Order in the Court: How Firm Status and Reputation Shape the Outcomes of Employment Discrimination Suits

Abstract

This article explores the mechanisms by which corporate prestige produces distorted legal outcomes. Drawing on social psychological theories of status, we suggest that prestige influences audience evaluations by shaping expectations, and that its effect will differ depending on whether a firm’s blameworthiness has been firmly established. We empirically analyze a unique database of more than 500 employment discrimination suits brought between 1998 and 2008. We find that prestige is associated with a decreased likelihood of being found liable (suggesting a halo effect in assessments of blameworthiness), but with more severe punishments among organizations that are found liable (suggesting a halo tax in administrations of punishment). Our analysis allows us to reconcile two ostensibly contradictory bodies of work on how organizational prestige affects audience evaluations by showing that prestige can be both a benefit and a liability, depending on whether an organization’s blameworthiness has been firmly established.