The negative impact of market-discrimination CSR: How do consumers respond to perceived company greed?

Abstract

Corporate social responsibility (CSR) is reported to have a positive effect on corporate image. However, if companies that have entered different markets implement market-discrimination CSR, which refers to unfairly applied CSR policies in the intermarket, and if the consumer recognizes this fact, the CSR effects will be diminished. To prove this, this research investigated consumers’ adverse reactions when a company that implements market-discrimination CSR faces a crisis. According to the results of this study, consumers who perceived company greed as evidence of a company practicing market-discrimination CSR activities experienced pleasure at the misfortune which called schadenfreude when the company faced a crisis and schadenfreude positively affected the argument strength of a rumor. Finally, the argument strength of a rumor has a positive effect on the consumer’s intention to spread the rumor as an act of revenge against the company. The results of this research suggest that CSR, which aims to build a positive corporate image, can have an adverse effect when it is felt that it is used to discriminate against consumers. Based on these results, this research presents theoretical and practical implications.

Keywords

argument strength of rumor corporate social responsibility greed schadenfreude spreading rumor

Introduction

Global companies are approaching, and operating within, various geographical markets. Consumers criticized Korean automobile companies (Autoinsight, 2016) because they were rumored to have different quality standards for domestic and export vehicles.

Corporate social responsibility (CSR) is defined as categories or levels of economic, legal, ethical, and discretionary activities of a business entity as adapted to the values and expectations of society (Joyner and Payne, 2002: 300). A company actively carries out CSR activities to maintain a positive corporate image, which will enable it to cope with adverse consumer evaluations (as in the case of the aforementioned Korean automobile company). Given this, CSR activities should have a positive impact on the company. However, an important question remains unanswered: Why are CSR activities ineffective when corporate products and services are involved in rumors? Why are the market-specific CSR activities utilized by global companies that are engaged in marketing activities in various markets insufficiently buffered from corporate crises? Despite the social contributions of CSR, there can be situations in which the authenticity of a company becomes suspect when CSR is perceived as making a minor contribution to the community compared to sales or profits in certain markets. In such cases, the consumer may infer from management-oriented and discriminatory CSR activities that a company is greedy. Greed is perceived when a firm attempts to act opportunistically in a critical situation where the consumer determines his or her interests. In particular, when opportunistic attempts are linked to the maximization of profit, these attempts exacerbate the consumer’s perception of greed and lead to a desire to obtain revenge by condemning the conduct of the enterprise (Grégoire et al., 2010). If a company is implementing a limited CSR policy relative to the sales or profits that it generates in the market, how do consumers react to the company if they perceive that its consumer policy is unfairly applied from market to market? When consumers perceive CSR as a company’s façade for the public, recognize its greed at the same time, and hear about a brand rumor that the company is providing defective products or services, their response to this situation is the focus of our research. The stimulus–organism–response (SOR) paradigm (Mehrabian and Russell, 1974) can be applied to the current research framework. As it affects the internal state of an individual (Bagozzi, 1986), the stimulus is a marketing mix that influences the emotional responses of the consumer. The organism consists of perceptual, physiological, feeling, and thinking activities as part of the consumer’s internal processes. The response consists of the avoidance or approach behavior that is the consumer’s final action (Chang et al., 2011). In terms of the present study, which draws on CSR as a form of marketing stimulus, a consumer or citizen may recognize greed in business through an internal cognitive process and may thus determine that the company is immoral (Seuntjens et al., 2015a). As a result, the consumer may show a specific response to that company when he or she hears a rumor about it. In particular, consumers who have experienced inequitable treatment from a global company may feel inferior, seeing themselves as members of an out-group and thus deriving schadenfreude from unfortunate rumors about that company. This schadenfreude can trigger a specific revenge response to the company, which may be realized by the proliferation of brand rumors and by consumers believing those rumors. Moreover, as the communication of information becomes more widespread, consumer confidence in a company can quickly weaken (Kimmel and Audrain-Pontevia, 2010). Nevertheless, there has been little research on the role of rumor as a cause of crisis that is difficult to control or on the role of emotions as a consumer response to corporate behavior. The present study has two research goals in relation to determining how a consumer who is suspicious about the goodwill of the CSR activities implemented by a company perceives the failure of that company: (1) whether a consumer perceives the company as greedy and (2) when company greed leads to failure, whether the consumer intends to spread rumor as a form of revenge action based on schadenfreude.

Theoretical background

Perceived greed and schadenfreude

In essence, CSR plays a key role in reducing cognitive dissonance and negative corporate publicity and reminding CSR when negative information about the company is introduced to public. As a result, companies that practice CSR can obtain consumer trust (Lin et al., 2011). CSR consequently functions as a buffer against the negative information that is generated by the company; however, the CSR effect is not always the same (Sen and Bhattacharya, 2001) because consumers have questions about corporations’ motivations to engage in CSR (Webb and Mohr, 1998).

In particular, in the process of consumers inferring the motives of CSR, the application of discriminatory CSR between the in-group and the out-group, in terms of the scope of CSR policy regarding consumers, can be a problem. When a company implements a discriminatory CSR policy, the markets—that is, the consumers in the out-group—may realize that the firm is applying an inadequate CSR policy to them. Problems can arise when consumers understand CSR-related behaviors as impression management (Merkl-Davies and Brennan, 2007). In such a situation, the product or service failure of a company leads to stronger consumer dislike (Folse et al., 2013). One example of impression management is “greenwashing”—that is, when CSR managers try to highlight a company’s positive image by selectively disclosing information that is advantageous to it (Deegan, 2002). The question is whether the company’s CSR activities meet the criteria of fairness from the perspective of the investor rather than the shareholder of the company (Cohen et al., 2008). Consumers also perform in-role (purchasing product) and extra-role (making a recommendation and positive word-of-mouth (WOM)) responsibilities regarding citizenship behavior and based on social exchange; consumers are also more likely to engage in and benefit from reciprocation (Lii and Lee, 2012). In summary, CSR is a kind of insurance that avoids social penalties in the long run (Porter and Kramer, 2006). If the fairness of the company’s overall policy is impaired, CSR will be considered impression management. Finally, the consumer will have a negative response to the company.

