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Market-Based Solutions to Vital Economic Issues
Kenan Insight
Nov 16, 2023

Gender Inequality and Company Actions: How Do Wall Street and Main Street React?

The #MeToo movement has increased scrutiny on companies and amplified attention on gender inequality and sexual harassment in the workplace. It has pushed companies to publicly reckon with misconduct, and even organizations that do not face specific allegations have had to respond to mounting external pressure to address gender inequality. Societal pressure is multifaceted, however, and companies need to know how their stakeholders will view their actions in response to both broad-based and targeted pressures.

A recent study led by UNC Kenan-Flagler Business School Ph.D. student Angie Fairchild and Olga Hawn, UNC Kenan-Flagler associate professor of strategy and entrepreneurship, examines how two separate groups of stakeholders – Main Street (consumers and the public) and Wall Street (investors) – reacted to company actions addressing gender inequality and sexual harassment. Collaborating with Ruth Aguilera and Yakov Bart, both from Northeastern University, and Anatoli Colicev from the University of Liverpool, Fairchild and Hawn show that external perceptions of how companies address issues of workplace sexual harassment and gender inequality can lead to significant repercussions.

In particular, the reactions on Wall Street and Main Street toward a company’s strategy – or lack thereof – have ramifications for social media sentiment, brand equity and market value. The study shows that the timing and internalization of a firm’s actions on issues of sexual harassment and general inequality provoke certain reactions – or lack thereof — from investors to individual consumers. Companies can use this information when planning a social strategy.

#MeToo’s Impact on Corporations

On Oct. 15, 2017, the actress Alyssa Milano tweeted, “If you’ve been sexually harassed or assaulted write ‘me too’ as a reply to this tweet,”1 and the #MeToo hashtag went viral, with more than a million tweets and retweets using the hashtag in the first 24 hours, and as many as 19 million times in the following year.2 Yet, the #MeToo movement (MTM) had begun a decade earlier, in 2006, when Tarana Burke, an activist who has made the support of sexual assault victims her life’s work, promoted the two-word phrase “Me Too” to empower women through empathy and bring attention to the pervasiveness of sexual abuse in society.3

Milano, who had sent the “me too” tweet unaware of its prior use, was responding to the growing public attention on sexual violence in Hollywood after the exposé of Harvey Weinstein’s sexual misconduct in The New York Times 10 days earlier. The movement’s reach subsequently snowballed with far-reaching societal ramifications, especially in the corporate world. According to a 2018 New York Times analysis, 200 men in prominent leadership positions were let go because of public allegations of sexual assault just in the first year after the post.4

As the #MeToo movement became part of the public zeitgeist, it generated strong social pressure for companies to address gender inequality and sexual harassment, including firms that were not subject to any specific allegations. A study of 4,800 publicly listed companies showed that the movement led to negative market reactions, particularly for companies whose boards were composed exclusively of male directors.5 The movement also sparked positive change, as a study found improvements in workplace equality in Hollywood production studies in the years after the Weinstein scandal.6

Regardless of whether a company faces allegations, the public demands that leadership take action on gender inequality and sexual harassment. This demand is especially loud because, unlike traditional street protests or boycotts, the #MeToo movement has used digital channels. Social media has been a key tool in amplifying the voices of victims, creating engagement across audiences including journalists, private individuals and media organizations as well as market reactions to the movement and change within workplaces.

Fairchild, Hawn and their co-authors mined media articles to catalog the actions that companies took to address gender inequality before and after the #MeToo movement. They then categorized company actions based on the internalization (symbolic vs. substantive) and the timing of the action (proactive vs. reactive), finding that companies engaged in more actions of all types after the #MeToo movement took hold. The study’s categorization criteria are as follows:

  • Substantive actions include organizational changes that are difficult to reverse and require significant investment.7, 8 Examples include large-scale revisions to sexual harassment policies and the creation of high-level corporate positions devoted to managing gender issues.
  • Symbolic company actions are intended to produce the appearance of change without any significant investment or change to policies. They may include public statements, advertising campaigns or sponsorships with few other internal alterations.
  • A reactive action follows an external trigger, such as activist outcry or allegations of misconduct.
  • A proactive action is a preemptive adoption of a strategy intended to prevent a firm from being targeted and suffering reputational damage in the future.

Public Response to Company Actions

Company actions to address gender inequality affect many different stakeholders, including those who care about how they themselves are treated and those who are more concerned with how the company treats others. They comprise internal stakeholders, like employees, as well as external stakeholders, including customers, shareholders and the general public.

