Google is widely recognized as a good company to work for, offering competitive compensation, world-class benefits, and ample opportunities for learning and career development. Among large employers, Google ranked fifth in the US and took the #1 spot in the UK on Glassdoor’s Best Places to Work list for 2018, based on thousands of employee reviews.
In the age of HR as PR, a reputation like Google’s is more valuable than ever. On the other hand, the tech giant has also been at the center of several controversies in the past year concerning diversity, inclusion, and discrimination in the tech sector, including allegations from the US Department of Labor that it engaged in gender pay discrimination and a lawsuit by several former employees also claiming that the company systematically discriminated against women in pay and career development. (Google is not alone among tech employers in this regard; Microsoft is also facing a number of gender discrimination claims.)
In this instance, Google’s prestige could turn into a liability, business professors Mary-Hunter McDonnell and Brayden King explain at Quartz. That’s because of a phenomenon McDonnell and King found in their research that they call the “halo tax,” in which companies with good reputations are punished more severely when they are found liable for employment discrimination:
Using a unique database of more than 500 employment discrimination lawsuits between 1998 and 2008, we concluded that the greater the company’s prestige, the less likely it would be found liable because of the halo effect. However, once a prestigious company was found liable, punishments were more severe, which shows that prestige can be both a benefit and a liability, depending on whether a company is defending itself or its blameworthiness has been firmly established.
Our study demonstrates that prestigious companies are punished more harshly when they are found liable for discrimination in all forms, including cases alleging discrimination based on gender, race, ethnicity, age, and religion. But our findings represent a special precaution for firms that are struggling with whether and how to address sexual harassment in the workplace, given the many high-profile cases that have appeared in the media recently. Our study underlines why it is especially important for leaders of prestigious companies to be diligent in ensuring their workplace culture is closely aligned with the values they espouse.
The key factor in this phenomenon is the appearance of hypocrisy, which McDonnell and King found invites a particularly strong negative reaction from the media, activist investors, and other observers of corporate behavior. They compare Google to Uber, which has faced much bigger scandals in the past year regarding sexual harassment, toxic culture, and a hostile work environment for women employees. While Uber has suffered from these scandals, it did not have a “halo” like Google does and so had less to lose in terms of reputation.
One lesson here is that HR as PR cuts both ways: Companies are being judged in the public eye on the basis of how they treat their employees, whether or not they choose to advertise themselves on this basis, but those that seek to leverage their employer brand for competitive advantage risk getting burned if they are revealed to be overstating what virtuous employers they are. The other lesson is that issues of diversity and inclusion are playing a larger role in how HR shapes an organization’s reputation than ever before, so these issues are becoming even more risky to ignore.