DEFINITION of 'Social Identity'

Social identity is an organization or company's image as derived from its relationships with its customers, suppliers, shareholders, and others. An organization's social identity thus comes from the groups that the organization belongs to or is affiliated with, the way it is structured, the industry it belongs to, and other social factors. A company's social identity will impact how it is perceived by consumers, so social identity affects a company's bottom line and should be closely managed.

A company's brand image is part of the social identity and is increasingly managed in part on the internet through social media channels such as Twitter and Instagram, as well through traditional forms of media and public relations channels.

BREAKING DOWN 'Social Identity'

A company's social identity derives from its relations, connections, and perceptions inculcated into the minds of its stakeholders and observers. This takes place through branind & marketing efforts as well as through public relations departments, social media channels, and the company's own products and services. For instance, some companies pride themselves as being environmentally conscious, or "green," and so either produce eco-friendly products or use green technologies in their production processes. So-called ESG investing (environment, social, governance) criteria are used by socially conscious investors to ensure that they put their money behind company's with environmentally-friendly social images.

Making strategic alliances or joining professional associations or platforms can also be an important signal for social identity. For example, whether a public company becomes listed to trade its shares on the Nasdaq or the New York Stock Exchange (NYSE), it could be considered part of that company's social identity that signals legitimacy. Being added to an important equity index such as the S&P 500 adds further cachet. Social identity can also refer specifically to a company's image as portrayed through social networking websites such as Twitter, Facebook and LinkedIn. Company's now have their own verified Twitter and Instagram accounts that provide company updates, news, and promotions to their followers. Some companies Twitter feeds have built a social identity around wry humor, such as Wendy's Inc., which often responds cleverly to online posts. Company CEOs or other important figures may also take to social media under their own name, but in service of the corporations that they run. When someone falsely impersonates an individual or company online, it is considered social identity theft. Company's can also damage their social reputation online by consistently posting unfavorable tweets, which has been the case with Tesla CEO Elon Musk, where his board of directors have cautioned him against using social media as the stock price retreated after a series of ill-advised tweets.

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