Introduction
Given the unprecedented uncertainty associated with the mass community spread of the virus, the COVID-19 pandemic disrupted many aspects of social and economic life, but it has also presented an opportunity for corporations around the world to reevaluate and reconnect with their key stakeholders (Brammer, Branicki, & Linnenluecke, Reference Brammer, Branicki and Linnenluecke2020). Stakeholders refer to ‘any group or individual who can affect or is affected by the achievement of the organization's objectives’ (Freeman, Reference Freeman1984: 46). The stakeholder theory was proposed as an important departure from the traditional economic view on corporate responsibilities to maximize shareholders' economic interests (Freeman & Reed, Reference Freeman and Reed1983). During the pandemic, various primary and secondary stakeholders who are impacted by the economic and social disruptions are likely to gain prominent positions in managerial decision-making and may become particularly salient in corporate policy changes to cope with the disruptions brought by the widespread public health concerns, resulting in a potential shift of corporate policies that prioritize societal stakeholders' interests and contribute to the wellbeing of the society (Ayoko, Caputo, & Mendy, Reference Ayoko, Caputo and Mendy2021; Walters & Tacon, Reference Walters and Tacon2010).
Mitchell, Agle, and Wood's (Reference Mitchell, Agle and Wood1997) seminal theory of stakeholder identification and salience delineates that stakeholders' interests become more noticeable among corporate managers when these stakeholders accumulate three attributes, including power, legitimacy, and urgent claims. Built upon resource dependence theory, stakeholder salience researchers suggest that the stakeholders who provide access to needed resources for the organizations' survival possess the power to influence corporate policies (Barnett, Henriques, & Husted, Reference Barnett, Henriques and Husted2020; Freeman, Reference Freeman1984; Frooman, Reference Frooman1999; Sharma & Henriques, Reference Sharma and Henriques2005). The urgency of the dire situation of a widespread and rapidly circulated virus calls for corporate managers' immediate attention to the potential threat to long-neglected stakeholders' interests (Bapuji, Patel, Ertug, & Allen, Reference Bapuji, Patel, Ertug and Allen2020). The purpose of this study is to apply the stakeholder salience theory and explore the factors that contribute to corporate COVID-19 responses in enhancing welfare beyond shareholders' immediate financial interests. The attributes of stakeholders' power, legitimacy, and urgency can be used to identify the salient stakeholders at a given time (Mitchell, Agle, & Wood, Reference Mitchell, Agle and Wood1997), particularly the shift of salience toward the societal stakeholders. Based on the sample of large public firms in the US, we find corporate COVID-19 responses include customer-oriented practices to provide business operation flexibility, and employee-oriented practices, such as remote working policy and paid sick leave (Collings, Nyberg, Wright, & McMackin, Reference Collings, Nyberg, Wright and McMackin2021), as well as charity efforts in the form of a community relief fund (Pillay & Scheepers, Reference Pillay and Scheepers2020). Specifically, we find that corporations with a larger number of employees, representing power, and social media followers, representing legitimacy, tend to adopt more corporate responses that are addressing stakeholders' concerns. However, the extent of the COVID-19 impacts on the industries, representing urgency, reduces the positive effect of stakeholder salience on corporate responses to COVID-19.
