Slick 'Corporate Responsibility' Reports Are Actually Fooling Investors

There are few things drier than a corporate report. Pages filled with balance sheets and the occasional explanatory paragraph, in the case of financial disclosures… Your eyes are already glazing over.

But look at any corporate social responsibility report—meant to outline the amount of social good a corporation has done during the preceding year—and you'll notice a striking difference in presentation style: Gone are the reams of numbers and dry reporting, and in their place, pages of pretty pictures.

According to new research by business scholars at the University of Illinois, Champlain, corporate responsibility reports that emphasize style over hard facts fool less number-minded investors into thinking more positively about companies. In other words, corporate social responsibility reports are manipulative bullshit.

The researchers' study looked at how numerous corporations both framed and presented their self-determined ideas of corporate responsibility. They found a huge degree of variability; some companies, like Starbucks, preferred to take a global approach to their responsibility to the world, while others, like Wells Fargo, emphasized their impact in neighborhoods.

The researchers hypothesized that photo-focused presentations reinforce the effect of reports that emphasized local issues, since they impart the sense that evidence of some sort has been presented, while a global focus is best supported by prose that leaves people with the vague gist of goodness. To test this, they got 97 business students to look over fake corporate social responsibility reports and gauged how they perceived them.

Overwhelmingly, students reported feeling like they understood the reports better when the framing and presentation matched up (photos with local concerns, for example), as well as having positive reactions to the supposed corporate responsibility outlined therein. The researchers also gauged the number-mindedness of the students and found that students who relied more heavily on visual information were susceptible to being swayed by presentation style.

In short, it wasn't so much what the reports were actually saying that played the largest role in how potential investors felt about the company's social responsibility efforts, but how they were saying it.

"Our results hold even though we use a relatively numerate student population to recruit participants," the authors wrote. "Given that the average investor is likely to be less numerate than our average participant, our finding that they are more susceptible to the presentation effects that we examine have important implications for the growing literature in accounting on presentation effects."

A look at the reports of a few companies supports the University of Illinois researchers' findings. Wells Fargo's community-focused report, for example, features numerous photo spreads of inanely similing models:

Wal-Mart and Starbucks' reports take a global approach and are largely outlined in prose and huge, well-designed, and utterly meaningless infographics.

In many ways, the University of Illinois researchers' work only confirms, in administrative terms, what many of us already knew. It's not just corporate responsibility reports that are bullshit, by dint of their manipulative nature, but the idea of corporate responsibility itself as it stands.

Companies are free to define it as they will and present it any way they want, for one. Some commentators, like political philosopher Slavoj Zizek, find the concept of corporate responsibility itself to be an odious testament to how capitalism absolves itself of all its problems.

Wal-Mart, for example, can get away with conveniently ignoring the unrest and deplorable working conditions of its employees in its 2013 report while counting the amount of fruits and vegetables it sold Americans as a social win—an achievement which really only celebrates the acceleration of business and depends on innumerable social ills, like exploitative labour.

The fluffy presentation style of corporate social responsibility reports underscores the performative nature of the entire charade—that of genuine corporate responsibility—and at the same time tricks investors into thinking otherwise. A start to changing this, however small, might be building reports that don't try to manipulate the people reading them.