When CSR fairness is impeded, consumers may perceive company greed. The definition of greed tends to refer to wanting more due to dissatisfaction with what one has now (Seuntjens et al., 2015b). When people perceive the greed of a company, it is time for that company to pursue its interests, despite the results possibly harming the consumer (Crossley, 2009). Greed is a motivation for economic growth, but it has immoral and exploitative characteristics (Seuntjens et al., 2015a). People perceive greed in behaviors that hinder social norms (Grégoire et al., 2010). In particular, consumers consider a company to be greedy when they are negatively motivated owing to not being treated fairly by the company (Wooten, 2009). A company’s unfair treatment of a consumer means that its greed is strongly rooted in self-interest and is at the expense of other people’s well-being (Wang and Murnighan, 2011). In general, when people feel that they have been treated unfairly, they experience moral emotion. They also experience anger when the actor who violated the norm has a responsibility, even though the actor has other choices that he or she attempts to make (Weiner, 2006). A firm’s irresponsible behavior causes moral outrage (Lindenmeier et al., 2012), which comes from the perception of injustice in corporate behavior (Salerno and Peter-Hagene, 2013). Furthermore, anger about company greed is stronger when the consumer thinks that the company’s selfish behavior is due not to negligence but to a planned strategy (Baumeister et al., 1990), and morally outraged consumers will try to punish greedy companies (Bies and Tripp, 2009). In this situation, it is crucial for the consumer to take action against the corporation by “getting even” in the sense of restoring fairness (Bechwati and Morrin, 2003). More specifically, if the consumer wishes for the company to act fairly once more, and at the same time, he or she hears news about the company’s product failure or service failure, the appraisal theory approach can be used to predict how the consumer will react to this news. The core idea in appraisal theory is that each emotion can be related to a specific pattern of appraisals, which are cognitions about the perceived antecedents of emotional experiences (Van de ven et al., 2012). According to Roseman et al. (1996), people recognize the appraisal dimension (e.g. unexpectedness, motivational state, control potential, legitimacy, problem source, and agency) when they recall causal attribution for positive or negative events. Consequently, different emotions can occur as outcomes. In addition, if deservedness can be taken into account in the appraisal dimension, and if, for example, the misfortune of another person is deserved, then cognitive appraisal may make people feel pleasure in the pain of others (Feather, 2006). In this situation, the cognition–emotion–action model may be adapted to explain the causal relationship of consumer’s reaction variables (Grégoire et al., 2010). Perceived greed is a stage of cognition that infers the motivation of the company, and consumers may be angry at the company’s greed. If the company has experienced a failure, the consumers feel schadenfreude evenly, as they are pleased with the company’s failure. When a perceived greedy company is in a state of crisis owing to product or service failure, if the appraisal theory predicts consumers’ coping behavior, their responses may be taken to the direction of reducing emotional dissonance (Lazarus, 1991); therefore, consumers’ schadenfreude is plausible. Schadenfreude refers to the malicious pleasure and hostile emotional feelings experienced in response to the failure of an out-group (Feather and Sherman, 2002). It is entirely possible for consumers who feel schadenfreude to hate or damage brands (Dalakas and Melancon, 2012).

In this study, the main reason consumers feel schadenfreude toward a perceived greedy company that has adopted a discriminatory strategy in the consumer market regarding the implementation of CSR is as follows: First, social identification has worked. Social identification refers to a state in which an individual feels certain emotions and values while belonging to a particular social group (Tajfel, 1982). If social identification is crucially active, people seek more positive information about the group to which they belong and pursue discriminatory information that matches their status (Hogg and Terry, 2000). The benefits of CSR activities are not distributed evenly; therefore, the cause of consumer discrimination is due to competition for scarce resources (Hickman and Ward, 2007). When a company has engaged in such collective discriminatory practices, consumers have a strong sense of this discrimination and can target the company as an out-group. The misfortune of an out-group member who is considered greedy obtains a positive evaluation from the in-group through social comparison. In particular, in a social comparison between “them” and “us,” people have stronger positive feelings about the in-group when these feelings are based on social norms and judgment (Wert and Salovey, 2004). Likewise, for the opposing out-group, even if there is no direct benefit to oneself and even if social justice is unlikely to be realized to a significant extent, the company’s misfortune may be seen as good, because it makes people feel better (Smith, 2013). In such cases, there is schadenfreude on the ground (Van Dijk et al., 2012). A second reason is that the consumer may feel that the success of a company that has the ability to execute CSR is undeserved. Seeing the pain of the undeserved person makes people experience schadenfreude (Feather and Sherman, 2002). If the company implements a discriminatory CSR policy, this is morally hypocritical behavior against people who believe that the company is pursuing goodwill through CSR. When the company faces a catastrophic failure, people may consider this outcome a highly deserved misfortune (Polman and Ruttan, 2012). Moreover, although the firm may be a high-achieving company, if it achieves a high level of undeserved success, the schadenfreude that people feel will be stronger (Van Dijk et al., 2006).

Therefore, we hypothesize that if consumers perceive the greed of the company, they can feel schadenfreude after the misfortune of the perceived greedy company.

H1: Perceived greed and schadenfreude will be positively related.

