A company that wants to implement an industrial project with adverse local impacts can offer the members of the affected community compensation for bearing the burdens associated with the project. In the current study, participants evaluated such a situation from the perspective of observer. Depending on experimental condition, they learned that a company either had or had not consulted members of the affected community prior to deciding on the compensation offer. The compensation offer was either public goods compensation or individual monetary compensation. We hypothesized and found that the decision‐making process was considered fairer and the company was perceived as more concerned with the local public interest when the company had consulted local residents prior to deciding on the compensation offer. Also, the company was believed to be more concerned with the local public interest when it offered public goods compensation instead of individual monetary compensation. Perceived concern and perceived fairness predicted the perceived trustworthiness of the company, and this, in turn, predicted how participants anticipated the members of the affected community to react to the compensation offered by the company. The study thus demonstrates the importance of consultations with local residents in the process of deciding on compensation measures. Copyright © 2014 John Wiley & Sons, Ltd.