by Ave Grosenheider, J.D. Candidate, 2021, University of Richmond School of Law

In 2003, Elizabeth Holmes founded Theranos with the aim of supplanting the current hospital blood testing diagnostic and monitoring system in favor of rapid testing that one day would be in every drug store or home in America. However, her demise came as quickly as her rise to biomedical fame. In 2018, Theranos dissolved and Holmes, along with former president Sunny Balwani, was indicted on wire fraud charges.[1] As documented in John Carreyrou’s book Bad Blood, Holmes used evasive and fragmented methods of communication with her investors, employees, partners, and even federal agencies to build and distribute a faulty product.[2] The result was tens of thousands of misrepresented or inaccurate blood test results across the United States and an erosion of public trust in health care technologies.[3] Holmes was able to perpetuate these lies for so long in part due to the asymmetry in information for this new health care technology. However, this scandal eventually led to widespread public skepticism with effects still lasting today. These lessons brought out by Bad Blood shed light on current public opinion surrounding the COVID-19 pandemic and efforts to quickly develop an effective, trusted vaccine.

Theranos was pitched to investors and potential retail partners as the future of diagnostic technology.[4] Founder and Chief Executive Elizabeth Holmes claimed that she was going to reinvent the laboratory diagnostic landscape by processing over 240 different blood tests with just a few drops of blood.[5] At its height, Theranos was valued at $9 million—the “largest valuation of any venture-capital-backed health company.”[6] However, the façade Holmes and other officers presented was dramatically different from the reality. A Theranos employee who was aware of these indiscretions eventually decided to take his list of mounting concerns to Wall Street Journal reporter John Carreyrou.[7] offput by the policies and procedures and culture. Fr 2015 through 2018, Carreyrou wrote a series of articles and eventually a book detailing Theranos’s operational failures that eventually led to the company’s dissolution and officers’ indictment on wire fraud charges.[8]

Among the indiscretions, Carreyrou discovered that Theranos was misclassifying its proprietary machines to evade higher levels of federal oversight and releasing patients’ results—even when the machines produced erratic results that could not be reproduced on their own machines or other traditional lab tests and failed quality control tests.[9] In January 2016, an inspection and subsequent evaluation from the U.S. Centers for Medicare and Medicaid Services (CMS) revealed “deficient practices” in five categories, which “posed ‘immediate jeopardy to patient health and safety.’”[10] These practices were not sufficiently remedied, which led to Walgreens breaking off their retail relationship with Theranos in June 2016.[11] One month later, CMS banned Holmes from working in the blood-testing business for two years and revoked Theranos’s laboratory operating license in California.[12]

From the inception of Theranos and its proprietary blood testing technology, Holmes kept all but those in her innermost circle in the dark on the progress of her company. Even some of her own employees were unaware of the technological inaccuracies and shortcomings.[13] Those who were aware were discouraged from voicing their concerns or speaking to other employees.[14] When speaking to investors or potential retail partners such as Walgreens and Safeway, Holmes assured them that the technology was more accurate, cost-effective, and convenient than traditional laboratory blood tests.[15] She went to great lengths to perpetuate these lies, even going so far as to give demonstrations with fake read-outs to dupe audiences and forbidding outsiders to see inside the laboratories when visiting for business meetings.[16]

These deceptive tactics culminated in a federal indictment for wire fraud. On June 15, 2018, Elizabeth Holmes and Sunny Balwani, former Theranos President and Chief Operating Officer, were “charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud . . . [T]he charges stem from allegations that Holmes and Balwani engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients” through a series of knowingly false and misleading statements about their technologies.[17]

Many who were personally affected by Theranos’s deceptive practices were not surprised by news of the indictment. As Carreyrou and the Wall Street Journal reported, a number of patients who received wildly inaccurate blood tests from Theranos were sent by their doctors for further follow ups.[18] “Patients and doctors told the Journal they were shocked when Theranos produced hard-to-explain results that could signal serious or even life-threatening problems.”[19] This “unprecedented” health scandal is fresh in many people’s minds as drug manufacturers and federal agencies have felt immense pressure to develop and approve a COVID-19 vaccine as soon as possible.[20]

The Theranos scandal provides a necessary background for researchers, drug manufacturers, and federal agencies racing to put a COVID-19 vaccine to market. These two events are intertwined in many respects. The most salient amidst the COVID-19 pandemic is that new technologies in public health are ripe for skepticism. Members of the general public must rely on the advice of their doctors, and the approval of federal agencies when determining the most effective and safest course of treatment. However, the newer the treatment is, the less likely it is that the patient will feel comfortable with that course of treatment. Sometimes this may be for good reason. Theranos reported “issu[ing] ‘tens of thousands’ of voided or revised test results to doctors or patients.”[21] Errors such as this can erode the relationship of trust between health care providers and health care consumers. In light of these concerns, public health experts and federal agencies alike have been diligent in efforts to disseminate correct information and resolve the general public’s concerns to prevent memories of scandals like Theranos from derailing efforts made to combat the virus.

