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Darla Moore School of Business

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Companies’ COVID-19 responses sway public perceptions

When businesses largely shut down or went to remote work at the beginning of the COVID-19 pandemic, some organizations and their leaders were viewed more favorably than others depending on their plans for compensating workers and safety precautions they took for their employees. 

Two Moore School faculty recently published research in the Journal of Applied Psychology on companies’ efforts to protect essential workers during the COVID-19 pandemic and their impact on stakeholder sentiment. They also specifically looked at CEOs’ track record for prioritizing stakeholders and how that impacted stakeholders’ perspectives.

The research team included Adam Steinbach, a Moore School management assistant professor; Audrey Korsgaard, a Moore School management professor and director of the Riegel and Emory Human Resources Center; and Jason Kautz, a University of Texas at Dallas assistant professor of Organizations, Strategy and International Management. Kautz graduated with his Ph.D. from the Moore School in 2020.

Steinbach, Korsgaard and Kautz examined media coverage of companies to determine their responses to COVID-19, companies’ annual letters to shareholders and all public Twitter posts mentioning the companies in their sample.

The research team looked at 59 companies from the stock market’s Standard & Poor’s 1,500 composite list who were considered essential and needed to remain operational despite the mass COVID-19 pandemic shutdown that began in March 2020, Steinbach said.

“The sample we examined includes a mix of retailers (e.g., Walmart, Costco), food and beverage manufacturers (e.g., Coca-Cola, Mondelez) and household goods producers (e.g., P&G, Colgate-Palmolive),” he said. “Our examination focused on two categories of actions — those intended to protect employee safety and those for employee compensation — in the immediate two-week aftermath of the formal declaration of COVID-19 as a federal state of emergency on March 13, 2020.”

Steinbach and his colleagues scrutinized how stakeholders reacted over the subsequent two months to companies’ actions in that first two-week period of the pandemic.

Compensation actions — like added “hero” pay or enhanced paid leave — were associated with a persistent rise in positive stakeholder sentiment. For CEOs with a track record for prioritizing stakeholders, positive stakeholder sentiment further increased.

“Our underlying logic is that compensation actions went above-and-beyond stakeholder expectations and fortified beliefs around companies’ genuine commitment to protect their employees’ livelihoods,” Steinbach said.

For organizations’ safety actions like signs encouraging social distancing or screenings for COVID-19 symptoms, stakeholders were not as easily swayed unless the CEO of the company offering the added protections was usually known for disregarding stakeholder concerns.

“Here, our logic is that people generally expected companies to adopt these workplace safety practices and only responded positively to low benevolence CEOs that they may have been more skeptical of given their otherwise poor track records for stakeholder well-being,” Steinbach said.

In their research, Steinbach and his colleagues used a 0-to-4-point scale to examine stakeholder views of companies’ pandemic actions. They scored companies at zero if they did not make any announcements about safety/compensation as it related to the pandemic. They considered a company a four on the scale if they publicly mentioned four practices for both safety and compensation.

For safety, the four practices were personal protective equipment (PPE), sanitation, screenings and social distancing; for compensation, the four were bonus pay, enhanced paid leave, increased hiring and other additional benefits.

“Our research demonstrates, first and foremost, that people were paying attention to essential workers during the pandemic and were quite responsive to whether the companies employing those workers were taking concrete action to protect their health and financial well-being,” Steinbach said. “This is, perhaps, part of a larger movement in which people’s expectations of major companies are higher and more expansive than they have been traditionally, especially as it relates to their treatment of their employees.”

Steinbach said their research shows that urgently responding to crisis situations as opposed to meticulously planning a response for them is important for company leaders to consider, especially when employee well-being is at stake.

“Overall, our findings are not so much that companies were penalized for ‘stalling’ but that companies often clearly benefitted from taking decisive action on behalf of their employees, especially when those actions centered on employees’ compensation and job security,” Steinbach said.

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