I watched Air New Zealand’s reputation unravel recently—not because of a catastrophic crash or massive data breach, but because people in Blenheim couldn’t afford to visit their grand-kids. That disconnect between corporate profit-taking and human reality? That’s what losing your social license looks like.
This isn’t theoretical. It’s happening to household names right now, and the pattern is repeatable. If you’re leading a technical team, advising executives, or building a business, understanding this pattern might be the difference between durable success and becoming another cautionary case study.
What social license actually is and why the definition matters
Kevin Jenkins is a business consultant who’s written about social license for years. He still resists using the phrase, calling it “sloppy.” Why? Because ask three people and you’ll get five definitions.
Let me cut through that: Social license is ongoing permission from the people affected by your business to keep operating. You can’t buy it. You can’t apply for it. You earn it or lose it through every decision you make.
The term originated in the 1990s after the Marcopper mining disaster in the Philippines, when dozens died and mining executives realized legal compliance wasn’t enough. One executive said publicly: “We need to rebuild our social license.” It came from the corporate side, not activists—a recognition that technical competence and regulatory approval don’t guarantee stakeholders will let you continue operating.
Think of it as the difference between what you’re legally allowed to do and what your community will tolerate you doing. That gap is where businesses either thrive or die. It’s the difference between Air New Zealand having the legal right to set regional flight prices and their customers feeling that “taxpayer-funded symbol of home” has betrayed them.
Three patterns of collapse worth understanding
I’ve picked three companies that show distinct failure modes. Each demonstrates a different way social license breaks—and why the breakdown matters to you.
Wells Fargo and the fraud that wouldn’t die
In September 2016, Wells Fargo employees opened millions of fee-generating accounts without customer consent. The scale was staggering: 3.5 million accounts, fake email addresses, forged signatures. Employees did this to meet sales quotas that management knew were impossible without fraud.
CEO John Stumpf resigned. The company paid $3 billion in fines. They fired 5,300 employees. They eliminated sales quotas entirely. None of it mattered.
The bank’s stock remained 12% below pre-scandal levels years after the revelations. Legal scholar Hillary Sale used Wells Fargo as her primary case study for social license theory, arguing the company fundamentally failed to account for the public nature of corporate actions. Once people understood the business model required systematically deceiving customers, no amount of compliance theater could restore legitimacy.
The question became existential: what value does a bank hold if it can’t be trusted with its customers’ money? Regulators and investors couldn’t answer that question favorably, which is why Wells Fargo’s market cap still hasn’t recovered a decade later.
For technical leaders, the lesson is architectural: systems that require workers to commit fraud to meet targets will produce fraud. Wells Fargo’s CRM tracked every customer interaction and flagged under-performance. That system was technically sophisticated and operationally disastrous. Your monitoring systems encode incentive structures—and those structures either earn social license or destroy it.
Boeing’s engineering culture that forgot safety comes first
Boeing’s 737 MAX crashes killed 346 people in two separate incidents five months apart. But the crashes weren’t the social license failure—they were the consequence of a social license failure that had been developing for years.
In the 1990s, Boeing shifted from an engineering-led culture to a finance-led culture following its merger with McDonnell Douglas. Engineers who had once held veto power over designs that compromised safety found themselves reporting to executives who measured success in delivery schedules and unit costs.
The 737 MAX’s MCAS system demonstrated this shift. Boeing added new, larger engines to an old airframe to compete with Airbus without the expense of clean-sheet design. The new engines changed the aircraft’s handling characteristics. Rather than redesigning the airframe or requiring extensive pilot retraining (both expensive), Boeing created MCAS—automated software that would push the nose down if sensors detected a stall risk.
They made MCAS rely on a single sensor with no redundancy. They didn’t tell pilots the system existed. When that sensor failed, MCAS repeatedly forced the nose down while pilots fought to regain control. In both crashes, pilots lost.
Airline pilots had flagged problems publicly on professional forums and in union communications. Boeing demonstrated what investigators later called a “cavalier attitude toward implementing software fixes in an urgent manner.” The company had to be forced by the FAA to ground the fleet—they didn’t volunteer to do so even after the second crash.
By 2024, Boeing faced a crippling machinist strike costing hundreds of millions per day, reported a $6.1 billion quarterly loss, announced 17,000 job cuts, and raised $19 billion through stock sales to avoid credit rating downgrades. Their stock price declined nearly 30% from peak levels.
Mission statements matter. Boeing’s 1990s statement prioritized engineering excellence and safety. Their 2000s statement prioritized shareholder value. That linguistic shift encoded cultural priorities that eventually killed hundreds of people and nearly destroyed the company.