The findings of the current study contribute to the crisis management and stakeholder salience literature in multiple ways. First, prior research provided great insights into crisis management, especially in the cases of accidental crises and preventable crises which are largely within the organization's control (Coombs, Reference Coombs2007a; Reference Coombs2007b). In the cases of managing external stakeholders during the crisis, the organizations would develop multiple response strategies to avoid the attributions of responsibilities and alleviate the negative perceptions (Bundy & Pfarrer, Reference Bundy and Pfarrer2015). The COVID-19 pandemic is a public health crisis in which corporates are likely to be perceived as victims (Coombs, Reference Coombs2007b). With weak crisis responsibility from the organization, we find that managerial attention is shifted to increasing corporate social responsibility (CSR), which is rarely discussed in the crisis management literature. Second, informed by the stakeholder salience theory, we explore the factors that explain the corporate responses and respond to the recent call for research to reevaluate ‘who and what really counts’ (Crane & Matten, Reference Crane and Matten2020; Hall, Millo, & Barman, Reference Hall, Millo and Barman2015; Neville, Bell, & Whitwell, Reference Neville, Bell and Whitwell2011). As such, we extend the stakeholder identification and salience framework by incorporating the contingencies derived from the crisis event characteristics suggested in the crisis management literature (Pearson & Clair, Reference Pearson and Clair1998). Third, a recent review of Mitchell, Agle, and Wood's (Reference Mitchell, Agle and Wood1997) framework suggests that the prevalence of digital media compressed the cycle of stakeholder engagement work (Wood, Mitchell, Agle, & Bryan, Reference Wood, Mitchell, Agle and Bryan2021). The typical cycle may take up to years to develop stakeholder awareness, and identification, followed by stakeholder understanding work, and prioritization work, leading to stakeholder engagement work (Lee, Reference Lee2015; Mitchell, Lee, & Agle, Reference Mitchell, Lee, Agle, Wasieleski and Weber2017). We provide critical empirical evidence that the corporations facing the COVID-19 crisis are engaging stakeholders in a cycle as short as the first six months of the pandemic.
Conceptual background and hypotheses development
Stakeholder salience and corporate responses
Mitchell, Agle, and Wood (Reference Mitchell, Agle and Wood1997) proposed the stakeholder salience framework and defined stakeholder salience as ‘the degree to which managers give priority to competing stakeholder claims’ (p. 854). Managers evaluate the stakeholders' concerns based on stakeholders' three attributes, power, legitimacy, and urgency. The more attributes associated with the stakeholders' concerns, the more salient these stakeholders' claims. The foundations of stakeholders' power are based on the type of resources to exercise power. For instance, shareholders possess utilitarian power based on financial resources (Lähdesmäki, Siltaoja, & Spence, Reference Lähdesmäki, Siltaoja and Spence2019). Organizational managers are likely to view the shareholders as the primary stakeholder due to the substantial resources provided by shareholders to sustain corporate operations. The second attribute, legitimacy, refers to ‘a generalized perception or assumption that the action of an entity is desirable, proper or appropriate within some socially constructed system of norms, values, beliefs, and definitions’ (Suchman, Reference Suchman1995: 574). Institutional theory researchers suggest three pillars of coercive, cognitive, and normative institutional pressures for corporate compliance to gain legitimacy (Scott, Reference Scott1995). The local government possesses coercive power in the form of a lockdown ban or safety protocol and presents a legitimate claim that is backed up by the coercive institution in the business environment. Neville, Bell, and Whitwell (Reference Neville, Bell and Whitwell2011) further propose that it is the ‘moral form that is relevant for legitimacy's role in the stakeholder salience framework’ (p. 366). Stakeholders' legitimacy, hence, is based on how managers should assess and perceive the net benefits, rights, justices, and so on. Lastly, urgency presents the time-sensitive nature of the stakeholder's concern.
When the stakeholders gain salience, corporations respond to stakeholders' concerns in multiple ways. First, corporations may either focus on threats or benefits to themselves or focus on issues that affect relationships with stakeholders, leading to multiparty collaboration to solve common problems (Roloff, Reference Roloff2008; Sheehan & Ritchie, Reference Sheehan and Ritchie2005). Second, corporations may adopt either substantiative or symbolic responses to address stakeholders' concerns depending on whether the stakeholder's concern is related to organizational identity (Bundy, Shropshire, & Buchholtz, Reference Bundy, Shropshire and Buchholtz2013). Third, corporations do not directly address stakeholders' concerns but opt to manipulate stakeholders' perceptions. For instance, Ulmer and Sellnow (Reference Ulmer and Sellnow2000) studied the deadly contamination incident at the fast-food restaurant, Jack in the Box, and revealed corporations' crisis communication could privilege one stakeholder group, typically shareholders, over others who may be more seriously affected. Kolk and Pinkse (Reference Kolk and Pinkse2006) publicized two case studies of ‘stakeholder mismanagement’, by which ‘managers neglect, avoid, or thwart stakeholder interests and pressures’ (Wood et al., Reference Wood, Mitchell, Agle and Bryan2021: 220). Next, we turn to crisis management to seek more insights into corporate responses during a crisis event.
