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Processing Contradictory CSR Information: The Influence of Primacy and Recency Effects on the Consumer-Firm Relationship

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Abstract

Drawing on the influence of primacy and recency effects in processing information about corporate social responsibility (CSR), the authors examine how internal (customer experience) and external (CSR reputation) factors impact the consumer-firm relationship in the presence of contradictory CSR information. Evaluating these factors provides a more comprehensive understanding of how consumers react to unethical and socially irresponsible actions. Contrary to recent research that suggests a reactive CSR communication strategy to be best due to recency effects, the present findings show that past customer experiences with the firm facilitate a ‘primacy effect’. Thus, when corporate social irresponsibility (CSI) occurs, a customer’s prior experiences mitigate negative consequences. Conversely, a firm’s positive CSR reputation may provide goodwill, although it does not guarantee that consumers will process CSR information differently. Therefore, firms cannot build a strong CSR reputation and expect to be immune from the consequences of CSI. Given these new findings of how consumers process contradictory CSR information, firms should implement a strategic and deliberate communication plan that delivers different messages to different stakeholders. Specifically, these findings suggest that firms benefit most from a proactive communication strategy with their current customers and a reactive communication strategy with the general public.

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Authors and Affiliations

  1. College of Business, Middle Tennessee State University, 1301 East Main Street, Murfreesboro, TN, 37132-0001, USA

    Michael C. Peasley

  2. College of Business, University of Central Arkansas, Beatrice Powell St, Conway, AR, 72034, USA

    Parker J. Woodroof

  3. College of Business, Missouri State University, 901 South National Ave, Springfield, MO, 65897, USA

    Joshua T. Coleman

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  1. Michael C. Peasley
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  2. Parker J. Woodroof
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Correspondence to Michael C. Peasley.

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Appendices

Appendix

Scenario Examples

Exploitation of Customers

Wells Fargo: Leading the Way in Corporate Social Responsibility

Wells Fargo is committed to an integrated company-wide corporate social responsibility (CSR) strategy to address social and economic challenges. This includes significant commitments to in home and small business lending, community investment, and corporate philanthropy. We are motivated by the demographic and cultural shifts taking place as well as the financial needs of underserved individuals and communities.

Wells Fargo seeks to address these societal challenges to strengthen the communities in which we serve by donating $100 million towards education for develo** women and diverse leaders. We also seek to utilize more diverse suppliers and expand opportunities for women and diverse talent, including a goal to increase military veteran team members from 8200 to 20,000. We also are providing $500 million in financial education and affordable housing and extending $150 billion in mortgage originations to minority households.

We are determined that our corporate social responsibility (CSR) activities will have a lasting, positive impact on the Company’s value and reputation. We continue to look for ways to work together with our partners to create the best society for everyone.

Wells Fargo and Their Failure of Corporate Social Responsibility

Wells Fargo represents above all an absolute failure in terms of Corporate Social Responsibility (CSR). They exploited customers by opening up to 3.5 million fake bank and credit card account in their names to generate fees. Perhaps the largest effect of the excessive credit card fees was on small business cards and accounts for many mom and pop businesses. In addition, 528,000 Wells Fargo customers had been enrolled, without their knowledge or consent, in an online bill-paying service.

Furthermore, Wells Fargo also provided unauthorized auto insurance to 800,000 customers who had borrowed money from Wells Fargo to buy new cars; made unauthorized changes to mortgage repayments terms while customers were in bankruptcy, lengthening out by years the money they owed to the bank; and withheld different insurance refunds from some customers who had borrowed money to buy cars, causing some to default on their loans.

This rejection of ethical standards makes one thing absolutely clear, Wells Fargo and their employees are more concerned with bonuses and protecting profits than the fair treatment of their customers.

Environmental Destruction

Volkswagen: Leading the Way in Corporate Social Responsibility

For Volkswagen, sustainability means pursuing economic, social and ecological objectives simultaneously and with equal energy. It is our aim to create lasting values, offer good working conditions, and conserve resources and the environment. We pride ourselves in being named best in class for automotive sustainability by the Dow Jones Sustainability Indices. Between 2009 and 2015, our “Clean Diesel” engines won several environmental awards.

We are determined that our corporate social responsibility (CSR) activities will have a lasting, positive impact on the Company’s value and reputation. We continue to look for ways to work together with our partners to create the most environmentally friendly vehicles and provide long-term sustainable automotive solutions.

Volkswagen and Their Failure of Corporate Social Responsibility

The Volkswagen (VW) case represents above all an absolute failure in terms of Corporate Social Responsibility (CSR). The company deliberately set out to design a means to circumvent emissions control—with the aim of giving the company an unfair advantage over its competitors that made it the world’s number one car maker, in large part on the basis of its supposedly environmentally friendly cars; meanwhile it was poisoning the planet.

Over 11 million cars worldwide were provided faulty software to cover up diesel emissions, emitting 40 times the legal limit of nitrogen oxide. They tricked the EPA by using faulty software to lie about their diesel emissions, using the development of certain lines of software that could put an engine into test mode and then return it to “dirty mode.” This helped them win several environmental awards that also allowed the company to receive several tax breaks.

Volkswagen launched a huge marketing campaign promoting the small emissions of their diesel cars, even though they were covering up the truth. This rejection of ethical standards makes one thing absolutely clear, Volkswagen decided that it didn’t matter if they lied about their cars, as long as doing so allowed them to become the world’s leading car maker and make a hefty profit.

Exploitation of Workers

Gap: Leading the Way in Corporate Social Responsibility

For Gap, sustainability means pursuing objectives that create lasting values for employees, offering good working conditions and wages. We pride ourselves in being one of the first several years ago to raise the hourly wage of our workers to over $10 per hour, pay female and male employees equally, and have a senior leadership team with equal numbers of women and men.

Corporate Social Responsibility (CSR) is one of the important aspects of our business. We have won a number of awards for our CSR programs and initiatives, including 2016 Catalyst Award in recognition of its commitment to equality, diversity and inclusion. Moreover, we continue to work to protect the natural resources we use, for fair trade, and to stop slavery and human trafficking.

We are determined that our corporate social responsibility (CSR) activities will have a lasting, positive impact on the Company’s value and reputation. We continue to look for ways to work together with our partners to create the best and safest work environments in which all people can flourish.

Gap and Their Failure of Corporate Social Responsibility

The clothing store Gap represents above all an absolute failure in terms of Corporate Social Responsibility (CSR). Gap has been accused of using factories with extremely bad human rights records. These factories are unsafe, hot, and overcrowded facilities. In addition, they use child labor, force workers to work 11 h shifts 6 days per week and pay workers $25 to $37 per month. Being responsible for exploiting their workforce by firing anyone who refuses to work long hours and under the poor conditions is unacceptable.

For Gap, it’s unacceptable that women and children are being forced to work long hours under the threat of having their pay cut, paid below minimum wage—earning as little as $1.00 a day in extreme cases—and kept in insecure employment without pensions or health insurance. This rejection of ethical standards makes one thing absolutely clear, Gap is more concerned with protecting profits than the treatment of workers in the factories and plants they use.

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Peasley, M.C., Woodroof, P.J. & Coleman, J.T. Processing Contradictory CSR Information: The Influence of Primacy and Recency Effects on the Consumer-Firm Relationship. J Bus Ethics 172, 275–289 (2021). https://doi.org/10.1007/s10551-020-04514-4

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