If you’re leading technical teams, this is your wake-up call. When business stakeholders ask you to cut corners on redundancy, monitoring, or safety margins to hit delivery dates—that’s not a technical discussion. That’s a social license discussion. Your answer determines whether your company earns continued permission to operate.
Volkswagen’s deliberate deception at scale
Volkswagen’s 2015 emissions scandal stands apart because the fraud was architected at the software level with conscious intent.
VW engineers programmed diesel engines to detect when they were being emissions-tested in laboratory conditions. During testing, the engines activated full emissions controls and ran at reduced performance. During normal driving, emissions controls were disabled, allowing the engines to emit 10 to 40 times the legal limits for nitrogen oxides while delivering the advertised power and fuel economy.
This wasn’t a mistake or an oversight. It was deliberate, systematic deception implemented in code that executives reviewed and approved.
The EPA announced in September 2015 that VW had violated the Clean Air Act by installing illegal “defeat device” software in 11 million vehicles worldwide. CEO Martin Winterkorn resigned within days. His replacement, Michael Horn, testified to Congress: “We’ve totally screwed up. Our company was dishonest with the EPA, and the California Air Resources Board and with all of you.”
By June 2020, Volkswagen had paid $33.3 billion in fines, penalties, settlements, and vehicle buyback costs. Research showed that environmentally conscious consumers created significant but short-lived backlash—sales declined 50 to 60 percentage points more in markets with highest environmental awareness compared to lowest.
The speed with which regulators and markets demanded action had profound impact on VW’s reputation and operational permissions. Courts in multiple countries restricted VW operations. Germany required extensive executive testimony. Multiple countries introduced tighter emissions testing that VW had to accommodate at massive cost.
For those of you building software systems, this is the social license implication of technical decisions made visible: every line of code you write either earns trust or erodes it. VW’s engineers programmed fraud into the engine control unit. That fraud wasn’t financially motivated for the individual programmers—it was an organizational directive. Systems thinking says you need to ask: what pressures in my organization might lead technical staff to implement unethical requirements? Because if those pressures exist, someone will eventually act on them.
Why this keeps happening according to the research
Boston Consulting Group studied 66 trust-destroying corporate events over three years. The finding that matters: 80% had internal causes—misjudgment, organizational dysfunction, misaligned incentives.
These aren’t external catastrophes. They’re self-inflicted wounds from choices leadership makes about culture, incentives, and operational priorities.
The most common drivers were company scandals (fraud, bribery, policy violations), efficacy failures (product malfunctions, security threats), and large-scale accidents. Companies that recovered did three things: correctly identified the root cause, took visible corrective action, and sustained attention long after media moved on.
Most companies failed at that third step. They showed “complacency” after initial recovery, at which point stakeholder distrust re-surged. The capability to maintain social license is an internal organizational competency, not an external relations problem. It’s about system design, incentive structures, and cultural norms—all things technical and business leaders directly control.
The profit chasm that delegitimizes everything else
After-tax corporate profits went from 5.5% of GDP in the 1980s to nearly 10% by 2023, according to JPMorgan Asset Management. CEO-to-worker pay ratios exploded from 59:1 in 1989 to 399:1 by 2021, with Amazon’s CEO earning 6,474 times the average worker’s pay.
In Canada, corporate profit margins nearly doubled from an average of 8.9% between 2002-2019 to 15.8% in 2021. The detail that matters: 90.3% of increased sales revenue went directly to profits rather than wages or costs. This wasn’t organic market evolution—corporations systematically raised prices during COVID and inflation crises while holding worker compensation flat.
When power companies and banks make record profits while people struggle to afford groceries and heating, that’s not a messaging problem. That’s a legitimacy crisis. People notice that executives are profiting from the same conditions causing widespread hardship. And increasingly, they act on what they notice.
Why corporate social responsibility programs fail
A study of 43 multinational mining corporations across 523 communities in 27 countries between 2008-2020 found that even “strong” CSR programs failed to earn community approval under two conditions: weak global perception of the corporation’s legitimacy, or polarization within affected communities.
The core problem: CSR becomes pro forma—consultation without compromise. Communities are asked about concerns. Those concerns get documented in reports. Nothing fundamentally changes. Power imbalances persist: corporations remain insulated from costs of their decisions while communities experience externalities.
I’ve watched clients invest six figures in community engagement programs while simultaneously lobbying against wage increases for those same communities. The dissonance is visible to everyone. CSR activities actually increase community anger and conflict when people recognize they’re being performed at rather than listened to.
What this means for your work
Let me translate research into operational reality for the roles you likely occupy.