Schadenfreude and the argument strength of the rumor

Schadenfreude (pleasure at the misfortune that happenstance causes another party) refers to passive intergroup malevolence resulting from inferiority (Leach et al., 2003). When schadenfreude triggers revenge, this can be carried out directly or indirectly. The direct method of exacting revenge is to insult a company to its face, and the indirect way is to distribute negative WOM about the company (Grégoire et al., 2010). Originally, WOM referred to informal verbal communication between people about services or goods; it could be made either face to face or through communication media (Goyette et al., 2010). Satisfaction (or dissatisfaction) is related to positive (or negative) WOM (De Matos and Rossi, 2008). Since consumer opinions can now go viral independently of any company response (Hennig-Thurau et al., 2004), the effect of WOM has increased and more informal marketing strategies have become prevalent. Therefore, when perceived greedy companies with discriminatory CSR policies face a crisis, consumers feel schadenfreude toward them and may engage in negative WOM (Coombs, 2007). Consumers who are discriminated against by inferior CSR policies may initially feel malicious envy toward the companies that implement such policies and may ultimately experience schadenfreude due to dislike, hostility, and the company’s undeserved success (Van Dijk et al., 2015). As untested and instrumentally relevant information serves as negative WOM, rumor helps people to manage risk in ambiguous, dangerous, and potentially threatening situations (DiFonzo and Bordia, 2007).

A rumor, sometimes categorized as a form of WOM, is a specific proposition for belief among a number of people without a standard of evidence (Allport and Postman, 1947). A determining factor in the intensity of a rumor is the anxiety and uncertainty that people have about events that are important and relevant to them (Rosnow, 1991). Rumor has negative and positive valences as well as biases in content and effect (Hornik et al., 2015). However, rumor is less likely to be delivered than WOM, because of the lack of an evidential basis for the credibility of the message (Kamins et al., 1997). Nonetheless, people continue to use rumor, a distortion of the facts that give them a favorable self-enhancing value rather than accurate information (Lindgreen et al., 2013). Commercial rumor is a type of public communication based on unidentified suspicions that consumers have concerning the marketplace (Kimmel and Audrain-Pontevia, 2010). Unlike advertising, WOM is not under the control of the manufacturer, and consumers, particularly those who are dissatisfied, may take account of a rumor that has not been confirmed by the company and which is therefore mainly negative WOM mixed with facts (Kamins et al., 1997).

There are a number of reasons why consumers who feel schadenfreude about perceived greedy companies believe the rumors. First, consumers who feel discriminated against by CSR policies gain self-enhancement opportunities by recovering their inferior positions through schadenfreude due to the misfortunes of perceived greedy companies. People attempt to share such companies’ misfortunes because this gives them comfort (Van Dijk et al., 2015).

Second, rumor is a means that consumers who feel schadenfreude can actually use as typical indirect revenge. Rumor is a behavior that is based on the intent to retaliate against organizations (Skarlicki and Folger, 1997) and exact revenge on harmful opponents (Bordia et al., 2014). Rumor helps to establish a sense of justice by punishing those with strong self-interests, which include greed (Bordia and DiFonzo, 2013).

Third, schadenfreude has different effects on group affiliation. Rumor-sharing behaviors have the practical effect of forming and promoting relationships within in-groups (Leary, 1995), and the transmission of rumors enhances in-group affiliation (Bordia et al., 2014). Schadenfreude acts as an intergroup emotion, and rumors strengthen group polarization and arrangement (Hsu and Liang, 2007). People’s identification or disidentification affects rumor belief. Because identification is associated with people’s self-concept, people support and show loyalty to their groups (Einwiller and Kamins, 2008). Thus, identification formed through schadenfreude helps assure rumor to the out-group.

Beliefs about rumors are influenced by the attitudes that were created in the past regarding whether to choose to accept or reject rumors (DiFonzo and Bordia, 2007). In particular, people align attitudes and beliefs with self-definitional attitudes and beliefs (Chaiken et al., 1996). Therefore, consumers who intend to exact revenge against target of schadenfreude and who have negative attitudes will have stronger beliefs about rumors than those who do not. In sum, we set the following hypothesis:

H2: Schadenfreude and the argument strength of the rumor will be positively related.

The argument strength of the rumor and the intention to spread the rumor

The argument strength of the rumor influences the intention to spread the rumor for the following reasons. First, people may believe rumors before spreading them (Rosnow, 1991). The stronger the belief in the rumor, the more likely it is to be spread because people tend to act in a way that is consistent with their cognition and behavior (Bordia et al., 2014). Under the fairness norm, the intention to spread a rumor will increase to restore relationship balance through the harming behavior to the person who committed the fault (Jensen and Raver, 2012).

Second, spreading rumors provides consumers with very realistic conditions for implementing negative social aggression (Galen and Underwood, 1997) to attack a company’s social status. When people are motivated to exact revenge—especially by spreading a rumor—it is less likely for them to face counterretaliation because rumor spreading is hidden aggression compared to a high-risk corporate attack (Baron and Neuman, 1996), such as sabotage or the destruction of property. The risks that consumers face when penalizing a greedy company may be relatively small. However, recent online public contexts have become a mass-public feature and an accessible means to larger audiences (Grégoire et al., 2010). Spreading rumors is a comparatively safe behavior that is based on the cognitive judgment of the consumer compared to the risk of using it.

Third, the strategy for spreading a rumor is motivated by an explicit action, which is to cope with the environment successfully (Bordia et al., 2014). People seek a supposition that controls their anxiety and uncertainty by operating a negative bias; in explaining an event, there is a motivation to focus more on its negative side than its positive side, even in the absence of clear evidence (Hornik et al., 2015). For example, negative product information is generally more diagnostic or informative and is therefore given more weight in consumer judgments than positive information (Herr et al., 1991). Consequently, spreading a rumor is based on practical problem-solving that involves collecting and interpreting information in ambiguous situations (Miller, 2005). Therefore, if consumers have a strong argument for using a rumor, they prefer the intention to spread the rumor. We set the following hypothesis:

H3: The argument strength of the rumor and the intention to spread the rumor will be positively related.

