In yesterday’s episode of “Yes, we boycott,” Social Media “activists” turned their animus to PayPal, one of the biggest online payment companies in the world. On Saturday, October 15th, news broke that PayPal’s co-founder, Peter Thiel, plans to donate $1.25 million to Donald Trump’s campaign. Since then, Social Media has had a visceral reaction calling for a boycott of the electronic payment behemoth.
According to Brayden King, a management professor at Northwestern University in Chicago, boycotts are most effective when directed at a single company. A boycott can yield concessions because continued media attention tends to push the company’s stock price down. As a result, boycotted companies tend to do more “prosocial” programs to cure the harm. But what if the wrong company is implicated?
Right Guy, Wrong Company
Considering Trump’s Presidential campaign of hate, racism, xenophobia and misogyny, it seems appropriate that anything that contributes to his campaign must be bad and thus boycotted. Unfortunately, in #BoycottPayPal Social Media has misplaced its anger.
Eighteen years ago, Peter Thiel and Elon Musk founded PayPal. Although it’s undisputed that Thiel contributed to PayPal’s initial success, he no longer has an interest in the company. In 2002, Thiel and his partner were bought out by eBay in a $1.5 Billion dollar deal where he walked away with $55 million dollars. In 2015, PayPal split from eBay with its second IPO and Thiel was not listed as an owner.
Ironically, Peter Thiel does have an ownership interest in several companies, including Facebook, one of the social media outlets where calls for the boycott originated. In 2004, he gave Mark Zuckerberg a $500,000 loan as its first outside investors. Thiel later converted his loan to a 7 percent ownership interest in the company and a seat on its Board of Directors. He has served on the Board of Directors since April 2005. In 2011, his interest in Facebook was valued at $1.5 Billion dollars.
In documents required by the Securities and Exchange Commission, Thiel’s Facebook stock ownership was reported as 3,837,384 shares in 2013 and 1,075,811 shares in 2016. Interestingly enough, there have been no calls to boycott Facebook. If, in boycotting PayPal, Social Media is not boycotting Peter Thiel and his contribution to Donald Trump’s campaign of hate, then what is it doing?
What is the effect of a boycott that is “fantastically off target”? The adverse effects of an off target boycott are two-fold. First, instead of negatively affecting the company boycotted, it creates a “reputational crisis” for the group promoting it. The effectiveness of this group’s future boycotts of “worthy causes” is now diminished. Second, it has unintended consequences. In the wake of the PayPal boycott, many people closed their PayPal accounts without a viable alternative. In a swell of frustration and anger, people severed their access to a network of 188 million PayPal users. This unnecessary exit will cause these former PayPal users a lot of frustration and possibly money. Everything circulated on Social Media is not true. A simple Google search could have easily prevented #BoycottPayPal. The failure of #BoycottPayPal should be a cautionary tale for the need for accuracy in boycott movements, lest we become the “group who cried wolf.”
Courtney Richardson, Esq. is an attorney, former financial and investment advisor with over a decade of experience in tax, investing, and estates.