Journalists and social media users are key drivers of product recall decisions

Canada records a record 2,330 product recalls in 2023 — more than six a day, the highest number since the federal government began disclosing data in 2011. The recall comes when a manufacturer takes action to recall consumer goods due to security defects or non-compliance with regulations coming from the market.

The decision on how many units of a product should be recalled is usually made left to the managers of manufacturing companies. There could be a lot of external pressures that could impact this decision. But what exactly is driving these managers to issue a recall?

My recently published research answers this questionfocusing on two stakeholder groups — journalists and social media users — who, although they have no direct power over managers, have significant influence on dismissal decisions.

My research shows that journalists’ praise of a manufacturer’s product safety leads to increased disclosure of product safety flaws, while their criticism reduces such disclosure. Social media users, on the other hand, have the opposite effect: their criticism increases disclosure, but their praise makes no difference.

Who oversees product recalls?

In Canada, different agencies oversee the safety of different products. The Canadian Food Inspection Agency regulates food productsTransport Canada is responsible for car and car parts safety AND Health Canada oversees safety consumer goods, pharmaceutical drugs, medical devices and biological products.

Laws vary depending on product categorybut generally require that a product manufacturer notify the appropriate regulatory authority as soon as it suspects a product may be unsafe, before initiating an internal investigation.

If a recall is necessary, the manufacturer must inform the regulator again. The manufacturer – and in some cases the regulator – must then make every effort to inform consumers about the risky products, recall defective products if necessary, and offer appropriate remedies, such as refunds or replacements.

However, as can be expected, these actions are insufficient due to system limitations, such as the inability to determine who purchased the contaminated food or using outdated methods of issuing product recall alertsAs a result, consumers continue to be exposed to unsafe products.

Product Recall Notices

Vehicle manufacturers lasts an average of 465 days between the discovery of a defect and the recall of affected vehicles. Manufacturers in the healthcare sector fare slightly better, needing an average of 136 days between the discovery of a defect and the initiation of a recall.

These long delays raise crucial questions about why it takes so long for consumers to learn about potentially unsafe products.

One perspective is that managers face a real dilemma: they may be reluctant to announce too early that a product is unsafe, fearing that prematurely withdrawing the product from the market could cause unnecessary anxiety and damage the company’s reputation.

However, a more cynical view points to financial motivations: product recalls can harm product sales and the manufacturer’s stock pricesTherefore, managers have a powerful incentive to delay recall announcements as long as possible, protect the company’s financial result.

In profit-oriented companies, the pressure to reduce the number of product recalls may outweigh the moral obligation to protect consumers.

The situation is made worse by the fact that regulatory authorities are They have few resources and limited ability to monitor producersAs a result, they may not be able to enforce timely withdrawals, which will result in consumers at risk.

As regulatory oversight is reduced, the responsibility for holding producers accountable increasingly falls on journalists and social media users.

Holding manufacturers accountable

My research has shown that the tone of journalists’ reporting and the tone of social media users’ posts can have a significant impact on a manufacturer’s decision to recall a product.

My empirical analysis of a huge dataset shows that negative media reports about product safety often result in fewer recalls, whereas positive reports are associated with an escalate in recalls.

Publications such as US News and World Report often rate and rank products by safety. When journalists provide positive coverage, it can give managers the confidence to disclose negative information. Critical coverage, on the other hand, can discourage transparency.

In contrast, my research indicates that negative posts on X (formerly Twitter) about product safety can lead to more product recalls, while positive posts have little impact.

Because social media users are also consumers, they are more likely to share negative experiences online. When social media users criticize the safety of a company’s products, it is more likely to prompt managers to recall units. Praise makes them more reluctant to recall products, preferring to maintain a positive atmosphere.

Additionally, I found that both news and social media posts have a greater impact when security breaches are severe, suggesting that journalists and social media users play an even more crucial role in ensuring public safety.

A balanced approach

Press coverage plays a significant role in shaping how a company’s stakeholders—such as investors, employees, and customers—perceive the company. On the other hand, social media posts about the company gauge public opinion of the company.

My complementary tests examined whether the influence of these two types of media on a company’s decision to disclose product safety defects is stronger or weaker when they occur simultaneously.

My findings suggest that negative press coverage and negative social media posts have interchangeable effects on management disclosure. That is, if there is already negative coverage in one medium, additional negativity from the other does not significantly escalate the pressure on management to disclose flaws.

On the other hand, positive news and positive social media posts reinforce each other’s influence, making managers more likely to disclose safety issues. In other words, when a company receives praise from both journalists and social media users, it can encourage managers to be limpid about safety issues.

These findings underscore the need for a balanced approach to media coverage. Constructive journalism that highlights a company’s efforts to improve safety can lend a hand create an environment that encourages transparency from manufacturers. On the other hand, consumers on social media can exert pressure and directly influence the safety and quality of the products they employ by speaking out and sharing their concerns online.