The Governance of Reputation: Pre- and Post-Crisis Perspectives on Corporate Ethics

Abstract

Reputational crises can have severe and long-lasting consequences for organizations. They occur when an unexpected event or behavior damages an organization's reputation, resulting in negative public perceptions, loss of trust, and financial losses. This study investigates the impact of a crisis, an unexpected event that can disrupt an organization's operations, on consumer perceptions and subsequent reputational damage to the organization. Specifically, the research examines how an organization's pre-crisis reputation, whether positive or negative, can influence the extent of reputational loss following a crisis. According to the study, companies with a good pre-crisis reputation suffer less reputational harm than those with a bad pre-crisis reputation. Consumers have a tendency to hold onto their early perceptions of a company, therefore during a crisis, organizations with a good pre-crisis reputation receive less blame. Additionally, the research demonstrates that having a positive pre-crisis reputation can aid organizations in minimizing the negative effects of a crisis as well as averting ensuing bad press and outside allegations.