Crisis management
An organizational crisis refers to ‘an event perceived by managers and stakeholders as highly salient, unexpected, and potentially disruptive’ (Bundy, Pfarrer, Short, & Coombs, Reference Bundy, Pfarrer, Short and Coombs2017). Crisis management is defined as ‘a systematic attempt by organizational members with external stakeholders to avert crises or to effectively manage those that do occur’ (Pearson & Clair, Reference Pearson and Clair1998: 61). Due to their profound impact, scholars have been interested in investigating and studying organizational crises and how to manage and reduce their harm (Bundy & Pfarrer, Reference Bundy and Pfarrer2015). A rich body of literature was produced by researchers from a variety of disciplines. One stream of literature focuses on the internal managing processes within an organization, such as organizational learning (Veil, Reference Veil2011) and crisis leadership (James, Wooten, & Dushek, Reference James, Wooten and Dushek2011). James, Wooten, and Dushek (Reference James, Wooten and Dushek2011) outlined the leadership competencies that demonstrate the core set of behaviors in a complex and dynamic environment during a crisis. Studies (e.g., Johansen, Aggerholm, & Frandsen, Reference Johansen, Aggerholm and Frandsen2012; Mazzei & Ravazzani, Reference Mazzei and Ravazzani2015) also have investigated how internal crisis management and crisis communication affect employees' behaviors.
Another stream of research focuses on the external environment, which investigates the interaction between the organization and stakeholders. For instance, how stakeholders perceive and react to a crisis and how organizations use crisis response strategies to influence evaluators (Bundy & Pfarrer, Reference Bundy and Pfarrer2015). Coombs's (Reference Coombs2007b) Situational Crisis Communication Theory (SCCT) provides an evidence-based framework for assessing and responding to crises according to the level of crisis responsibility and reputational threat. SCCT considers the role of crisis attribution and finds that the stakeholder would have greater negative perceptions when they attribute more responsibility to an organization. However, Bundy and Pfarrer (Reference Bundy and Pfarrer2015) believe that the attributions are negotiable in crisis management, and, thereby, subject to social influence. The existing studies are interested in investigating different types of strategies (e.g., defensive or accommodative) according to the organization's acceptance level of responsibility (Bundy & Pfarrer, Reference Bundy and Pfarrer2015) and the timing and the source of the crisis response (Bundy et al., Reference Bundy, Pfarrer, Short and Coombs2017). Additionally, the endowment of positive evaluations, such as reputations and legitimacy, is found to either positively (buffer) (Pfarrer, Pollock, & Rindova, Reference Pfarrer, Pollock and Rindova2010) or negatively (burden) (Coombs & Holladay, Reference Coombs and Holladay2006) affect stakeholders' opinions and reactions to an organization in crisis management literature.
These studies provided excellent insights for crisis management, especially in the cases of accidental crises and preventable crises (Coombs, Reference Coombs2007b). The COVID-19 pandemic is a public health crisis in which corporates are perceived as victims (victim crises) (Coombs, Reference Coombs2007b). With weak crisis responsibility from the organization, the managerial attention might be shifted to CSR, and this study will add new insights from the CSR perspective to crisis management literature.
Stakeholder engagement during public health crisis and COVID-19 responses
According to the Centers for Disease Control and Prevention (2017), ‘Public health is the science of protecting and improving the health of families and communities through the promotion of healthy lifestyles, research for disease and injury prevention, and detection and control of infectious diseases’. COVID-19 presented an unprecedented public health threat because it has spread rapidly around the world in just a few months, while many health officials scrambled to learn more about it (Mack, Reference Mack, Chan, Shaker, Abrams, Wang, Fleischer and Greenhawt2020). To control the outbreak of the coronavirus, government officials provide guidelines for physical distancing measures placed to curtail community virus outbreaks (Centers for Disease Control & Prevention, 2020). Since the outbreak of coronavirus in Wuhan, China swiftly locked down 27 cities, and many factories were not allowed to operate. Subsequently, 94% of the Fortune 1,000 companies are negatively impacted by supply chain interruptions, which induced stock market corrections (Sherman, Reference Sherman2020).