Serial multiple mediator hypothesis

Although studies have referred to anger emotions to exact revenge on a greedy firm (Grégoire et al., 2010), there is a lack of research on emotions, such as schadenfreude, that lead to revenge that originates from the failure of a relatively greedy company. This research applies the SOR paradigm and appraisal theory to determine whether consumers perceive company greed based on a judgment that the company’s discriminatory CSR behavior is unfair, and moreover, if the perceived greedy company experiences a failure, the consumer feels schadenfreude. Consequently, based on the strong belief about rumor as a cognitive judgment, the act of transmitting the rumor to the failed company may increase the consumer’s indirect aggression. This research hypothesized the serial mediating role of schadenfreude and the argument strength of the rumor of the failed greedy company, which finally influences to intention to spread the rumor.

H4: Perceived greed will be sequentially associated with schadenfreude and the argument strength of the rumor, which will be related to the increased intention to spread the rumor

Method

Pretest

We decided to use hypothetical scenarios for this study. There has been criticism that scenarios lead theories to participants rather than actual consumer beliefs and moods (Parkinson and Manstead, 1993). However, scenarios are based on the individual’s experience and feelings about life and are a means of ensuring the consistency of the research results. Moreover, our study is consistent with the methodology of previous studies based on perceived deservingness concept studies (Feather et al., 2013).

The purpose of this study is to investigate the negative reactions of consumers when they are rumored by a certain global company with high market profitability but whose social contribution is low. Before undertaking the main study, we assumed that a hypothetical automobile company (“X motor company”) would provide a low CSR activity and a high CSR activity scenario (see Appendix 1). We then verified whether there was a difference perception of the consumer in CSR. To generate the difference of perceived CSR, we manipulated the difference of the CSR contribution of the hypothetical company in the scenario. To generate the difference of perceived CSR, we manipulated the difference of the CSR contribution of the company in the scenario. In the case of low CSR, the hypothetical scenario produced in the newspaper article format suggested that the company had a lower net income contribution (1.2%) than the average CSR contribution (5.65%) in the industry. The high CSR company had a higher net income contribution (7.5%) than the industry average.

Next, we manipulated the level of the company’s CSR activity inside and outside the United States. In the case of low CSR, there was insufficient CSR activity in the United States. However, in the case of the high CSR company, CSR activity contributed equally outside and inside the United States. To examine the perceived differences in CSR by the participants in these two company scenarios, four of the questions on perceived CSR items were adapted from Lichtenstein et al’s. (2004) study (e.g. “The X motor company gives back to the communities in which it does business”; 1 = strongly disagree and 7 = strongly agree).

A total of 32 participants recruited from CrowdFlower, a crowdsourcing data collection platform, completed the survey (M _age = 44.25, SD = 15.69; 53.1% female). The area of data collection was limited to inside the United States. Based on the average of the composite item (Cronbach’s α = 0.904) taken from four items, we confirmed that the low CSR condition (n = 15; M = 4.083, SD = 1.067) was significantly lower than the high CSR condition (n = 17; M = 5.661, SD = 0.790; t = −4.791, p < 0.001). Based on these results, we decided to use the low CSR condition in this study.

Participants and procedure

The main study is a survey of consumers’ responses when low-CSR companies face a negative rumor about their products. To achieve this objective, we also suggested to participants that it has been rumored that the fuel efficiency of the vehicle that was newly released by the low-CSR X motor company is inferior to what is being advertised (see Appendix 2).

Upon obtaining their agreement to participate in the study, the participants were informed that they would be asked to provide their responses on the manipulated experimental scenario. After the experiment, they were compensated appropriately for their participation. No conflicts of interest were reported in the current study. A total of 241 participants recruited from CrowdFlower completed the survey (M _age = 35.17, SD = 12.39; 56.4% female). As in the pretest condition, the area of data collection was limited to inside the United States. After collecting the study variables, the perceived level of CSR was once again confirmed in the scenarios used in the main survey. As a result, the level of CSR perceived by the participants (M = 3.927, SD = 1.413) was the same as the level perceived in the pretest (t = 0.419, p = 0.659). Also, we confirmed the perceived seriousness of the participants regarding the proposed fuel efficiency rumor. Using the three semantic differential scale (e.g. minor problem–major problem, small inconvenience–big inconvenience, and minor aggravation–major aggravation), which has a seven-point scale (Cronbach’s α = 0.914), we confirmed that the severity of the fuel efficiency failure mentioned in the rumor was almost neutral (M = 4.17, SD = 1.496) when compared with the midpoint (t = 1.808, p = 0.072). We also asked about product involvement by posing three questions, whose responses were on a seven-point scale (i.e. importance, interest, not indifference; Cronbach’s α = 0.926), about how much interest there is in the car mentioned in the scenario. As a result, the participants were more interested in than neutral point (M = 4.509, SD = 1.522, t = 5.188, p < 0. 001). We decided that failure severity and product involvement would potentially increase interest in the company; therefore, these items were inputted as the control variables. Finally, the participants responded that the experimental scenarios that we produced were more realistic than normal (M = 5.41, SD = 1.256, t = 17.444, p < 0.001).

Ethical approval

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.

Informed consent

Informed consent was obtained from all individual participants included in the study.

Measures

Perceived greed

Perceived greed was measured using four semantic differential items adapted from the perceived greed used by Grégoire et al. (2010). Using a seven-point scale, the exemplar items were “The company was primarily motivated by…‘my interests’ (1) vs. ‘its own interest’ (7)” and “The company ‘did not intend’ (1) vs. ‘intended’ (7) to take advantage of me.”