The study sought to uncover how different external stakeholder groups react to the various types of company actions. Analyzing the combined effects of internalization and timing showed that Wall Street and Main Street were aligned in their reactions to company actions on gender inequality.9

Main Street and Wall Street Align

Metrics of Main Street’s reaction to company actions come from both social media and consumer perception survey, which fluctuate daily. The study observed an uptick in negative social media chatter regarding reactive and symbolic company actions. Consumer perception scores, as measured by daily surveys of Brand Buzz, Impression, Quality, Value, Recommendation, Corporate Reputation and Satisfaction, also decreased on the date of such actions. The authors found that social media chatter actually influences consumer perceptions, and the drop in consumer perception is most profound for company actions that garner the most negative social media coverage.

Public perceptions of company actions seem to have changed after the #MeToo movement. Negative responses to reactive-symbolic actions are stronger after #MeToo. Before #MeToo, consumer perceptions were neutral in response to both reactive-substantive and reactive-symbolic actions from companies, but since the movement began, the penalty for reactive-symbolic actions increased.

Contrary to the authors’ expectations, Wall Street aligns with Main Street in its reactions. The study finds that the average market-adjusted cumulative abnormal return is negative on the date of reactive-symbolic company actions. This result indicates that short-term financial performance suffers for companies whose actions are viewed as reactive and symbolic. And yet, companies that take proactive or substantive action are not rewarded, either financially or socially — in the eyes of the public. This neutrality is perhaps a function of normalization: Companies are now expected to take proactive, substantive action on gender issues. It may also be a missed opportunity for the public and the market to reward companies that are preemptively making real, lasting changes.

In Practice

Companies must balance the interests of their stakeholders, and that also means addressing gender inequality in the workplace. Organizations experience explicit pressure, exemplified by the U.N.’s sustainable development goal No. 5 targeting gender equality, as well as the #MeToo movement’s call to bring attention to and end systemic gender-based harassment and inequality.

When strategizing how to respond to stakeholder demands, managers need to know how different audiences value various types of company actions because some actions may bring losses in both brand equity and financial performance. On the issue of sexual harassment and gender inequality, the question for corporate leaders is how do they address these pervasive problems in the workplace in a way that is meaningful, while also garnering positive public attention and avoiding a detrimental misstep.

The act of responding is not enough to instill goodwill in the public or gain reputational equity. The timing and internalization are critical to shaping public perception. Wall Street and Main Street react negatively to companies that make reactive or symbolic gestures.

The reaction from internal stakeholders – employees – was not examined, but the authors believe it is in management’s best interest to proactively enact lasting, substantive policies to combat gender inequality and provide a safe work environment for its employees.

It is a common trope that Wall Street values profits, while Main Street values fairness, yet the two camps will coalesce on an issue of overwhelming social salience. Responding to gender-based discrimination and workplace harassment in merely reactive, symbolic way hurts a company’s reputational and financial equity. These are important, practical implications for firms aiming to be both morally right and maximally profitable: It is better to act before you are forced to and to do so meaningfully, or else you may be sunk by the wave ushering in new corporate and societal norms.

1 Clark-Parsons, R. (2021). “I SEE YOU, I BELIEVE YOU, I STAND WITH YOU”: #MeToo and the performance of networked feminist visibility. Feminist Media Studies, 21(3), 362-380. https://doi.org/10.1080/14680777.2019.1628797

2 Williams, J. B., Singh, L., & Mezey, N. (2019). MeToo as catalyst: A glimpse in to 21st century activism. The University of Chicago Legal Forum.

3 Garcia, S. E. Oct. 20, 2017. The Woman Who Created #MeToo Long Before Hashtags. The New York Times. https://www.nytimes.com/2017/10/20/us/me-too-movement-tarana-burke.html

4 Carlsen, A., Salam, M., Miller, C. C., Lu, D., Ngu, A., Patel, J. K., & Wichter, Z. Oct. 29, 2018. #MeToo Brought Down 201 Powerful Men. Nearly Half of Their Replacements Are Women. The New York Times. https://www.nytimes.com/interactive/2018/10/23/us/metoo-replacements.html

5 Billings, M. B., Klein, A., & Shi, Y. C. (2022). Investors’ response to the #MeToo movement: Does corporate culture matter? Review of Accounting Studies, 27(3), 897-937. https://doi.org/10.1007/s11142-022-09695-z

6 Luo, H., & Zhang, L. (2022). Scandal, social movement, and change: Evidence from #MeToo in Hollywood. Management Science, 68(2), 1278-1296. https://doi.org/10.1287/mnsc.2021.3982

7 Hawn, O., & Ioannou, I. (2016). Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility. Strategic Management Journal, 37(13), 2569-2588. https://doi.org/10.1002/smj.2464

8 Nardi, L. (2022). The corporate social responsibility price premium as an enabler of substantive CSR. The Academy of Management Review, 47(2), 282-308. https://doi.org/10.5465/amr.2019.0425

9 Amis, J., Brickson S., Haack, P., & Hernandez, M. (2021). Taking inequality seriously. The Academy of Management Review, 46(3), 431-439. https://doi.org/10.5465/amr.2021.0222

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