In late January 2020, the US reported the first confirmed case of COVID-19. World Health Organization (WHO) declared COVID-19 a global pandemic in March. To flatten the curve of the community spread of the virus, many countries outside China started taking similar measures to restrict nonessential travel. In the US, California was the first state to order all residents to stay at home (Mervosh, Lee, Gamio, & Popovich, Reference Mervosh, Lee, Gamio and Popovich2020). Several states followed suit and announced shelter-in-place orders and mandated the closing of all nonessential businesses in April. Many individuals and companies turned to social media to stay connected and informed (Chew & Eysenbach, Reference Chew and Eysenbach2010; Li, Bailey, Huynh, & Chen, Reference Li, Bailey, Huynh and Chen2020).
Stakeholder salience based on power
Based on the resource dependence theory, when the stakeholder provides access to resources, the stakeholder will have a larger power, hence increasing salience. Frooman (Reference Frooman1999) suggests that under the condition of high resource interdependence, the stakeholders would likely use a direct strategy (as opposed to an indirect strategy) to influence the firm's allocation of resources (as opposed to withholding resources) in a way that the firm would accommodate their objectives. During normal times, employees present a stakeholder that is resource dependent on the firm, but the firm dependence on the employees is less apparent, especially when there is no shortage of labor supply. In such a scenario, employees are not likely to be able to directly pressure corporations to change corporate policies and have limited influence over corporate actions (Sharma & Henriques, Reference Sharma and Henriques2005). However, amidst the pandemic, employees are gaining importance due to the immediate threat to employee safety at the workplace, which ultimately impacts business operations (Collings et al., Reference Collings, Nyberg, Wright and McMackin2021). Corporations that employ a large workforce are more likely to consider multiple safety protocols and employee benefits to sustain business operations, as employees' health and safety become a determinant factor of business continuity.
Furthermore, employee stakeholders are also likely pressing and supporting corporations to provide resources for other societal stakeholders, such as setting up a community relief fund to help families that are impacted by COVID-19 as there could be existing employee volunteer programs that are ‘management-led initiatives to facilitate and encourage employee volunteerism in the local community’ (Knox, Reference Knox2020: 450) and shown to improve not only individual employee loyalty (De Gilder, Schuyt, & Breedijk, Reference De Gilder, Schuyt and Breedijk2005; Jones, Reference Jones2010) but also overall firm-level productivity (Knox, Reference Knox2020). In the same way, employees can drive and transmit some of the social gains from their activism upstream as well as downstream in the production and supply chains. For example, studies have noted that though employees can be insider activists, they can also work as outside activists and generate industry-level changes (Briscoe & Gupta, Reference Briscoe and Gupta2016). In this case, as outside activists, the employees of the focal organization can influence the target organizations via mechanisms of changing perceptions – either enhancing the investment uncertainty or altering perceptions of business opportunities (Soule, Swaminathan, & Tihanyi, Reference Soule, Swaminathan and Tihanyi2014). This is especially crucial during the pandemic when employees observe other firms' activities and protection policies and put pressure on their respective firms to follow leading industry standards. In summary, given the power possessed by employees during the pandemic, firms with a larger number of employees are more likely to provide corporate responses that enhance societal stakeholders' welfare.
Hypothesis 1 (H1): The greater the number of employees, the greater the likelihood that the firm addresses COVID-19 disruptions and announces CSR policies that enhance multiple stakeholders' welfare.
