A comment from David Vogel, a business professor at the University of California, Berkeley, in a New York Times Magazine story about Mattel and corporate social responsibility got me annoyed enough to do a little research into Mattel's stock price before during and after the various recalls the company faced over the past four months.
Vogel says, "C.S.R. doesn't buy you much credit when things go wrong." Is that so? A quick look at Mattel's stock price over the past year suggests that investors at least are relatively confident in Mattel's reputation. And one feature of that reputation is likely the integrity and responsibility demonstrated in the overall social behavior of company, as the article itself suggests elsewhere.
- Mattel's share price on December 29, 2006 was $22.66: a year later it is $18.97 (28.12.07), a decline of year-over-year of about 16.0%. Not comforting, but no greater turbulence than most investors see in any given year especially in a market as tough as that of 2007.
Looking a little closer at the company's stock movement over the recall months also suggests that investors are not terribly troubled by the extraordinary events of this period:
- On August 2, 2007 when Mattel announced that it was pulling toys due to fears of lead contamination, the stock sat at $23.58.
- On August 14, 2007 when the company announced an expanded recall the stock was trading at $23.00 a share, hardly a noticeable decline from two weeks earlier.
- By September 4, 2007, the date of the third recall, the stock had dropped only nominally to $21.97.
- Even with the announcement of a Congressional review of Mattel's safety performance on September 10, 2007, the stock was still trading above $21.00 and had in fact recovered to $24.08 a share a couple of weeks later.
- Over the next month or so, Mattel announced further recalls (25.10.07 - $21.09) and it issued a media release that argued lawsuits against it had no merit (12.12.07 - $20.19).
So, Mattel's share performance can hardly be said to have suffered significantly from its highly publicized recalls.
Perhaps, as Vogel claims, "They got no positive press coverage in any of the lead-paint stories for their strong performance on labor standards." But, since when is positive press coverage during a crisis the key measure of the strength of an organization's reputation? Mattel's reputation -- built among other attributes on its social contributions -- seems to be standing it in relatively good stead where it counts with at least one of its key stakeholders . . . those who own its shares.