Schadenfreude

Schadenfreude was measured using five items that were adapted from the study by Van Dijk et al. (2015). Schadenfreude was measured by asking the respondents to what extent they felt liked and enjoyed with regard to the unfortunate rumor about the company. Using a seven-point Likert scale (1 = strongly disagree and 7 = strongly agree), the exemplar items were “I enjoy what happened to the firm” and “I’m satisfied with what happened to the firm.”

The argument strength of the rumor

The argument strength of the rumor was measured using three semantic differential items adapted from Bordia et al. (2014). The argument strength of the rumor was measured by asking respondents to what extent they felt confidence, true belief, and credibility with regard to the rumor. Using a seven-point scale, the exemplar items were as follows: “Overall, how confident are people that this rumor is true? ‘No confidence in truth of rumor’ (1) vs. ‘Strong confidence in truth of rumor’ (7)” and “How credible is this rumor as a source of company-related information? ‘Barely credible’ (1) vs. ‘Extremely credible’ (7).”

Intention to spread the rumor

The intention to spread the rumor was measured using three semantic differential items adapted from Einwiller and Kamins (2008) and Bordia et al. (2014). The intention to spread the rumor was measured by asking respondents to what extent they shared the rumor with the people they knew, such as their relatives and friends. Using a seven-point scale, the exemplar items were as follows: “How likely would you be to warn your friends and relatives not to buy X motor company’s car? ‘Very unlikely’ (1) vs. ‘Very likely’ (7)” and “How willing would you be to share the rumor with your friends and relatives? ‘Not at all willing’ (1) vs. ‘Very willing’ (7).”

Reliability and validity of measurements

The Cronbach’s α coefficients for the constructs ranged from 0.836 to 0.913. These results indicate adequate internal consistency for the majority of the measures. In terms of content validity, the measurements were validated by applying items used in previous research. To determine validity, factor analysis was performed on the construct measures, using principal component analysis as the extraction method. Four factors emerged with eigenvalues greater than 1, and these accounted for 74.42% of the total variance. To ensure construct validity, the factor loading results for each factor were required to exceed 0.7 (Hair et al., 1998; Nunally and Bernstein, 1994). Here, the factor loading values ranged from 0.730 to 0.873, which is higher than the recommended level.

Results

The purpose of this study is to investigate how the consumers who face the greed of a company affect the acceptance and diffusion of rumors based on the theoretical background. To examine whether perceived greed predicts intention to spread a rumor through schadenfreude and the argument strength of the rumor, we used a three-path sequential multiple mediational model based on traditional ordinary least squares regression. In this model, the indirect effect is composed of two mediators placed in chain, reflecting the theoretical assumption that perceived greed leads to schadenfreude and that the argument strength of a rumor is a reaction strategy that is designed to punish the company. To compute all the regression equations, we used a specialized SPSS macro called PROCESS model 6 (Hayes, 2017), which computes the regression coefficients for all indirect effects and uses a bootstrapping procedure to compute bias-corrected confidence intervals (CIs) around the point estimates of each indirect effect in the model. We first computed the total effect (path c) by regressing the intention to spread a rumor on perceived greed. Second, to compute the indirect and direct effects, three regression equations were used: (1) regressing schadenfreude (mediator 1) on perceived greed, (2) regressing argument strength of rumor (mediator 2) on schadenfreude and perceived greed, and (3) regressing intention to spread rumor on schadenfreude, argument strength of rumor, and perceived greed. A generic form of this model is depicted in Figure 1.

Figure 1.

The three-path sequential mediation model linking perceived greed to intention to spread rumor through schadenfreude and argument strength of rumor.

Preliminary results

First, all the main study variables were tested for nonnormality. All the measures of skewness (−0.689 to 0.655) and kurtosis (−0.929 to −0.044) were under the cutoff line of satisfaction. Second, Mahalanobis distance was used to check for multivariate outliers with the main study variables, and no participant was removed due to being a multivariate outlier, resulting in a final analytic sample of 241. Finally, to decide which, if any, demographic and control variables to include in the model testing, the study examined the bivariate correlations study variables with demographic characteristics (for age and gender), failure severity, and product involvement. There were correlations based on demographic, control, and study variables. Therefore, age, gender, failure severity, and product involvement were included as covariates in all the subsequent analyses. The means, standard deviations, and bivariate correlations for the study variables for the final analytic sample are presented in Table 1. All study variables were intercorrelated in predicted directions.

Table 1.

Sums, SDs, intercorrelations, and scale reliabilities b for the study variables.

	1	2	3	4	5	6	7
1. Perceived greed	0.835
2. Schadenfreude	0.351**	0.912
3. Argument strength of rumor	0.559**	0.370**	0.880
4. Intention to spread rumor	0.462**	0.457**	0.664**	0.852
5. Age	0.063	−0.057	0.001	0.015
6. Gender	0.174**	−0.094	0.112	0.090	0.043
7. Failure severity	0.360**	0.204**	0.326**	0.387**	0.027	0.121
8. Product involvement	−0.101	0.124	0.016	0.129*	−0.114	−0.179**	0.001
M	4.316	3.035	4.437	4.261
SD	1.250	1.416	1.155	1.474

Note: SD: standard deviation; gender: 1 = male and 2 = female; values on the diagonal are Cronbach’s α (perceived greed (1) to intention to spread rumor (4)).