Stakeholder salience based on legitimacy
In recent years, researchers have started to study organizational legitimacy established through social media presence. A well-established stream of the literature suggests that legitimacy emerges and develops from a deliberative discourse among various actors with the active participation of corporations (Etter, Colleoni, Illia, Meggiorin, & D'Eugenio, Reference Etter, Colleoni, Illia, Meggiorin and D'Eugenio2018; Palazzo & Scherer, Reference Palazzo and Scherer2006). For instance, Castelló, Etter, and Årup Nielsen (Reference Castelló, Etter and Årup Nielsen2016) conducted an in-depth longitudinal case study and proposed a networked legitimacy strategy to engage stakeholders through social media. Here, we argue the extent to which a modern corporation gains external legitimacy in society depends on the size of its social media followers. Barnett, Henriques, and Husted (Reference Barnett, Henriques and Husted2020) apply cognition theory and argue that social media stakeholders would need to filter information and go through a sense-making process in forming a collective narrative. The framing of the narratives becomes a double-edged sword to direct managerial attention on corporate social responsibilities as the managers could carefully craft a message that effectively manipulates the public perception of the company's responsibilities.
During the COVID-19 pandemic, several leading public corporations in the US, particularly high-tech giants, set great examples in combating disinformation and providing credit sources of public health information. Hence, the nature of the pandemic takes away the corporations' deniability of wrongdoing since the corporations are not responsible for causing the public health crisis. We believe that the large size of social media followers grants societal stakeholders additional legitimacy and leads corporations to join the positive force of responding to COVID-19.
Foremost and crucially, it is likely that a large number of social media followers will scrutinize and critique the firm's customer-oriented approaches during the crisis, and this can generate pressure on the firms to proactively engage with customer-related CSR activities. Similarly, a large set of social media followers can keenly observe the treatment of employees, and their oversight can lead to employee-related CSR actions. For example, the protection of the workers and their ability to work in a COVID safe environment, including working from home, might be commented on social media, and firms' unwillingness to engage in these actions can experience reputational risks.
Also, a large number of social media followers can generate continuous feedback on the firm's engagement with the suppliers and highlight any shortcomings in the firm's activities. Thus, during the crisis, legitimacy pressures can make the firm invest in supplier-oriented CSR activities. In the same vein, community-oriented or lack of community focus can generate legitimacy issues amongst large social media followers; for example, the use of scarce resources and moving resources from the public domain to the private sectors – like the single-use personal protection aprons and masks, etc.
Hypothesis 2 (H2): The larger the number of social media followers, the greater the likelihood that the firm addresses COVID-19 disruptions and announces CSR policies that enhance multiple stakeholders' welfare.
Stakeholder salience based on urgent claims
The urgency refers to the time sensitivity and criticality of the stakeholder's claim (Eesley & Lenox, Reference Eesley and Lenox2006; Neville, Bell, & Whitwell, Reference Neville, Bell and Whitwell2011). According to Neville, Bell, and Whitwell (Reference Neville, Bell and Whitwell2011), ‘The urgency attributes provide a dynamic dimension to the salience framework, helpful and relevant in the prioritization of stakeholder claims, but irrelevant in the identification of stakeholders’ (p. 362). In other words, the urgency of the stakeholders' claims alone may not qualify managerial immediate attention to stakeholders but will intensify the first two attributes of the stakeholders' salience. In the context of the public health crisis, not all industries are impacted equally. Some industries, such as healthcare, food service, delivery, and public transportation, were classified as ‘essential business’ and mandated to continue the business, exposing employees to a high level of health threat (Lancet, Reference Lancet2020). Other industries that are highly impacted are due to exposure to heightened economic risks, such as delays in operation, supply chain disruptions, and government-mandated shutdowns (Li, Liu, Mai, & Zhang, Reference Li, Liu, Mai and Zhang2021). In these highly impacted industries, the corporate responses presented in the previous two hypotheses will be heightened due to the sense of urgency and criticality displayed in the stakeholders' claims.
Hypothesis 3 (H3a): The highly impacted industry moderates the stakeholder salience during a pandemic such that the employee effect on the CSR policies will be stronger in a highly impacted industry than in a less impacted industry.
Hypothesis 3 (H3b): The highly impacted industry moderates the stakeholder salience during a pandemic such that the effect of social media followers on the CSR policies will be stronger in a highly impacted industry than in a less impacted industry.