Even with public health officials lauding the COVID-19 vaccine efforts and emphatically assuring the public that the vaccines would not be approved unless they were safe, there is still a great deal of public skepticism. A Kaiser Family Foundation poll published on December 15, 2020 indicated that 27% of Americans probably or definitely would not get a COVID-19 vaccine if it is deemed safe and is available for free.[22] Among the most commonly cited reasons for this hesitance are “worries about possible side effects (which 59% cite as a major reason), lack of trust in the government to ensure the vaccines’ safety and effectiveness (55%), [and] concerns that the vaccine is too new (53%),” as well as distrust of the health care system in general (35%).[23] Some skepticism may be for good reason as there are many aspects of the vaccinations for which experts do not have answers, especially relating to the cause of severe anaphylactic reactions in some who have already been vaccinated, as well as how the vaccine will fare in pregnant women and children.[24]

Fifty-four vaccines are currently in human clinical trials in the United States.[25] Pfizer’s vaccine emerged as the front-runner, with the company announcing that it was 95% effective.[26] On November 20, Pfizer submitted an application with the FDA for Emergency Use Authorization.[27] Prior to submitting the application, Pfizer completed three phases of clinical trials, though on a truncated timeline when compared to the typical vaccination approval procedures:[28]

Consistent with FDA regulations, Phase 1 clinical studies assess vaccine safety, dosage, and capacity to induce an immune response in a small number of healthy subjects. Phase 2 trials evaluate initial safety and efficacy in a larger population, perhaps a few hundred. Phase 3 trials provide more definitive evidence of a vaccine’s efficacy. They are usually large, randomized, blinded, and controlled, and involve hundreds to thousands of subjects.[29]

The multiple phases of clinical trials with large and representative populations are essential to ferret out any potential risks. The FDA released new guidelines for vaccines in light of the pandemic, stating that the standard guiding approval of these vaccines will be whether the potential benefits outweigh the risks based “on data from at least one well-designed Phase 3 clinical trial that demonstrates the vaccine’s safety and efficacy in a clear and compelling manner.”[30]As of January 18th, the FDA has approved both Pfizer’s vaccine and Moderna’s vaccine for Emergency Use Authorization (EUA) in the United States. EUAs allow for the vaccine to be administered to a targeted group, but are not intended for distribution among general populations.[31]  As it relates to the COVID-19 pandemic, approximately 24 million health care workers, and nursing home residents comprise the essential and vulnerable populations expected to receive the highest priority status for Pfizer or Moderna EUA vaccine.[32] The FDA will continue to monitor the vaccine for adverse effects, before the vaccination is fully approved for the general public.[33]

The speed at which multiple drug manufacturers are already seeking approval for COVID-19 vaccinations is unprecedented. It takes an average of ten years to develop a vaccine, with the four years it took to develop the mumps vaccine to be the shortest documented timeline.[34] This information has left the general public wondering how the FDA can reconcile statements that these vaccines are both safe and effective, given that it has been less than a year since most of the United States has been shut down due to COVID-19. The safety and effectiveness is explained through three elements: the availability of previous research, funding, large testing pools.[35] These elements taken together are referred as “Operation Warp Speed” (OWS) by the U.S. Department of Health and Human Services, with the goal of produc[ing] and deliver[ing] 300 million doses of safe and effective vaccines with the initial doses available by January 2021.”[36]

Researchers around the world were not starting from scratch when developing a vaccine for the current pandemic. Much of their research was based on advancements in understanding SARS and MERS outbreaks in 2003 and 2012, respectively.[37] All three pathogens are from the coronavirus family, with “high virological similarity.”[38] Notably by 2020, there were already ten SARS vaccines in Phase 3 clinical trials, with over 100 vaccines in the development phase.[39]  This served as the starting point for a COVID-19 vaccine. Next, the US government has allocated “record amounts of funding” for vaccine development.[40] Specifically, $6.5 billion and $3 billion have gone to the Biomedical Advancement Research and Development Authority and to the National Institute of Health, respectively, to fund OWS and accelerate the development of a safe and effective vaccine.[41] This money has gone directly to fund companies including Pfizer and Moderna in their research and development.[42] Private funding has also helped accelerate the development of vaccines from celebrities including Dolly Parton and Bill and Melinda Gates, to name a few.[43] Finally, pharmaceutical companies have secured thousands of volunteers in a short period of time, enabling these companies to complete the clinical trials with a constant source of participants.[44] [45] While vaccines typically go through the research process, three phases of clinical trials, manufacturing, and then distribution, the above factors—i.e., partially completed research, increased funding, and many clinical trial participants in a short period of time—have allowed for the research and development process to occur concurrently with Phase 1 trials, as well as the manufacturing to occur concurrently with Phase 2 trials, Phase 3 trials, and distribution.[46] Taken together, these processes create the current expedited timeline.