**p < 0.001.

Mediation models

A focal question of the study was whether perceived greed influenced the intention to spread a rumor based on positive belief regarding the misfortune of a firm. This hypothesis was modeled and tested by setting direct paths from perceived greed to schadenfreude, the argument strength of the rumor, and the intention to spread the rumor, as well as a serial mediation pathway through schadenfreude and the argument strength of the rumor to the intention to spread the rumor (see Figure 1) while statistically controlling for gender, age, failure severity, and product involvement (not depicted in Figure 1). In the first model, we tested the following predicted sequential model: Perceived greed → schadenfreude (mediator 1) → argument strength of rumor (mediator 2) → intention to spread rumor. The regression coefficients of all four regression equations for this mediational model are presented in Table 2 and Figure 2. Table 3 presents the bootstrapping-based point estimates and standard errors (SEs) of each indirect effect and its associated 95% CIs. As can be seen in Figure 2, perceived greed was positively associated with schadenfreude (b _a1 = 0.406, SE = 0.072, p = 0.000), thereby supporting hypothesis 1. Next, schadenfreude was positively associated with the argument strength of the rumor (b _a3 = 0.151, SE = 0.046, p = 0.001), thereby supporting hypothesis 2. In addition, the argument strength of the rumor was positively related with the intention to spread the rumor (b _b2 = 0.634, SE = 0.071, p = 0.000), thereby supporting hypothesis 3.

Table 2.

Multiple regression coefficients, SEs, t values, and p values for all regression equations testing a mediational model with perceived greed as the independent variable.

Predictor		ß ^†	SE	t	p
	Path	Equation 1: Computing total effect predicting intention to spread rumor
		R ² = 29%, F (5, 235) = 19.917, p < 0.001
Perceived greed	c	0.456	0.070	6.502	0.000
Age		0.001	0.002	0.050	0.960
Gender		0.069	0.167	0.415	0.678
Failure severity		0.241	0.057	4.164	0.000
Product involvement		0.166	0.054	3.067	0.002
		Equation 2: Predicting schadenfreude
		R ² = 17%, F (5, 235) = 10.158, p < 0.001
Perceived greed	a ₁	0.406	0.072	5.579	0.000
Age		−0.002	0.002	−1.027	0.305
Gender		−0.406	0.174	−2.336	0.020
Failure severity		0.088	0.060	1.463	0.144
Product involvement		0.118	0.056	2.105	0.036
		Equation 3: Predicting argument strength of rumor
		R ² = 36%, F (6, 234) = 22.318, p < 0.001
Schadenfreude	a ₃	0.151	0.046	3.235	0.001
Perceived greed	a ₂	0.413	0.055	7.410	0.000
Age		−0.000	0.001	−0.324	0.745
Gender		0.104	0.126	0.826	0.409
Failure severity		0.940	0.043	2.163	0.031
Product involvement		0.033	0.040	0.811	0.417
		Equation 4: Predicting intention to spread rumor
		R ² = 53%, F (7, 233) = 37.827, p < 0.001
Schadenfreude	b ₁	0.223	0.052	4.244	0.000
Argument strength of rumor	b ₂	0.634	0.071	8.836	0.000
Perceived greed	c′	0.064	0.068	0.944	0.345
Age		0.001	0.001	0.663	0.507
Gender		0.133	0.139	0.957	0.339
Failure severity		0.153	0.048	3.185	0.001
Product involvement		0.107	0.045	2.389	0.017

Note: SE: standard error.

^† All coefficients are unstandardized.

Figure 2.

Unstandardized path coefficients for serial multiple mediation. Note: Dotted line denotes the direct effect.

Table 3.

Bootstrapping point estimates and 95% CIs for all indirect effects with perceived greed as the independent variable as well as contrasts among indirect effects (CIs that do not include zero indicate that the point estimate is significantly different than zero).

			Bootstrapping BC_a 95% CI
	Estimate	SE	Lower	Upper
a1b1	0.090	0.027	0.047	0.157
a1a3b2	0.039	0.016	0.014	0.081
a2b2	0.262	0.053	0.169	0.379
Total indirect effect	0.391	0.065	0.272	0.534

Contrast
a1b1 versus a1a3b2	0.051	0.026	0.004	0.109
a1b1 versus a2b2	−0.171	0.059	−0.291	−0.060
a1a3b2 versus a2b2	−0.222	0.054	−0.345	−0.127

Note: SE: standard error; BC_a: bias corrected and accelerated; CI: confidence intervals.

Most pertinent to hypothesis 4 was the estimate of the indirect effect through both mediators. The indirect effect through both mediators was significant—a1a3b2 = 0.039, 95% CI [0.014, 0.081]—thereby supporting hypothesis 4. This suggests that a serial multiple mediation has indeed taken place. However, unlike our hypothesis, mediator 1 and mediator 2 were mediated separately via a path of perceived greed and intention to spread the rumor. Table 3 also presents that the other two indirect effects (perceive greed → schadenfreude → intention to spread rumor and perceive greed → argument strength of rumor → intention to spread rumor) were also significant, and contrasts among all three indirect effects were significant. Therefore, a bias-corrected bootstrap CI for the total indirect effect (a1b1 + a2b2 + a1d1b2 = 0.391 [CI 0.272 to 0.534]) indicated a significant effect between perceived greed, schadenfreude, argument strength of rumor, and intention to spread rumor. This means that although our theoretical model was supported by the data, models with one indirect effect from perceived greed to intention to spread rumor through schadenfreude alone or through the argument strength of the rumor alone were also supported by the data. An examination of the single mediator paths compared to the serial mediation showed that perceived greed had a stronger influence on the intention to spread the rumor through schadenfreude (a1b1 − a1a3b2 = 0.051 [CI 0.004 to 0.109]) and through the argument strength of the rumor (a1a3b2 − a2b2 = −0.222 [CI −0.345 to −0.127]) than through the serial mediation, which included schadenfreude and the argument strength of the rumor simultaneously. Moreover, when taking account of all the variables in the model, the total effect of perceived greed on intention to spread the rumor was significant (b _c = 0.456, SE = 0.070, p = 0.000). There was no evidence that perceived greed influenced the intention to spread the rumor, independent of its effect on schadenfreude, and the argument strength of the rumor (b _c = 0.064, SE = 0.068, p = 0.345). In summary, hypotheses 1–4 were supported; however, the single mediation model was also confirmed.

