Social movements often try to mobilize local stakeholders of a company for their cause, such as the customers, shareholders, or employees of a company. If successful, these local stakeholders will not only exert influence on a specific company but could become a signal for the whole industry. Yet, what happens when social movements target a firm but fail to mobilize local stakeholders? We argue that local mobilization failures contain valuable information for managers about the preferences of local stakeholders and can thus influence corporate behavior. Specifically, when social movements address environmental and social (E&S) issues, as they often do, local mobilization failures signal to target firms that E&S issues are of low priority to local stakeholders. In turn, managers follow suit by deprioritizing E&S issues, creating an organizational environment in which corporate social irresponsibility can proliferate. An analysis of failed E&S shareholder proposals at U.S.-based publicly traded firms from 2007 to 2022 shows that failed E&S proposals induce corporate social irresponsibility. Further, we show that this response is mitigated when compensation contracts incentivize managers to take E&S issues seriously and heightened when proposals are expected to pass. Our study thereby advances both research on social movements and shareholder activism.