Method
Sample
We collect data from the Just Company list (https://justcapital.com/covid-19/). Just Capital tracked major American publicly listed firms' corporate responses to COVID-19 since March 2020. The results reported in this paper are based on a sample of America's 301 largest employersFootnote 1 updated on June 9, 2020. Table 1 lists the sample CSR policies according to the corporate responses related to five major stakeholders, including employees, customers, shareholders, suppliers, and the community. Major stakeholder issues identified by the JUST survey among Americans include backup dependent care, personal protective equipment, paid sick leave, financial assistance, customer accommodations, and community relief funds (Just Report, n.d.). To control for the exogenous influence of different countries, we only include the 293 US headquartered, publicly traded firms.
CSR policies in response to COVID-19 pandemic*
* Adapted from the COVID-19 corporate response tracker by Just Capital Foundation, Inc. (https://justcapital.com/data/). Detailed information in Appendix A.
Measures
Independent variables
The firm size is operationalized by the employee number of the corporate (Employees). The number of social media followers was collected based on the number of followers to the corporate accounts on the Twitter platform. The recognizable social media site was created in the late 1990s, and the two most popular social media sites, Facebook and Twitter, came into existence in 2006. While both are popular social media platforms in the US, Twitter has a more transparent data infrastructure that is advantageous for data collection and analysis and has been widely utilized in crisis management studies (Chew & Eysenbach, Reference Chew and Eysenbach2010; Getchell & Sellnow, Reference Getchell and Sellnow2016; Stieglitz, Mirbabaie, & Milde, Reference Stieglitz, Mirbabaie and Milde2018).
Moderator and control variables
We use the definition of Li et al. (Reference Li, Bailey, Huynh and Chen2020) to identify the industries that are likely to be impacted by the pandemic. Using a large sample of US public firms' corporate calls in the first four months of 2020, the top three industries with the greatest exposure to the COVID-19 crisis include chemicals and allied products, consumer nondurables, and manufacturing industries. To control for the heterogeneity of the firm resources, we control for the market capitalization and total sales in the year prior to 2020 (El Ghoul, Guedhami, & Kim, Reference El Ghoul, Guedhami and Kim2017; Song & Rimmel, Reference Song and Rimmel2021). Additionally, we recognize that the local municipal governments enact different public policies during the pandemic in response to the fluid, evolving public health risk in the local communities. Thus, we include the control variable of headquartered state to control how corporate response policies are potentially dictated by the local government policies. The COVID-19 impact on their headquarters (HQ) is operationalized by the positive test result divided by the state's total tests in which the corporate headquarter resides.
Analysis
Organizational strategy research usually involves multiple contingencies and requires a multiple-dimensional understanding, including the corporate responses to the COVID-19 pandemic. To examine the configurations of the corporate responses, we first conduct a cluster analysis to delineate the extent to which corporations respond to stakeholders during the COVID-19 pandemic (Ketchen & Shook, Reference Ketchen and Shook1996). The cluster analysis helps us identify these companies' responses by grouping together the companies with similar responses to their stakeholders (Brusco, Singh, Cradit, & Steinley, Reference Brusco, Singh, Cradit and Steinley2017; Gilson & Shalley, Reference Gilson and Shalley2004). After we establish the clusters of corporate responses, we conduct regression analyses to test our hypotheses. Lastly, we use the five sets of corporate responses to five stakeholders to further assess the stakeholder salience framework.
Results
We use the STATA software to cluster our data based on the firm's responses across five focus areas – customers, employees, suppliers, community, and shareholders. By employing Ward's linkage method to cluster the data (Brusco et al., Reference Brusco, Singh, Cradit and Steinley2017; Gilson & Shalley, Reference Gilson and Shalley2004; Ketchen & Shook, Reference Ketchen and Shook1996), we identify that the optimal number of clusters is two. The Calinski/Harabasz pseudo-F score is 250, and this value is typically the highest for the optimal number of clusters. We compared the Calinski/Harabasz pseudo-F scores for clusters of various formations, like four, five, and six groups, along with the two groups noted in this paper. The Calinski/Harabasz pseudo-F score was the highest for the two groups used in the rest of the analyses. Table 2 reports the means, standard deviations, and pair-wise correlations of all variables.
Means, standard deviations, and pair-wise correlations
*p-value < .05.