As the Pfizer vaccine is administered to the targeted group of health care providers and nursing home residents through EUA, it will be monitored closely for adverse effects.[47] These post-authorization monitoring protocols will play heavily into the approval (or not) of a vaccine for widespread use.[48] Unlike medications that treat acute conditions, vaccines require “meticulous post-approval safety surveillance” because “a vaccine trial must go on for many months before a statistically significant difference can be seen in the incidence of a condition that may not occur in most patients without a vaccine.”[49] If the FDA determines that the benefits no longer outweigh the risks as statutorily required, the vaccine can be pulled from the market.[50] If not, the vaccine will be scrutinized under the more rigorous “‘substantial evidence’ of safety and effectiveness” standard for full approval and widespread use.[51]

These reassurances give the public reason to be hopeful about the safety and efficacy of approved vaccines, even amidst cautious optimism surrounding many questions to which experts do not have the answers. Data suggest that efforts to reassure the public are working, however only with more time and research will the full picture of the vaccine’s effects will come into view. The Theranos scandal provides a cautionary tale for what can go wrong with improperly supervised health care innovations, but also provides lessons that relevant experts have heeded to regain public trust in health care.

 

[1] United States v. Holmes, No. 5:18-cr-00258 (N.D. Cal. June 14, 2018).

[2] John Carreyrou, Bad Blood 179–83, 228–39 (2020).

[3] Christopher Weaver, Agony, Alarm and Anger for People Hurt by Theranos’s Botched Blood Tests, Wall St. J. (Oct. 16, 2016), https://www.wsj.com/articles/the-patients-hurt-by-theranos-1476973026 [https://perma.cc/78BW-PRTU].

[4] Carreyrou, supra note 2, at 82–92.

[5] John Carreyrou, Hot Startup Theranos Has Struggled With Its Blood Test Technology, Wall St. J. (Oct. 16, 2015), https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901 [https://perma.cc/Z25N-XHBG].

[6] Id.; John Carreyrou & Christopher Weaver, Theranos Devices Often Failed Accuracy Requirements, Wall St. J. (Mar. 31, 2016), https://www.wsj.com/articles/theranos-devices-often-failed-accuracy-requirements-1459465578 [https://perma.cc/9DK5-Y8VQ].

[7] Carreyrou, supra note 2, at 223–39.

[8] See generally John Carreyrou, https://www.wsj.com/news/author/john-carreyrou; Carreyrou, supra note 2.

[9] John Carreyrou, FDA Inspectors Call Theranos Blood Vial ‘Uncleared Medical Device,’ Wall St. J. (Oct. 27, 2015) https://www.wsj.com/articles/fda-inspectors-call-theranos-blood-vial-uncleared-medical-device-1445967607 [https://perma.cc/G9PT-QCFK].

[10] John Carreyrou & Christopher Weaver, Theranos Ran Tests Despite Quality Problems, Wall St. J. (Mar. 8, 2016), https://www.wsj.com/articles/theranos-ran-tests-despite-quality-problems-1457399479 [https://perma.cc/C2XY-H5T5].

[11] Carreyrou, supra note 2, at 289; John Carreyrou, Michael Siconolfi, & Christopher Weaver, Theranos Dealt Sharp Blow as Elizabeth Holmes Is Banned From Operating Labs, Wall St. J. (July 8, 2016) https://www.wsj.com/articles/u-s-regulator-bans-theranos-ceo-elizabeth-holmes-from-operating-labs-for-two-years-1467956064 [https://perma.cc/56CL-X7VC].

[12] Carreyrou, supra note 2, at 286; Carreyrou et al., supra note 11.

[13] Carreyrou, supra note 2, at 161–68.

[14] Id. at 161–68, 193–98.

[15]  Christopher Weaver & John Carreyrou, Craving Growth, Walgreens Dismissed Its Doubts About Theranos, Wall St. J. (May 25, 2016) https://www.wsj.com/articles/craving-growth-walgreens-dismissed-its-doubts-about-theranos-1464207285 [https://perma.cc/TX5W-QQTA].

[16] Carreyrou, supra note 2, at 179, 252.

[17] Press Release, U.S. Food & Drug Admin, Theranos Founder and Former Chief Operating Officer Charged in Alleged Wire Fraud Schemes (June 15, 2018), https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/press-releases/june-15-2018-theranos-founder-and-former-chief-operating-officer-charged-alleged-wire-fraud-schemes; see also United States v. Holmes, No. 5:18-cr-00258 (N.D. Cal. June 14, 2018).

[18] Carreyrou, supra note 5; Weaver, supra note 3; Carreyrou, supra note 2, at 233.

[19] Weaver, supra note 3.

[20] Id.; John Carreyrou, Theranos Voids Two Years of Edison Blood-Test Results, Wall St. J. (May 18, 2016), https://www.wsj.com/articles/theranos-voids-two-years-of-edison-blood-test-results-1463616976 [https://perma.cc/6UBE-G322].

[21] Carreyrou, supra note 20.

[22] Liz Hamel, Ashley Kirzinger, Calley Muñana & Mollyann Brodie, KFF COVID-19 Vaccine Monitor: December 2020, Kaiser Family Foundation (Dec. 16, 2020, 9:02 PM), https://www.kff.org/coronavirus-covid-19/report/kff-covid-19-vaccine-monitor-december-2020/ [https://perma.cc/9CGA-N77X].

[23] Id.

