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Principled profits

To succeed with modern-day consumers, companies need more than good products and services; they need good morals, too.

Sarah “Echo” Steiner was tired of the single life. So in January 2011, the 39-year-old resident of Lake Worth, Florida, made a strange, public declaration: She decided to get married. What made Steiner’s announcement so peculiar, however, wasn’t that she wanted to wed. Rather, it was who—or what—she wanted to wed. Instead of a man or a woman, she wanted to exchange vows with a corporation.

“I haven’t found the right man, but there are plenty of corporations out there,” Steiner told a local newspaper.

Although it was an absurd stunt—corporations can’t love you, laugh at your jokes, hold your hand, or take out the garbage, to say nothing of kissing the bride—it was conceived in order to make a very serious point. Steiner, a political activist and a member of the Palm Beach County Green Party, was protesting Citizens United v. FEC, a landmark Supreme Court case that a year earlier had granted corporations the right to spend money freely in support of political causes and candidates. In so doing, it answered a resounding “yes” to a very controversial question: Are corporations people?

It may not be a new question, but it feels especially relevant in the context of modern consumerism, according to Jeremy Nicholson, Ph.D., an assistant professor of behavioral economics at The Chicago School of Professional Psychology’s Online Campus.

“Companies—as separate from the people who make them up—do, indeed, have some of the same legal rights and responsibilities as actual people. This is known as corporate personhood, and it’s a long-standing legal precedent,” explains Dr. Nicholson, who says what began as a legal question now has social and psychological dimensions as well. “Consumers are interacting and having ‘relationships’ with companies more now as if they were people.”

When it affords them legal rights and financial advantages, corporate personhood benefits companies. What can be an asset, however, can also be a liability. Case in point: Starbucks faced a national backlash in April 2018 when the manager of a Starbucks in Philadelphia asked two black men to leave her store after they used the restroom without making a purchase. When they refused, she had them arrested for trespassing, catalyzing a maelstrom of controversy that climaxed on May 29, when Starbucks closed more than 8,000 company-owned stores in the United States to conduct a four-hour, racial-bias training for nearly 175,000 employees.

The incident suggests an unforeseen consequence of corporate personhood: If corporations are people, then their customers can hold them as accountable for principles as their shareholders do for profits. When that happens, companies have no choice but to recalibrate their moral compass. Those that do so successfully will navigate beyond their corporate quagmire while those that don’t risk sinking inside it.

Starbucks isn’t the only company whose brand has recently faced public relations challenges. Last year, the hashtag #DeleteUber began trending on social media when a former employee accused Uber of having a sexist work culture. In February, gun-rights advocates boycotted Dick’s Sporting Goods over its decision to stop selling assault-style weapons after the mass shooting at Florida’s Marjory Stoneman Douglas High School. And in May, television network ABC came under fire when one of its stars, Roseanne Barr, made a racially insensitive comment on Twitter.

What’s fueling these types of corporate crises isn’t just controversial behavior by companies and their employees; according to Elizabeth Schwab, Psy.D., it’s the emotional connections they have with consumers.

“There is a concept within psychology called ‘self-brand overlap,’” explains Dr. Schwab, associate chair of the Business Psychology Department at The Chicago School of Professional Psychology’s Online Campus. “Self-brand overlap refers to consumers’ tendency to use brands as a way to help them manufacture, nurture, and display aspects of their self-identity. When a company fails to live up to our expectations, we might feel conflicted; because that brand has helped us generate an aspect of our self-identity, some consumers may feel that errors are an attack on their own identity.”

Echoes Dr. Nicholson, “A company’s public face, or brand image, is important because the consumer is often buying more than just a product or service. They are buying a feeling, a relationship, and a way of signaling their own identity.”

Self-brand overlap is what compels consumers to buy a $50 T-shirt instead of a $5 T-shirt. If utility were their only care, consumers would buy the latter exclusively; because clothing labels broadcast messages about their style and status, however, millions of people buy the former.

