Business scandals don’t always affect reputation

Study shows a company's standing can be surprisingly resilient

Apple topped Fortune's list of most admired companies 2022 (Credit: Marc Fernandes/Nurphoto/Getty Images)

A study by Warwick Business School (WBS) has found that corporate scandals do not necessarily affect reputation.

The research, which was the first large-scale undertaking of its kind, looked at Fortune magazine’s 2022 World’s Most Admired Companies survey, which ranks the reputation of the top 50 global companies. 

It then analysed media coverage of any corporate scandals affecting the listed companies, and compared this with where each company ranked on the list.

For each negative event, the study looked at whether it had led to legal action, affected a non-complicit stakeholder, (such as children, the disabled or those from a lower socio-economic background) or if it was otherwise undesirable.

It found that events on their own were not likely to lead to changes in reputation; however, if an event led to legal action, this was more likely to lead to reputational damage than if an event affected a non-complicit group.

The study also found that when a company had not been found culpable by a court, then stakeholders were likely to give them the benefit of the doubt. Companies that had previously invested in social responsibility efforts were more likely to benefit from this effect than companies with a past negative reputation.

Irina Surdu-Nardella, associate professor of international business and strategy at WBS and one of the study’s authors, said that stakeholders were likely to view the scandals “through the lens of their existing perceptions and often dismiss events that contradict their views”. 

The study “highlights how resilient a company’s standing can be, and therefore, the value of investing in gaining a positive reputation in the first place”, she added. “However, if it’s a business people already dislike [being] embroiled in scandal, they see it, to a large extent, as merely confirming what they already thought.”