When the Firm is Deceiving Its Stakeholders, It Talks Differently

A STUDY BY MAURIZIO ZOLLO AND COAUTHORS REVEALS THAT FIRMS' DECEPTION OF THEIR STAKEHOLDERS APPEARS IN THE LANGUAGE OF THEIR COMMUNICATION. AND SPECIALIST STAKEHOLDERS ARE ABLE TO DETECT THESE LINGUISTIC NUANCES

Firms often launch sustainability initiatives without changing their business practices accordingly. “This is a problem because the firm knows well what it actually does but its stakeholders do not”, Maurizio Zollo (Bocconi’s Department of Management and Technology) explains. Existing studies highlight information asymmetry as the reason why stakeholders do not detect whether firms actually implement these policies. So, are stakeholders really unable to detect firms that say one thing but do another (or don’t do anything at all), a phenomenon called decoupling? The intuition Zollo and his co-authors had is that a firm’s deception might be observed not so much in the content of its communication, but in its linguistic properties.
 
A paper by Zollo, London Business School’s Donal Crilly, and Berkeley’s Morten Hansen (The Grammar Of Decoupling: A Cognitive-Linguistic Perspective On Firms’ Sustainability Claims And Stakeholders’ Interpretation, in Academy of Management Journal, Volume 59, Issue 2, 705-729, doi: 10.5465/amj.2015.0171) finds that firms that implement policy consistently and those that do so only inconsistently do not differ in the content of their reports, but talk differently when defining their sustainability commitments.
 
The authors focused on 12 multinational corporations and analyzed 119 interviews with executives, 142 evaluations by external stakeholders, and data on policy adoption and practice implementation. The authors adopted the cognitive-linguistic perspective, which proposes that there is a relationship between language and speakers’ mental representations. In this way, you can detect differences in how individuals express their thoughts, rather than just differences in what they say. The authors thus compared firms that consistently implement policy (“implementors”) and those that don’t (“decouplers”). “We show that the difference between them is not a matter of content. It is not what they say, it is how they say it. Implementors communicate through a careful, discriminant language, rather than using a triumphalistic, oversimplified communication approach”, Zollo explains.
 
But why, then, do some stakeholders not see through these sweeping claims? What the authors find is that specialist stakeholders, with a focus on a single issue such as, for instance, NGOs, can indeed provide accurate evaluations. Generalist stakeholders and those who receive resources from the firm, instead, are not able to do the same, either because of lack of specific knowledge or because of specific incentives to penetrate the smoke screen.
 
An interesting conclusion that can be drawn from this study is that uncovering decoupling is not only a problem of information asymmetry between firms and stakeholders. Rather, identifying which firms make truthful claims is hard because the content of deceptive and truly committed firms’ communications is similar. Furthermore, stakeholders are differently motivated to interpret data. However, Zollo adds, “adopting a cognitive-linguistic perspective can help in predicting, at least in part, those cases where firms are decoupling, and not just in relation to sustainability policies”.

by Paola Zanella