[24] The Kaiser Family Foundation has been conducting polls on vaccine reluctance for months now. Their findings indicate that reluctance among the citizens is decreasing. In September, 63% of Americans responded that they would definitely or probably get a vaccine if available and deemed safe. Notably, these numbers—while increasing from 63% to 71%—still fall below the 85% threshold thought to be the tipping point for herd immunity. Id.; Dylan Scott, Fauci: 85 Percent of the US Needs to Get the Covid-19 Vaccine for “True Herd Immunity,” Vox (Dec. 15, 2020), https://www.vox.com/coronavirus-covid19/2020/12/15/22176555/anthony-fauci-covid-19-vaccine-herd-immunity-goal [https://perma.cc/X6XS-NGE7].

[25] Carl Zimmer, Jonathan Corum & Sui-Lee Wee, Coronavirus Vaccine Tracker, N.Y. Times (last updated Jan. 14, 2021) https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html [https;//perma.cc/AZ7A-STRE].

[26] Pfizer and BioNTech to Submit Emergency Use Authorization Request Today to the U.S. FDA for COVID-19 Vaccine, BusinessWire (Nov. 20, 2020) https://www.businesswire.com/news/home/20201120005370/en/ [https://perma.cc/A49Y-PEZE].

[27] Id.

[28] Aaron S. Kesselheim et al., An Overview of Vaccine Development, Approval, and Regulation, with Implications for COVID-19, 40 HealthAffairs 1 (2021).

[29] Id. at 2.

[30] U.S. Food & Drug Admin., Emergency Use Authorization for Vaccines to Prevent COVID-19

(Oct. 2020), https://www.fda.gov/media/142749/download.

[31] Kesselheim et al., supra note 28, at 2.

[32] Lena H. Sun & Isaac Stanley-Becker, Health-care Workers and Nursing Home Residents Should be the First to Get Coronavirus Vaccines, CDC Advisory Group Says, Wash. Post (Dec. 2, 2020), https://www.washingtonpost.com/health/2020/12/01/vaccine-priority-groups-covid [https://perma.cc/8CV5-UNUQ].

[33] What Does Emergency Use of a Covid-19 Vaccine Mean?, Associated Press, Nov. 20, 2020, https://apnews.com/article/emergency-use-covid-19-vaccine-explained-c8cca451619c1705e06414a32c20facb [https://perma.cc/V3AJ-HXD8].

[34] Asher Mullard, COVID-19 Vaccine Development Pipeline Gears Up, 395 The Lancet 1751 (2020); Nsikan Akpan, Why a Coronavirus Vaccine Could Take Way Longer than a Year, National Geographic (Apr. 10, 2020) https://www.nationalgeographic.com/science/2020/04/why-coronavirus-vaccine-could-take-way-longer-than-a-year/ [https://perma.cc/ZL7A-QYWF].

[35] Fact Sheet: Explaining Operation Warp Speed, U.S. Dept. of Health & Human Services (Dec. 15, 2020, 9:28 PM), https://www.hhs.gov/coronavirus/explaining-operation-warp-speed/index.html [https://perma.cc/963R-6TDM].

[36] Id.

[37] Nicola Petrosillo, Giulio Viceconte, Onder Ergonul, Giuseppe Ippolito & Eskild Petersen, COVID-19, SARS and MERS: Are They Closely Related?, 26 Clinical Microbiology & Infection 729 (2020).

[38] Id. at 732.

[39] Mullard, supra note 34, at 1751.

[40] Ihor Sawczuk, M.D., Behind the COVID-19 Approval Process, Hackensack Meridian Health (Dec. 9, 2020), https://www.hackensackmeridianhealth.org/HealthU/2020/12/09/behind-the-covid-19-vaccine-approval-process/ [https://perma.cc/6PF2-JZET].

[41] Id.

[42] Id.; Allie Clouse, Fact Check: Moderna Vaccine Funded by Government Spending, with Notable Private Donation,  USA Today (Nov. 24, 2020), https://www.usatoday.com/story/news/factcheck/2020/11/24/fact-check-donations-research-grants-helped-fund-moderna-vaccine/6398486002/ [https://perma.cc/A4HQ-XPLE]; Was the Pfizer Vaccine Part of the Government’s Operation Warp Speed?, N.Y. Times (Nov. 10, 2020), https://www.nytimes.com/2020/11/10/health/was-the-pfizer-vaccine-part-of-the-governments-operation-warp-speed.html [https://perma.cc/3XJX-TQN7].

[43] Kerry A. Dolan, Bill and Melinda Gates Are Giving Another $70 Million for Covid Vaccines, Forbes (Nov. 12, 2020), https://www.forbes.com/sites/kerryadolan/2020/11/12/bill-and-melinda-gates-are-giving-70-million-more-for-covid-vaccines/?sh=48701b6a29f8 [https://perma.cc/GSH2-X9PK].

[44] U.S. Food & Drug Admin., Inside Clinical Trials: Testing Medical Products in People (2020) https://www.fda.gov/drugs/information-consumers-and-patients-drugs/inside-clinical-trials-testing-medical-products-people [https://perma.cc/5BVC-TV38]; Sawczuk, supra note 40.

[45] While Pfizer had ample participants, there is still a significant need for clinical trial participants for additional covid-19 vaccines to create a diverse testing pool that is representative of the general population within the United States and worldwide. See Marc Zarefsky, COVID-19 Vaccine Trials: 1 Million More Volunteers Still Needed, Am. Med. Ass’n. (Nov. 9, 2020), https://www.ama-assn.org/delivering-care/public-health/covid-19-vaccine-trials-1-million-more-volunteers-still-needed [https://perma.cc/U45C-NP4F].