As shown in Table 3, compared to the 103 firms that fall into cluster two, cluster one of the 190 firms has a higher orientation on corporate responses to all five stakeholder groups, especially the employees' interests. We conduct an unpaired t-test to examine the difference in the mean values of the various corporate responses between these two clusters. We observe that there exist statistically significant differences between the four corporate responses – customers (t = 4.0667, p < .0001), employees (t = 22.2611, p < .0001), community (t = 2.6819, p < .0077), and shareholders (t = 2.3351, p < .0202). There is no meaningful difference in the corporate responses toward the suppliers across these groups.
Summary statistics for the two clusters of firms that have distinct corporate responses to COVID-19 pandemic
Hypothesis testing results
Table 4 shows the results of the analysis of employees, social media followers, highly impacted industry, and the firm's COVID-19 corporate policies. Model 1 in Table 4 presents the baseline analysis. Models 2–3 in Table 3 show the effect of the independent variables and models 4–7 that of the independent variables and the moderator. We observe that the number of employees will have a positive effect on the COVID-19 corporate policies (β = 7.69 × 10−07, p = .012, model 2), and similarly, the number of Twitter followers will have a positive effect on the COVID-19 corporate policies (β = 3.98 × 10−08, p = .075, model 3). Both H1 and H2 are supported. In this case, the positive effect of the independent variables indicates that the higher values for independent variables (number of employees, number of Twitter followers) will lead to a higher number of COVID-19 corporate policies (cluster 1). Also, a highly impacted industry, our moderator, has a positive effect on the COVID-19 corporate policies (β = .108, p = .063, model 5).
Regression analysis of employees, social media followers, and highly impacted industry on the firm's COVID-19 corporate policies
Robust standard errors in parentheses
***p < .01, **p < .05, *p < .1
Hypotheses 3a and 3b propose that the stakeholder salience is enhanced by the extent of the impacts in the industries. Model 6 in Table 4 suggests that the moderating effect is negative (β = −2.03 × 10−06, p = .005), contrary to H3a, implying that the presence of the firm in the highly impacted industry reduces the positive influence of the number of employees on the COVID-19 corporate policies. As shown in Figure 1, in a highly impacted industry, the positive association between the number of employees and corporate responses is weaker than in a less impacted industry. We do not find a significant moderating effect of highly impacted industry and Twitter followers in model 7 as well as in model 8, which includes all variables. Hence, H3b is not supported.
Two-way interaction of employee stakeholders and highly impacted industry.
Post-hoc analyses on corporate responses to five stakeholders
To better delineate the stakeholder salience and corporate responses, we perform the above regression analyses on the five sets of corporate responses in relation to five stakeholders. As shown in Table 5, the number of employees is positively related to employee-oriented (β = 9.55 × 10−06, p = .002, model 3) and customer-oriented (β = 3.09 × 10−06, p = .011, model 1) CSR but not significantly related to the other three stakeholders’ related corporate response. It is noted that though the number of employees is positively related to both employee-oriented and customer-oriented CSR, the magnitude of the effect is almost three times higher for employee-oriented CSR. Additionally, the number of Twitter followers is only positively related to the customer-oriented (β = 4.80 × 10−08, p = .014, model 1) corporate responses but is not significantly related to the rest of the stakeholders' related corporate responses. Further, the number of Twitter followers in the case of customer-oriented policies, we observe that a highly impacted industry increases the positive influence of the number of Twitter followers on corporate policies (β = 7.96 × 10−08, p = .030, model 1). By contrast, in the case of employee-oriented policies, we observe that a highly impacted industry reduces the positive influence of the number of employees on the corporate policies (β = −6.49 × 10−06, p = .032, model 3).
