing for further scholarly investigation into the intersection of CSR, crisis management, and corporate reputation as well as to provide insights for managers of firms that are interested in better understanding how and when to engage in CSR during societal crises. As such, this paper offers practical guidelines for managers of firms preparing to navigate future societal crises and provides an alternative pathway for both qualitative and quantitative inquiry that has the potential to illuminate important insights for both organizational studies and firms.