Lobbying is a part of doing business for many organizations, and that’s not surprising. When told a company lobbies the government for favorable laws or policies, most people shrug.
Until a company has a product recalled for safety reasons. Then, people might see lobbying with more jaundice, thinking that the company is advocating for policies that might put people in danger.
So when media starts aggressively covering a recall in a way that could damage the firm’s reputation, the firm is apt to cut back its lobbying or even stop entirely for a time, says a researcher in the University of Iowa’s Tippie College of Business.
Miranda Welbourne Eleazar, assistant professor of management and entrepreneurship, said businesses can save millions of dollars in recall-related costs by lobbying and negotiating to reduce the extent of the recall. However, doing so might come with some reputational risk because people may see it as that abuse of their access to power.
She was part of a study team that found evidence that when media coverage of a recall gets too hot, firms often pre-emptively reduce their lobbying to avoid reputational harm. The team analyzed 3,747 recalls in the auto industry between 2008 and 2022. They found that in the quarter after receiving negative media coverage of a recall, the auto maker was less likely to lobby on recall-related issues, suggesting the value of their reputation is worth paying the additional costs that they could have avoided through lobbying.
Lobbyists and others in the auto industry acknowledged in interviews with Welbourne Eleazar’s team that they keep an eye on media coverage of their lobbying and if the fallout is too negative, they step back from their activities to ride out the crisis.
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