[46] See Sawczuk, supra note 40.

[47] What Does Emergency Use of a Covid-19 Vaccine Mean?, supra note 33.

[48] Kesselheim et al., supra note 28, at 3–5.

[49] Id. at 6.

[50] Id.

[51] What Does Emergency Use of a Covid-19 Vaccine Mean?, supra note 33.

by Gabrielle Brill, J.D. Candidate, 2021, University of Richmond School of Law

 

Introduction

“It takes 20 years to build a reputation and five minutes to ruin it.”

– Warren Buffett [1]

Social media has dramatically altered everyday life, and nowadays it can take an extraordinary amount of discipline to effectively limit screen time. Over forty percent of people check their phone within the first five minutes of being awake.[2] However, social media use is more than mere habit or addiction: it is changing corporate social activism. Money for social activism is being raised through financial technology programs like GoFundMe, strangers are coordinating boycotts and protests online, and hashtag campaigns like #MeToo and viral videos like the death of George Floyd are elevating awareness of social issues. These new, social media-centric methods are also pressuring businesses to act in the sphere of social justice. Corporate executives used to fear “a bad newspaper story; today, they dread a bad viral video or negative trending hashtag that can hurt their brands or stock prices more than a bad newspaper story.”[3] These bad viral videos and negative trending hashtags are linked to a new phenomenon dubbed “cancel culture.”

This essay explores the recent explosion of cancel culture, its accountability goal, and, as a result, its link to calling for companies to fulfill their corporate social responsibility initiatives and inspiring corporate social accountability.

Defining Cancel Culture

Cancel culture is a “mass online public reaction to perceived wrongs done by an individual or entity by withdrawing support or consumer patronage.”[4] Black users of Twitter created the term “cancel culture” and began using the phrase as a hashtag.[5] The term has exploded in recent years due to conversations arising from #BlackLives Matter, #MeToo, and various other social movements that are pressing for greater accountability among public entities.[6]

The cancel culture phenomenon has been critiqued across the political spectrum. Left-leaning writers, artists, and celebrities referred to cancel culture as an “intensif[ying] a new set of moral attitudes and political commitments that tend to weaken our norms of open debate and toleration of differences in favor of ideological conformity.”[7] On the right, President Donald Trump has described cancel culture as “the very definition of totalitarianism.”[8] However, proponents of the cancel culture movement argue that the online judgments, critiques, and callouts would be best described as “accountability culture.”[9] This accountability culture perspective frames the online criticism as simply making people and institutions in power address their problematic pasts (or presents).[10] The point of this essay is not to argue whether cancel culture as a whole is good or bad, but to note that this accountability lens is being applied to businesses and filling gaps in the corporate social responsibility regime.

Defining Corporate Social Responsibility

Corporate social responsibility (CSR) comprises voluntary actions that businesses take to display commitment to responsibly managing the social, environmental, and economic effects of its operations.[11] These actions are nearly always made in line with public expectations.[12] Businesses often take these actions because consumers and employees demand and prefer it.[13]  Millennials, especially, are lending their support to brands that embrace social responsibility and emphasize community engagement. “88% of millennials expect companies to produce and communicate the results of corporate social responsibility efforts, and 89% of consumers are likely to switch brands to one that is associated with a good cause.”[14] Companies engaging in CSR can attribute 40% of their reputation to CSR work.[15]

Once upon a time, corporations used to be able to remain silent or ambiguous on social issues. But, the evolving role of the corporation and the rise of social media pressure is pushing corporations to become leaders on social issues and social movements.[16] Instead, silence can now cost a company money, and society has an expectation that well-to-do companies will take a stand on social issues. A 2016 Public Affairs Council study stated “more than three-quarters” of companies “experienced increased pressure to weigh in on social issues.”[17] These social issues ranged from discrimination, the environment, education and human rights.[18] Most telling is that from 2013–2016, not a single respondent reported that pressure to weigh in on social issues decreased.[19]

Corporate Social Accountability Versus CSR

Corporate accountability is often used interchangeably with corporate responsibility, but they are not synonymous. Corporate responsibility encompasses voluntary engagement with social issues. On the other hand, “corporate accountability focuses more on establishing institutional mechanisms that hold companies accountable rather than merely urging companies to act toward a socially desirable end voluntarily.”[20] This view of a corporation is in stark contrast to neoclassical thought, where companies should only be accountable to shareholders.[21]

I. Where CSR Fails, Cancel Culture Can Force Corporate Accountability

With widespread access to the internet, the general public now has a means to pressure corporate action on social issues through social media and cancel culture. The current CSR remedies at law often fail to give society the corporate social accountability it is expecting from large companies. Where CSR remedies at law fail, cancel culture has the ability to step in and advocate for corporate accountability until a corporation acts in a way consumers agree with. Again, the point is not whether a use of cancel culture in this way is good or bad. But there is an accountability function to cancel culture that can be applied to businesses when CSR remedies at law fail to uphold societal expectations.

