On September 25, 2018, the public learned that nearly 50 million Facebook users’ personal information was exposed in a data breach. The same day, the Securities and Exchange Commission (SEC) announced that Chegg — a tech firm specializing in education services — had exposed around 40 million users’ private data. Facebook’s breach received massive media attention, including coverage by “The New York Times,” “The Wall Street Journal,” and “The Washington Post.” Only specialist industry media covered Chegg’s breach. Why such a difference in notoriety for cybercrimes of similar magnitude and timing?
According to a new study published in the Strategic Management Journal, only 36% of the 224 data breaches at publicly traded US companies between 2015 and 2018 received media attention. The reasons why only some companies garner coverage reveals new insights about the road from corporate misconduct to public scandal and the complexities of public perception.
What Determines Whether Corporate Misconduct is Newsworthy?
Two characteristics determine newsworthiness: deviance (actions outside social norms) and social significance (cultural, economic or institutional importance). As the example noted earlier demonstrates, most corporate misconduct on its own doesn’t qualify as newsworthy even if it is objectively severe.
As Jung-Hoon Han of Sungkyunkwan University in South Korea and co-authors Timothy Pollock of UT’s Haslam College of Business and Srikanth Paruchuri of Texas A&M point out, the larger factor drawing attention to misconduct and leading to scandalization is the actor’s social significance or deviance. They aligned these newsworthy characteristics with two company descriptors:
High-Reputation: social significance based public recognition of the quality of a firm’s activities and outputs
Celebrity: high level of attention and positive emotional responses from stakeholder audiences based on a firm’s deviation from the norm in activities and outputs
The study referenced industry rankings lists and comparative newspaper coverage to qualify the reputation and celebrity of 157 data-breached companies. It then measured the breaches’ media coverage for two weeks after each breach’s disclosure, charting company characteristics alongside the magnitude of the data breach.
Companies with high business reputations had 1.76 more articles published per day about their data breaches. Celebrity companies had 3.2 more articles published per day about their breaches.
“Given that just a single article places a breach in the top 90th percentile of coverage, both results are substantial,” Pollock said. “But the difference between high reputation and celebrity firms and their peers was pretty staggering when you factor in the breach’s severity.”
How Does an Incident’s Severity Affect Newsworthiness?
“Oil spills or product recalls incur strong negative reactions from audiences because they are objectively severe,” Han said. “But even incidents that caused minimal harm, such as when United Airlines violently removed a single passenger in 2017, can bring about strong punitive responses when they form a collective perception of severity.”
Data breaches provide an example of corporate misconduct with objective, quantifiable severity that can turn into much greater perceived severity depending on media coverage. The authors contextualized each breach’s severity and noted how high-reputation and celebrity affected data breaches’ media coverage in each context.
Measurably large data breaches at high-reputation companies generated 12.6 more articles per day, indicating scandal-level coverage. A good reputation seemed to buffer against out-sized media coverage of smaller breaches, however. For celebrity companies, the opposite was true: their minor breaches garnered 4.43 more articles per day, but coverage fell to 1.79 more articles for major breaches.
“The public might treat small instances of misconduct at reputable companies as outside the norm, but measurably bad behavior at a reputable company is clearly big news,” Paruchuri said. “Celebrity companies likely receive more coverage of minor misconduct because even small stories about them are newsworthy. It’s maybe harder for objectively severe incidents to reach the level of scandal, for coverage to continually build on itself, perhaps because the media outlets are already saturated with news on these businesses.”
Understanding a Company’s Public Perception Can Prevent Scandal
The authors note that these outcomes can give guidance for executives at highly publicized companies hoping to avoid scandal.
When the misconduct is objectively severe, high-reputation companies need to be even more concerned and take steps to demonstrate they are addressing the causes of misconduct. Conversely, quick, concise messaging might be more effective in tempering the emotional fervor around celebrity companies’ minor breaches than detailed, thoughtful plans.
“Committing misconduct is costly; having it scandalized is devastating,” Han said. “Understanding the public’s rational and emotional perceptions of companies that drive scandalization — and being prepared with the proper PR tactics — could save a company millions.
To read the full context of the study and gain greater insights into the interaction between public perceptions of companies and media coverage of corporate misconduct, access the full paper in the Strategic Management Journal.