Discussion

In a representative study of schadenfreude in the context of consumer behavior, product failure is assumed. Sundie et al. (2009) discussed schadenfreude as the pain felt by a consumer when a product causes a failure, depending on whether the consumer is regarded as deserving to own the product. At the same time, their study dealt with the negative WOM and brand attitude of product failure. In this study, on the other hand, the company is seen as creating the schadenfreude of the consumer. The findings confirm that consumers can feel schadenfreude directly toward a company as a social emotion caused by product failure and can take indirect revenge on that company, regardless of their feelings toward other consumers who experience product failure.

Consequently, the serial mediation between the research variables was confirmed. In the presence of the greed perceived by the company’s discriminatory CSR policy, product failures formed a belief in rumors through schadenfreude and finally had a significant impact on rumor proliferation. These results support the SOR paradigm and appraisal theory. During the hypothesis-testing process, we were able to compare the indirect effect of the nonserial mediation model. First, the perceived greed of the company enhances the consumer’s argument strength of the rumor, and then the argument strength of the rumor impacts the intention to spread the rumor. Second, perceived greed indirectly influences the intention to spread the rumor via schadenfreude. Various indirect influences between perceived greed and the intention to spread the rumor can provide the following theoretical implications.

If consumers perceive the company’s greed, when a product fails, they want to seek revenge on the greedy company, in keeping with the existing theory (Grégoire et al., 2010). At the same time, there is also a path from perceived greed to schadenfreude under product failure conditions, and schadenfreude finally impacts revenge behaviors, in keeping with our hypothetical expectation.

The first reason for schadenfreude’s disappearance from the path was because negative emotions, such as anger triggered by greed, led to a quick action response to cope with the threatened object (De Valk et al., 2015). Second, schadenfreude could be controlled by social desirability (Spears and Leach, 2004); therefore, even if people felt greed, they could have taken the rumor spreading–related action while suppressing their schadenfreude. Finally, even though CSR behavior itself contributes to the interests of the consumer, the reason the negative result appears may be because of the moral hypocrisy effect of the consumer. In other words, although people are generous to themselves, they apply stricter standards to the morals of the company than to their own (Polman and Ruttan, 2012). As a result, a negative feeling toward the company could emerge easily as a result of the moral reasoning of the consumer, if the company that is perceived as greedy experiences a failure.

In this study, it has been assumed that a consumer who feels schadenfreude will spread a rumor as a form of indirect revenge. However, in reality, the consumer may not act against a company, even if the consumer feels schadenfreude. There are several reasons for this. First, because schadenfreude involves taking pleasure in the misfortune of others, it is seen as objectionable and malicious rather than socially desirable. It can be a secret pleasure that people may try not to show to others. Second, schadenfreude is a passive emotion that shows the inferiority of the group experiencing the emotion. If a person has an underlying perception of belonging to a group that has already failed, it can be difficult to reveal schadenfreude to others (Leach and Spears, 2008). Third, even if a consumer is aware of a greedy company, he or she may not spread negative WOM if he or she does not have enough customer power to affect the firm (Grégoire et al., 2010; Menon and Bansal, 2006).

However, in the context of this study, schadenfreude is treated as causing rumor sharing as an emotional stimulus for behavior, because rumor is regarded by consumers as a penalty for product failure on the part of a greedy company. In addition, because schadenfreude is a form of pleasure, people want to emulate this positive emotion. Thinking and discussing positive emotions can bring about further pleasant emotions. Although schadenfreude is a socially undesirable feeling, if the misfortune of the company is perceived as deserved, rumor sharing may take place (Dasborough and Harvey, 2017). Schadenfreude can be shared within a social network because it is an in-group emotion. In a similar vein, the failure of the product will be shared as information about the company for the benefit of consumers who wish to make a careful and well-informed choice (Sundie et al., 2009). In any event, a comparison of the two perspectives can be the basis of an exciting future research project to predict whether a consumer who feels schadenfreude because of company greed will do something or do nothing in response.

The practical implications of this study are as follows. First, the company should make policy efforts to reduce greed and the perception of greed. Greed leads to economic growth and development to satisfy the desire for more, but it also has negative aspects, including self-interest, immorality, and being at the expense of others (Seuntjens et al., 2015b). In particular, when the balance is not maintained between a firm’s control costs and its efforts to satisfy the customer, the consumer will perceive the company as greedy. Therefore, in order to avoid the perception that the success of a company with market-discriminative CSR is undeserved (as in the results of the present study), companies should first clarify the reason for regional differences in input for CSR. It must be clear to consumers that any difference is based on revenue and marketing costs.

Second, if a company is in the process of recovering from a failure or crisis, it should be regarded as pursuing positive growth and development (i.e. as turning greed into something more positive). In particular, in the process of restoration, consumer’s desire to take revenge on a firm may be reduced if the company shows its good intentions by communicating its concern for customer problems rather than a cost-conscious attitude (Grégoire et al., 2010). Finally, in order to dilute the image of a greedy company, CSR activities must make a substantial and discernible social contribution. Unlike the belief that CSR will serve as a buffer against the adverse events that affect a company, CSR in regard to impression management may result in the undermining of the corporate image. This result is because market-specific discriminative CSR policy makes consumers inferior. In particular, global companies may make the consumer feel relatively deprived when companies engage in less CSR activity but earn more profit as they approach a variety of markets. If a company enjoys enormous profits and avoids making a sufficient social contribution as a social member, an image of a greedy company is created. Creating a favorable image would be a rational corporate CSR goal, but the image could be counterproductive when the company faces a failure. Consumers can feel betrayal more strongly when there is a strong sense of distance between the image of the company (an image created by its CSR activities) and the actual management style of the company. Similarly, despite rapid growth and enormous profits, companies that had previously neglected CSR in the market have since adopted it in order to restore consumer trust after illegal acts were discovered; nevertheless, people continue to doubt the authenticity of such companies. It is crucial to bear in mind that consumer revenge behaviors may arise as a result of a company’s broken promise (DiFonzo and Bordia, 2007).