When CSR Fails: Hershey Child and Slave Labor

Dana v. Hershey Company is a great example of how current remedies at law fall short of inspiring corporate social accountability consumers desire today. Hershey pledged nearly two decades ago to cease using slave labor in the manufacturing of its chocolate. Despite this, the Hershey candy company is still benefiting from low-cost cocoa farmed by children in West Africa.[22]

In a putative class action, Laura Dana sued Hershey, claiming Hershey’s failure to disclose that cocoa used in Hershey’s products originated from farms using child and slave labor violated California’s Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law.[23] Although Hershey acknowledges child and slave labor is present in its Ivory Coast supply chain, it does not disclose the labor abuses on its product packaging.[24] One of Dana’s main arguments was rooted in Hershey’s corporate social responsibility report, which stated “Hershey has zero tolerance for the worst forms of child labor in its supply chain,” and Hershey’s “supplier code” explicitly prohibits child labor and forced labor.[25] Despite these internal professions and standards, Hershey was shirking public accountability by failing to admit it was a beneficiary of slave labor on its product labeling. The court ultimately dismissed the suit because Dana did not allege any omission by Hershey of a known danger to the safety of customers, therefore there was no duty to disclose.[26] The court declined to decide whether misrepresentations regarding labor practices fall within the California Legal Remedies Act.[27]

Dana v. Hershey Company highlights an important thing about the corporate social responsibility structure: sometimes there is not an adequate remedy at law to ensure that companies are complying with their self-prescribed corporate social responsibility goals. As consumers seek out accountability from businesses of all sizes, the law is not only an expensive but also oftentimes an inefficient remedy for the change consumers are attempting to create. As a result, access to the internet and social media platforms are providing new, free media to critique and hold business accountable for the corporate social responsibility platforms they have adopted as well as encourage corporate social accountability.

When Cancel Culture Achieves Change: Aunt Jemima Syrup

A recent example of people taking to social media to call out a business for failing to uphold its corporate social responsibility platform is the cancelling of Aunt Jemima syrup. In June 2020, singer-songwriter Kirby posted a viral TikTok video exposing the racist roots of Aunt Jemima’s origin and logo.[28] The brand’s origin and logo were based off the song “Old Aunt Jemima” which has origins in minstrel shows and was reportedly sung by slaves.[29] The Aunt Jemima logo began in the year 1890 and was based on Nancy Green. The Aunt Jemima website used to portray Nancy Green as a “storyteller, cook and missionary worker,” but never mentioned the crucial fact that Nancy Green was born into slavery.[30]

The perpetuation of the racist elements within the Aunt Jemima brand was directly adverse to PepsiCo, the owner of Quaker Oats and thus Aunt Jemima’s Diversity and Engagement initiatives within their corporate social responsibility framework. PepsiCo touts itself as a leader in “advanc[ing] diversity and engagement in [their] industry.”[31] However, the Aunt Jemima logo was altered six times[32] before the Kirby TikTok video combined with Black Lives Matter protests across the country led Kristen Kroepfl, Vice President of Quaker Foods (the PepsiCo subsidiary that produces Aunt Jemima) to recognize “Aunt Jemima’s origins are based on a racial stereotype”[33] and drop the brand for good.

Kristen Kroepfl ultimately gets at the heart of why cancel culture is functioning to push companies to hold true to their corporate social responsibility goals. She states that companies “also must take a hard look at [their] portfolio of brands and ensure they reflect [a company’s] values and meet [their] consumers’ expectations.”[34] When companies hold themselves out as leaders in the realms of social justice and activism and then fail to uphold their own corporate social responsibility mission statements, consumers are understandably unhappy. Thus, when remedies of law do not force companies to live up to their corporate social responsibility, when the law does not create a pathway to hold businesses accountable in the social justice space like so many consumers now desire, consumers go to their phones.

In the case of Aunt Jemima, just one day after Kirby’s critical TikTok video went viral, Pepsi announced that it would rename and redesign the 130-year-old pancake brand.[35] Additionally, the Aunt Jemima brand will donate five million dollars over the next five years specifically targeted to supporting the black community.[36] That is the power of cancel culture in the corporate social accountability space.

II. How Should Brands Proceed Amidst Cancel Culture?

To reiterate, there are a wealth of arguments to be had about the overall societal good (or bad) of cancel culture as whole that are much too lengthy for this essay. I do not imply that cancel culture is all “good,” but that cancel culture has an accountability function that can force companies to uphold their corporate social responsibility initiatives without needing to navigate a court of law.

So, where does cancel culture leave businesses cultivating brands? Construction of brand identity and value is amplified by social media. Digital networks allow both invested and disinterested parties to comment, critique, and contribute to discourse surrounding a brand’s meaning.[37] Heading forward, how brands should proceed is easy to say and hard to apply: be authentic!

