Keywords

social norms, social movements, ratings, standards, board gender diversity

Abstract

We examine how social movement organizations (SMOs), particularly third-party rating agencies, can catalyze rapid shifts in social norms among an organizational population. We propose that rating agencies can instigate new social norms by defining appropriate and acceptable standards of performance that prompt organizations to realign their behaviors to mirror these new standards, thereby accelerating changes in shared understandings regarding appropriate firm behavior. We tested our theory by analyzing how members of the S&P 500 index adapted to a new gender diversity rating by KLD Research & Analytics, focusing on the acceptance and implementation of gender diversity standards on corporate boards during the early 1990s. Our results suggest that firms rated for their gender diversity were more likely to increase female board representation, particularly those firms initially not meeting the standard set by the rating agency. This public rating not only shifted behavior, but also shifted the underlying norm for gender diversity among S&P 500 companies. These findings challenge the traditional view that social change is gradual and highlight the potential of ratings as an alternative governance tool for practitioners and policy makers interested in changing corporate behavior.

Document Type

Working Paper

Publication Date

2024-10-24

Language

English

College

Marriott School of Management

Department

Management

University Standing at Time of Publication

Associate Professor

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