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A Firm's Image Following Alleged Wrongdoing: Effects of the Firm's Prior Reputation and Response to the Allegation

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Abstract

The corporate reputation literature asserts that a firm possessing ‘reputational capital’ or a ‘reservoir of goodwill’ will suffer less harm to its image from negative publicity than a firm that does not have a good reputation. Results of the current study provided support for this idea with respect to both the firm's perceived trustworthiness and level of expertise. Admitting wrongdoing in response to allegations generally yielded a more positive image of the firm than did either denial or declining comment. In addition, partial support was found for the prediction that when the firm had a good reputation, denial would lead to a better outcome than declining comment. Apparently, deniers are frequently believed when they have good reputations, but silence is usually viewed as reflecting guilt. Reputations are valuable resources that firms should strive to nurture and protect by making investments in monitoring and managing the impressions that stakeholders have of them.

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Authors and Affiliations

  1. Department of Management and Marketing, Salisbury University, Salisbury, MD, USA

    Wayne H Decker

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APPENDIX

APPENDIX

Tire Scenario

John is an employee of a company that manufactures automobile tires. In the past, John's company has received (positive publicity for contributing to the community in various ways and being voted an excellent company to work for)/(negative publicity for violation of several employment and environmental laws).

There have been statistics published in the news media indicating (vehicles having the company's tires are involved in more accidents resulting in serious injuries and deaths than are similar tires of competing brands)/(the company's tires do not last as long as similar tires of competing brands. On the other hand, the tires do not seem to be involved in any more serious accidents than are competitors’ tires).

John informed the news media that the company's manufacturing process is poorly controlled. He claimed that tires were often built using dried-out rubber and that foreign objects such as screws, wood chips and cigarette butts often got into the tires.

When questioned about the tires, the company's spokespersons (denied that it has any quality problems)/(admitted it may have quality problems)/(declined comment).

Food Scenario

John is an employee of a company that produces frozen foods. In the past, John's company has received (positive publicity for contributing to the community in various ways and being voted an excellent company to work for)/(negative publicity for violation of several employment and environmental laws).

There have been recent reports published in the news media indicating (several persons consuming the company's products have experienced severe food poisoning. There have been no such reports involving competing brands)/(the company's products do not score as highly in taste tests as do competing brands. On the other hand, there is no evidence that the company's products are any less nutritious than other brands).

John informed the news media that employees making the products routinely violate cleanliness standards and include lower quality meat components that should be sent elsewhere to be made into pet foods.

When questioned about the products, the company's spokespersons (denied that it has any quality problems)/(admitted it may have quality problems)/(declined comment).

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Decker, W. A Firm's Image Following Alleged Wrongdoing: Effects of the Firm's Prior Reputation and Response to the Allegation. Corp Reputation Rev 15, 20–34 (2012). https://doi.org/10.1057/crr.2011.27

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