Third, fundamentally globalized companies should have a process for resolving the tensions in their CSR activities between the perspectives of their local and global markets. It is necessary to pay close attention to the issue of CSR in local and global companies because of the economic, social, and environmental differences in the operation of the globalized company. Notably, the development of communication technology can spread information about a company quickly and make the problems arising from different perspectives more serious. In order to deal more effectively with social responsibility activities and problems, companies should establish a process for receiving feedback on CSR activities from stakeholders (including employees, shareholders, customers, suppliers, and local communities) and should implement transparent audit procedures for this process (Antal and Sobczak, 2004).

Limitation and future studies

The present research has examined the effect of perceived greed on the spread of rumor through schadenfreude, but this research still has limitations that must be complemented by future research. In the future researches, it is necessary to make the results of study more valid by applying characteristics of consumers, company, service, and products. First, it is required to examine the moderating function of loyalty of consumers as characteristics of consumers. Under the “Love becomes hate” paradigm (Grégoire et al., 2009), if consumers, who have to pay more switching costs for their ego protection due to company failure, experience double deviation (i.e. service failure and recovery failure), it is meaningful to confirm whether those consumers have more negative emotions leading to schadenfreude and revenge behavior are stronger than other consumers. Next, individual differences of consumers may be affected to research model. Individual differences in fairness are different. Individuals respond to different attitudes and responses to fair and unfair situations according to their equity sensitivity (Kickul et al., 2005). This trait affects how much people take care of the balance of give and take. It can be a criterion for determining whether a company’s behavior is Greed. In the same vein, the degree of anxiety about rumor affects belief in rumor (Pezzo and Beckstead, 2006). And belief in restoring unfair treatment (Eisenberger et al., 2004) can be considered as an influential variable to revenge actions of people. The difference in schadenfreude due to product differences should also be considered. Pancer et al. (2017) found that there was a difference in schadenfreude between brands with high product status and those with low product status because high product status leads to upward comparisons that are more severe. Given this, it is necessary to trace the effect of a greedy company’s behavior more precisely by adjusting for the status of the company that causes customer schadenfreude.

Second, corporate reputation can form a preattitude toward CSR as characteristic of company. If the reputation of company is low, people are skeptical about CSR (Lii and Lee, 2012). In such a case, the negative reaction to the company through moral reasoning may be even more serious. If this assumption is applied to a real company, the validity of our research model can be secured based on the cases of actual companies, while overcoming the limitation of the scenario technique of this study.

Third, the characteristics of the product can be applied. In the case of automobiles, this research used in the experimental scenario, consumer considers it as a product that represents social status as a status quo consumption. In this case, the effect of social attention may be greater; therefore, there is room for further schadenfreude’s behavior to be strengthened for brand failure (Sundie et al., 2009). Thus, future research may also investigate whether our findings can be applied to products that are nonstatus quo consumption.

Fourth, caution should be exercised in the interpretation of the research results obtained from this scenario. This study is based on the theoretical assumption that the simulation of emotion from emotional scenarios may cause slight differences in the intensity of the emotion induced by an experience; it is assumed that there will be no significant difference in the pattern of the emotion (Robinson and Clore, 2001). Nonetheless, real-world samples or nonscenarios should be applied in any attempt to generalize from our conceptual model, including stimulus, emotion, and response.

Conclusion

While CSR has a role in creating a positive image of corporate activities, is it sometimes less effective when corporate products or services are the subjects of rumors? In particular, why are global companies that perform CSR discrimination against the market vulnerable to corporate crises? Why are the CSR activities of a company suspicious? In conclusion, this study confirms that schadenfreude, which is pleasure at the misfortune of those who commit hypocrisy, identified in interindividual-level studies can also be applied to company management activities. For the purposes of this research, we assume a company perceived as greedy by consumers. A greedy company is self-centered and has excessive desires. Profits are necessary for companies’ survival, but the desired profits that go beyond fairness in the exchanges between consumers and companies become greed. This study has established that, despite the CSR activities of a company, consumers can perceive its greed and may consider its failure to be well deserved. In-groups and out-groups evaluate the deservedness of a group’s success and failure differently according to the social identity of the group within the human relationship (Feather et al., 2013). If consumers are able to view consumers themselves as nonprior groups or out-groups due to relative discrimination in products and services, a consumer discriminated against as inferior might consider the failure of the company to be right. Moreover, the results show that consumers feel hidden pleasure at the company’s failure and are willing to spread negative word about the company to punish its greed. In addition, the results suggest a possible explanation of why global companies perform CSR activities that contribute to society and why CSR’s positive effects are not constant and even adverse. Today, consumers have access to abundant concrete evidence and facts about how companies truly treat consumers through online information. In other words, information on companies’ greedy, opportunistic, hypocritical behavior is more easily specified, collected, and judged. Ultimately, consumers are willing to share information about the misfortunes of a greedy company to combat uncertainty, consumer anxiety, and the company’s greedy behaviors while keeping their enjoyment secret from other potential consumers.

Footnotes

Declaration of conflicting interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This research was supported by Sangji University Research Fund, 2018.

ORCID iD

Myungsuh Lim

Appendix 1

Appendix 2

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