The first question a brand should ask itself when facing cancel culture is: have the brand’s customers cancelled it? A brand should be acutely aware of its customer base. Cancel culture can make many jump on a boycott bandwagon that never even intended to be a customer of the brand being “canceled” in the first place.[38] A potent example of this are the various boycotts against Chick-fil-A over the years regarding Chick-fil-A’s Chairman Dan Cathy’s opposition to same-sex marriage. Despite these attempts at cancellation, Chick-fil-A still makes more per restaurant than McDonald’s even though Chick-fil-A only operates six days a week.[39] Chick-fil-A’s strong customer base has persevered through boycotts, which makes Chick-fil-A’s need to respond to the social justice criticisms monetarily unnecessary because it is not effecting their customer base as a whole.[40]

Second, brands must become aware of the difference between allyship and appropriation. When a brand is attempting to elevate voices of a community, members of that community should be represented in the decision-making process.[41] A grave example of failing to engage the proper audiences in decision-making processes is the infamous “Jump In” Pepsi commercial starring Kendall Jenner, which used imagery reminiscent of Black Lives Matter protest confrontations with police. PepsiCo’s in-house marketing team advanced the campaign too quickly and failed to properly seek external perspectives from ad agencies, market research, or diverse consumers.[42] The end result was severe tone deafness that offended many and left PepsiCo with a low public perception for nine months.[43] It will be prudent of businesses going forward not only to invest in diverse talent to join in-house marketing teams, but also ensure marketing material is getting properly vetted by diverse consumers.

Third, don’t be a “slacktivist.”[44] Consumers are looking for deeds to back up rhetoric. General or hollow sentiments will not do the job, but directly owning up to mistakes and genuinely expressing a desire to grow probably will.[45] To most effectively express desire for growth, a company should take time to step beyond their own perspective, and process and validate critiques.[46] Businesses should also be wary when attempting to meaningfully participate in social media trends meant to uplift social justice movements. Controversy erupted over the Black Out Tuesday movement on June 2, 2020 as social media users posted black squares as a show of solidarity in response to the death of George Floyd. However, the use of hashtags like #BlackLivesMatter and #BLM in association with the black squares enabled details for Black Lives Matter rallies and other important information accompanied with these hashtags to be buried from activists who needed them.[47] Marketing teams should stay alert and abreast of updates surrounding international social media trends to avoid the potential of hiding crucial information or resources.

Lastly, it would be wise for companies to participate in 24/7 monitoring of online commentary regarding the company, as well as high-profile endorsers of the brand. If the brand is the first to know and the first to act when a public relations crisis arises, a serious boycott attempt can be avoided.[48] This is critical as technology and social media continue to evolve, as it can take a matter of minutes for a negative video, hashtag, or post to go viral.

Above all, do not misrepresent or fail to uphold corporate social responsibility values—don’t just talk the talk; walk the walk. If a business fails to do so, there could be more than a lawsuit at their door. Cancel culture could be there, like a fast food order of accountability, intimidating them to do better.

 

[1] James Berman, The Three Essential Warren Buffet Quotes to Live By, Forbes (Apr. 20, 2014, 5:55 PM), https://www.forbes.com/sites/jamesberman/2014/04/20/the-three-essential-warren-buffett-quotes-to-live-by/ [https://perma.cc/AB4V-XNXA].

[2] Deloitte, Global mobile Consumer Survey: US Edition 4 (2016), https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-global-mobile-consumer-survey-2016-executive-summary.pdf [https://perma.cc/B7U3-D49M].

[3] Tom C.W. Lin, Incorporating Social Activism, 98 B.U. L. Rev. 1535, 1545 (2018).

[4] Heather Fletcher, Cancel Culture is Real – Here’s What Brands Need to Know About It, Target Marketing (Sept. 23, 2019), https://www.targetmarketingmag.com/article/cancel-culture-is-real-heres-what-brands-need-to-know-about-it/ [https://perma.cc/9KL6-RNDL]; see also Christopher Brito, “Cancel Culture” Seems to Have Started as an Internet Joke. Now It’s Anything But, CBSNOriginals (Aug. 19, 2020), https://www.cbsnews.com/news/cancel-culture-internet-joke-anything-but [https://perma.cc/5VUN-HREK] (Professor Anne H. Charity Hudley’s first definition of cancel culture is a public withdrawal of financial support that encourages others to also withdraw support).

[5] Words We’re Watching: What It Means to Get “Canceled,” Merriam-Webster (last visited Dec. 18, 2020), https://www.merriam-webster.com/words-at-play/cancel-culture-words-were-watching [https://perma.cc/5QC6-KCPT]; see also Rachel E. Greenspan, How ‘Cancel Culture’ Quickly Became One of the Buzziest and Most Controversial Ideas on the Internet, Insider (Aug. 6, 2020, 8:30 AM), https://www.insider.com/cancel-culture-meaning-history-origin-phrase-used-negatively-2020-7 [https://perma.cc/KPG7-LGFE] (“[T]he phrase ‘cancel culture’ experienced notable growth in 2016 and 2017, particularly on Black Twitter.”).

[6] Merriam-Webster, supra note 5.

[7] A Letter on Justice and Open Debate, Harper’s Magazine (July 7, 2020), https://harpers.org/a-letter-on-justice-and-open-debate [https://perma.cc/X7CX-JSLJ].

[8] Greenspan, supra note 5.

[9] Spencer Kornhaber, It’s Not Callout Culture. It’s Accountability, The Atlantic (June 16, 2020), https://www.theatlantic.com/culture/archive/2020/06/callout-culture-black-lives-matter-adidas-bon-appetit-lea-michele/613054/ [https://perma.cc/6HTP-6CEY].