Regression analysis of employees, social media followers, and highly impacted industry on the firm's individual COVID-19 corporate policies
Robust standard errors in parentheses
***p < .01, **p < .05, *p < .1
Discussion
As expected, larger firms, operationalized as the number of employees, have larger power, hence, eliciting more corporate responses to address their needs during the pandemic. In particular, the follow-up analysis suggests that corporations with a large number of employees are more likely to direct their corporate responses to not only employees but also customers. Some of the corporate responses, such as adjusting business hours, are going to impact both employees and customer stakeholders. Despite being a primary stakeholder group directly impacted by the business operations, employees may not be the most salient stakeholders, especially when the financial bottom line is at stake in normal times (Collings et al., Reference Collings, Nyberg, Wright and McMackin2021). However, based on our findings in the less impacted industries, the COVID-19 pandemic provides corporations with an opportunity to reevaluate their corporate policies and enhance employee wellbeing. The HR policies, such as paid sick leave and dependent care, are gaining importance to ensure business continuity during a pandemic. However, the industry effect of COVID-19 suggests that highly impacted corporations may not have enough resources and capacity to address employees' concerns as other firms that are in a less impacted industry.
Further, social media followers play an important role in today's business environment to not only disseminate information but also exchange ideas and shape the narratives regarding the perceptions of corporate policies. Our findings suggest that corporations with a large follower base are more likely to engage with customer-related corporate responses during the pandemic. Such an effect is even more profound in a highly impacted industry. We suspect that in the long run, when more social media followers are more attuned to other secondary stakeholders such as community stakeholders, the legitimacy granted by social media followers may help direct managerial attention to develop corporate responses that address community interests rather than only focusing on customers' interests.
Theoretical implications
A recent study suggests CSR performance prior to the pandemic is an effective buffer to the stock market corrections during the pandemic (Bae, El Ghoul, Gong, & Guedhami, Reference Bae, El Ghoul, Gong and Guedhami2021). Likewise, we contribute to the stakeholder salience literature by applying the three attributes to explain corporate variation in their CSR responses. The number of employees represents power, while the social media followers represent legitimacy. However, the extent of COVID-19's impact on the given industry counters our expectation of increasing the stakeholder salience. This finding further illustrates the complexity of the stakeholder engagement salience framework, which may need to be complemented by a resource-based view to examine a company's resource constraints during a public health crisis.
Practical implications
The stakeholder engagement researchers have shown that the companies proactively engage with the stakeholders and shape the narratives that define the company's organizational identity (Wood et al., Reference Wood, Mitchell, Agle and Bryan2021). The corporate responses during the pandemic become part of the corporation's history, and the corporate responses demonstrated are not one-time events without long-term consequences. The findings of the current study further support that stakeholder salience was enhanced during the pandemic, and corporations respond to the impacts of social and economic disruptions on both primary and secondary stakeholders. Organizational managers who do not recognize the stakeholder salience during the pandemic may miss an important opportunity to engage stakeholders and shape the CSR policies to contribute to the welfare of society.
Limitation and future research
The current study is not without limitations. First, we utilize a sample that is representative of large publicly traded firms in the US market, which has seen various environmental, social, and governance (ESG) index funds that track the corporations' economic, social, and governance performance (Alareeni & Hamdan, Reference Alareeni and Hamdan2020). Hence, stakeholder salience has been on the rise and directs managerial attention to various social issues (Boesso & Kumar, Reference Boesso and Kumar2016). The single-country study limits some of the generalizability of our results as what we observe might be typical of the US firms and might not be easily transferrable in other business environments, especially the countries where the economic environment may not provide a strong normative institutional environment to encourage corporate social responsibilities (Min Foo, Reference Min Foo2007). We encourage researchers to continue this line of inquiry and apply stakeholder salience to study corporate responses to the pandemic in other institutional contexts. Second, a large-scale, quantitative methodology has its limitation in uncovering the dynamic process of stakeholder engagement. A recent case study has used Nestle as an example to reveal how a multinational firm takes into account the local community stakeholders' needs in developing its charity practices (Pillay & Scheepers, Reference Pillay and Scheepers2020). More qualitative studies following corporate responses to engage stakeholders during the pandemic will help us gain a more refined understanding of the cycle of stakeholder engagement and address questions such as when and why particular stakeholders' concerns gain priority in corporate policies. Thirdly, though Twitter is a good way to measure the influence of social media followers in the US context, there might be other ways in which customers and stakeholders influence firms in different countries. For example, personal word of mouth or critical news media might have a larger impact on the firm strategy and social engagement in less developed economies.
Appendix A. COVID-19 corporate responses
Open access