If you’re leading technical teams, the systems you build encode social relationships. Facebook’s algorithms prioritized engagement over well-being. Boeing’s software lacked redundancy because finance people optimized for training costs. VW’s engineers programmed fraud because organizational incentives rewarded emissions violations over honest engineering.
Your architecture choices either earn permission or erode it. There’s no neutral position. When you accept technical debt to hit delivery dates, when you skip redundancy to save costs, when you implement features you know will externalize harm—those are social license decisions with long-term business consequences.
If you’re a small business owner, you have an advantage large corporations can’t buy. You live in your community. Your social license builds through hundreds of daily interactions: how you treat employees, whether you sponsor the Little League team, if you’re honest when you make mistakes.
Fonterra and Air New Zealand have legal departments, PR firms, and CSR budgets. They’re still losing social license because scale creates distance. Protect your community position fiercely—it’s more valuable than market cap.
If you’re consulting or advising, your clients need to hear this before crisis hits. Social license isn’t a nice-to-have CSR line item. It’s existential. Boeing, Wells Fargo, and Equifax all had legal licenses, compliance departments, and board oversight. They still lost permission to operate in stakeholders’ eyes.
Your role is helping leadership teams see the gap between legal clearance and social permission before that gap becomes a chasm. The conversation is uncomfortable because it requires examining whether the business model depends on externalizing costs without stakeholder consent.
If you’re building something new, design social license into your business model from day one. Who’s affected by your operation? What permission do you actually have from them? If your answer is “we’re following regulations,” you’re vulnerable. Regulations establish minimums. Social license requires earning ongoing consent from affected communities.
The path forward when permission is at risk
Rebuilding social license is difficult but the research shows what works.
Legitimacy comes before credibility or trust
You need stakeholders to believe you have the right to exist in this space before they’ll evaluate your competence or trust your values. That means genuine stakeholder involvement in decisions that affect them—not performative consultation where feedback gets documented and ignored.
BP’s Deepwater Horizon disaster killed 11 workers and caused approximately $40 billion in liability. While the operation held legal licenses and likely political support given energy security priorities, BP had no meaningful social license for deep-water drilling. The company’s competitors, NGOs, trade unions, community groups, and government agencies found no reason to defend BP because these stakeholders had never participated in discussing social risks or evaluating precautions.
Social license cannot be self-awarded through public relations. It must be earned by involving others in understanding operations and risks before crisis forces involvement.
Publicness means you don’t control the narrative
You operate in an era where internal emails become Twitter threads within hours. Hillary Sale’s framework of “publicness” explains this: it’s the interplay between internal corporate governance and outside actors—journalists, activists, social media users—who recapitulate, re-frame, and sometimes control your narrative.
Wells Fargo and Boeing lost social license not through single catastrophic events but through public recognition that their business models depended on systematically deceiving customers or regulators. Once the narrative shifted from “innovative companies” to “companies that lie,” recovery became nearly impossible.
Design for transparency because external actors will tell your story whether you participate or not. Make sure the version they tell is accurate.
Power sharing not better communications
Communities don’t want better newsletters—they want actual voice in decisions that externalize costs onto them. If your business model depends on externalizing costs without stakeholder consent, you don’t have social license. You have borrowed time.
The research on extractive industries is unambiguous: companies that treated CSR as pro forma consultation while maintaining all decision-making power failed to earn social license regardless of investment amounts. Companies that genuinely shared power over decisions affecting communities succeeded in maintaining operational permission even when those operations created real costs.
This is uncomfortable. Sharing power means accepting constraints on operational freedom. The alternative—operating without genuine permission—means those constraints eventually get imposed through regulatory action, boycotts, investor flight, or complete loss of legitimacy.
The operational question you need to answer
How many businesses are operating right now on borrowed social license? Legal, compliant, profitable—and completely unaware that permission is eroding until recovery becomes impossible.
The companies that understand this aren’t just more ethical. They’re more durable. They weather crises that destroy competitors because stakeholders defend them. Their employees stay during downturns. Their communities support them through regulatory challenges. Their customers give them benefit of the doubt when mistakes happen.
The ones that don’t? Wells Fargo’s stock underwater years after the scandal. Boeing selling $19 billion in stock to avoid collapse. Volkswagen paying $33.3 billion in settlements. These weren’t small companies run by incompetent people—they were industry leaders with sophisticated systems who fundamentally misunderstood what gave them permission to operate.
The question isn’t whether you have legal clearance. The question is whether the people affected by your business would defend your right to operate if someone challenged it.
If that question makes you uncomfortable, that discomfort is data. It’s telling you something about the gap between the permission you assume and the permission you’ve actually earned. Use it.