Disclosure strategies regarding ethically questionable business practices

Abstract

PurposeThe author's objective is to reveal the consumer responses to information disclosure strategies regarding controversial ethical issues.Design/methodology/approachThe author is interested in how voluntary disclosure of questionable business practices by chocolate manufacturers regarding child labor exploitation at cocoa plantations influences consumer behavior. A total of 120 students participated in an experimental study in which the author manipulated awareness of ethical issues in the chocolate industry and corporate disclosure strategy. The author measured willingness to pay (WTP) and consumer perceptions about the firm's commitment to corporate social responsibility.FindingsThe study found that voluntary disclosure of unethical business practices by a firm was not damaging in terms of consumer perceptions. When public awareness was limited, disclosing participation in unethical behavior did not influence WTP for the firm's products. When public awareness was high, disclosing this negative information is even more beneficial than no disclosure and generates similar responses to including only positive elements in the firm's communication, provided that the firm commits to eliminate its unethical practices.Research limitations/implicationsVoluntary negative social disclosure will not hurt a firm's performance in terms of sales, given the disclosure is transparent and this suggests a credible commitment to improve its practices regarding the issue.Originality/valueThe author investigates the optimal strategy for a firm to disclose ethical infractions. She demonstrates that being open about them does not necessarily damage a firm's reputation and suggests under which conditions this is the case.