[10] Greenspan, supra note 5.

[11] Embracing Corporate Social Responsibility: Hearing Before the Comm. on Small Business, 116th Cong. 2 (2019).

[12] Id.

[13] See id. at 1–2; see also Sairah Ashman, ‘Wokeness’ in the Age of the Twitter Mob: How Brands Can Navigate Cancel Culture, Forbes (July 22, 2019, 6:02 AM), https://www.forbes.com/sites/sairahashman/2019/07/22/wokeness-in-the-age-of-the-twitter-mob-how-brands-can-navigate-cancel-culture/#73784f0a56f2 [https://perma.cc/9UEQ-96GZ] (eighty-eight percent of consumers want businesses to help them make a difference and seventy percent of business executives take social purpose into account when deciding where to work).   

[14] Ashman, supra note 13.

[15] Christine Alemany, Marketing in the Age of Resistance, Harv. Bus. Rev. (Sept. 3, 2020), https://hbr.org/2020/09/marketing-in-the-age-of-resistance [https://perma.cc/K24G-HAST].

[16] Jennifer S. Fan, Woke Capital: The Role of Corporations in Social Movements, 9 Harv. Bus. L. Rev. 441, 452–53 (2019).

[17] Id. at 453.

[18] Id.

[19] Id.

[20] Min Yan & Daoning Zhang, From Corporate Responsibility to Corporate Accountability, 16 Hastings Bus. L.J. 43, 44 (2020).

[21] Id. at 44–45.

[22] Peter Whoriskey & Rachel Siegel, Cocoa’s Child Laborers, Wash. Post (June 5, 2019), https://www.washingtonpost.com/graphics/2019/business/hershey-nestle-mars-chocolate-child-labor-west-africa/?fbclid=IwAR0SfSYRgtrZwL2uePdn91Rx9gL6Kjv4Z3fgq_HkvA5U–7zmviqXwyC7zY&noredirect=on&utm_term=.d1e6d2198845 [https://perma.cc/X8SK-NVY7].

[23] Dana v. Hershey Co., 180 F. Supp. 3d 652, 654 (N.D. Cal. 2016).

[24] Id. at 655.

[25] Id.

[26] Id. at 665.

[27] Id.

[28] James Hale, Viral TikTok Video from Black Artist Kirby Prompts Pepsi to Rebrand ‘Aunt Jemima’ Products, TubeFilter (June 18, 2020), https://www.tubefilter.com/2020/06/18/kirby-singer-tiktok-video-rebrand-aunt-jemima [https://perma.cc/US6E-27XX].

[29] Jordan Valinsky, The Aunt Jemima Brand, Acknowledging its Racist Past, Will Be Retired, CNNBusiness (June 17, 2020) https://www.cnn.com/2020/06/17/business/aunt-jemima-logo-change/index.html [https://perma.cc/7XYZ-6QLC].

[30] Id.

[31] Diversity & Engagement Progress at PepsiCo: A Message from Ronald Schellekens, PepsiCo (June 30, 2020), https://www.pepsico.com/about/diversity-and-engagement/progress-at-pepsico [https://perma.cc/AU58-TZ2P].

[32] Jessica Snouwaert, Aunt Jemima’s Logo Has Changed 6 Times and Its History is Rooted in Racial Stereotypes and Slavery, Entrepreneur (June 18, 2020), https://www.entrepreneur.com/article/352060 [https://perma.cc/ ZJL9-GE85].

[33] Hale, supra note 28.

[34] Id.

[35] Id.

[36] Valinsky, supra note 29.

[37] Margaret Chon, Trademark Goodwill as a Public Good: Brands and Innovations in Corporate Social Responsibility, 21 Lewis & Clark L. Rev. 277, 291–92 (2017).

[38] Fletcher, supra note 4.

[39] Matthew McCreary, Chick-fil-A Makes More Per Restaurant Than McDonald’s, Starbucks and Subway Combined…and It’s Closed on Sundays, Entrepreneur (2018), https://www.entrepreneur.com/article/320615 [https://perma.cc/52TA-Y2PL].

[40] It is worth noting that Chick-Fil-A is a closely held corporation. It would be interesting to see if cancel culture affects close corporations and public corporations differently.

[41] Ashman, supra note 13 (Fairy successfully rebranded to Fair for Pride month by implementing key team members who were LGBTQ+, which provided the team with authority on the issue).

[42] Lily Tillman, Case Study: PepsiCo & Kendall Jenner Commercial, Astute (2018), https://astute.co/pepsi-kendall-jenner-commercial [https://perma.cc/N6BG-HPTY].

[43] Id.

[44] Id. (On May 30, 2020, Adidas made an Instagram post that was merely the word ‘Racism’ with a line striking through it. Consumers found this display of ‘solidarity’ to be lukewarm and insufficient.)

[45] Alemany, supra note 15.

[46] Id.

[47] Zoe Haylock, How Did #BlackOutTuesday Go So Wrong So Fast?, Vulture (June 2, 2020), https://www.vulture.com/2020/06/blackout-tuesday-guide.html [https://perma.cc/6HXL-QKTH].

[48] Fletcher, supra note 4.