“The perceived value of a product or service is more important than its actual value,” says Jay Finkelman, Ph.D., professor and chair of the Industrial and Organizational Psychology Department at The Chicago School’s Los Angeles Campus. “The problem for most organizations is that an image is crafted over an extended period of time but can be damaged quite quickly.”

It’s a precarious position to be in. On one hand, acts of corporate citizenship can help companies accrue brand equity, which they need in order to outshine their competition. On the other hand, those same acts can leave them vulnerable to attack.

This predicament is particularly evident in the perks and pitfalls of social media, the reach and immediacy of which is tinder for incendiary public controversies. “Social media and the rise of the internet has most definitely impacted our current environment,” explains Dr. Schwab, who says social media has given consumers more opportunities to both interact with brands and learn about them, which has simultaneously inundated companies with fans and critics alike. “We have more information at our fingertips, which means we can hold our favorites to a standard that perhaps we couldn’t before.”

Furthermore, social media compounds what’s known in psychology as “attribution theory,” which is the process by which people naturally seek internal causes for external events. In the case of corporate controversies, for instance, consumers naturally attribute the misdeeds of employees to their employers as a means of explaining inexplicable behavior.

“Negative employee behavior has always displeased customers,” Dr. Nicholson explains. “Nevertheless, it used to be an isolated effect where only a limited number of customers knew about that specific employee’s behavior at that specific store. Now, because more people can be made aware of it—and make attributions—there is a larger effect on the overall company.”

There’s no such thing as a bulletproof brand. But not all wounds are fatal.

“All relationships change and evolve over time. Even married couples have to adapt to each other’s changing needs and wants in order to remain satisfied,” Dr. Nicholson says. “Customer relationships are the same way. Customers’ tastes and needs change over time, and businesses have to adjust to stay connected to them. Companies who manage these relationships well can often be more profitable and stable in the long-term—with customers being quite satisfied, too.”

If customer relationships are like marriages, then business psychologists, industrial and organizational (I/O) psychologists, and behavioral economists—psychologists whose specialties are corporate strategy, workplace analysis, and consumer behavior, respectively—are like marriage counselors. It’s their job to mediate conflicts and nurture mutual satisfaction by way of offering new perspectives.

“People who are immersed in a business—particularly management—often can’t see what they’re not looking for,” Dr. Nicholson says. “Having an outside perspective can show them how to do business better.”

If there’s a silver lining to the new normal of constant corporate crises, that might be it: Although brands today face more challenges because of increased public scrutiny, the accelerated rate at which companies are strategically integrating psychology with business and economics means they also have more tools than ever with which to surmount them.

Because they learn them in a hands-on environment that emphasizes applied practice alongside theory, students in The Chicago School’s business psychology, I/O psychology, and behavioral economics programs are at the forefront of executing, evolving, and evangelizing such tools. Examples include persuasive messaging, marketing, change management, and team development, which can help companies elude and overcome controversy by designing positive consumer experiences, developing passionate employees, and building resilient brand identities.

“We try to teach our students how to anticipate business needs and market shifts so they can help answer consumer desires,” Dr. Schwab explains.

To onlookers, pleasing consumers seems an impossible task; like Sisyphus, embattled brands like Starbucks appear destined to spend eternity moving public opinion up a large hill, only to have it roll back down again whenever they near the top. Looking through the lens of business and I/O psychology, however, Dr. Finkelman sees things differently.

“It is an ongoing process of continuous improvement that I/O and business psychologists lead within organizations,” he concludes. “So in that sense, it is not like pushing a boulder up the hill, only to see it fall down each time. Rather, our graduates create many steps up the hill and inevitably lead organizations to new heights.”

Read articles from the Fall 2018 issue of Insight:

1. President’s Letter: “Four decades and counting”

2. “Predicting the unpredictable”

3.  “Rhymes + Rhythms = Revolution”

4. “Aging alone”

5. “Project 1948: Bosnia”

6. “Global education in action”

Matt Alderton

Matt Alderton is a freelance writer who regularly covers social justice issues, as well as business, culture, science, technology and travel. A graduate of the Medill School of Journalism at Northwestern University, he lives in Chicago with his partner, Jeff, and their Boston terrier, Roxy.


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