How Scandals Can Impact Corporate Reputations

Corporate scandals might make for juicy headlines, but behind them, there is often a trail of damage that can leave many lives irreparably impacted – including the people in charge of the company at fault.

This large human toll can often be felt for months, if not years. With both business and personal lives often harmed in equal measure.

So how do these scandals happen, and how can they be prevented from spiralling out of control? Let’s take a look.

Types of corporate scandal

To understand corporate scandals a little better, we shall examine some famous examples.

Enron:

Perhaps the most infamous corporate scandal of all time. With 29,000 employees across the world, Eron was plunged into crisis when an investigation found that accounts fraud had made the company appear financially sound, despite the fact it was haemorrhaging cash. The company ended up filing, at the time, the biggest bankruptcy case in history.

Lehman Brothers:

The current title of biggest bankruptcy case brought to courts now rests with this former Wall Street powerhouse, which collapsed in the midst of the 2008 subprime mortgage crisis, which played a huge role in the global financial meltdown that gripped markets then and still impacts many aspects of our financial lives today.

Volkswagen:

The fallout from the German automotive giant cheating emissions tests is still being felt, with compensation cases growing across the world. It is estimated that 11 million cars worldwide were fitted with ‘defeat devices’ which allowed them to pump out illegal levels of greenhouse gases.

How do scandals affect reputations?

The collapse of both Enron and Lehman Brothers shows quite clearly that business reputations can soon circle the drain amid scandal, especially when finances have been manipulated and businesses are put at risk.

The case of VW is noteworthy, however. Despite the company’s reputation taking a hammering, especially in these more eco-conscious times, they have continued to trade well, and it appears that their reputation for producing reliable cars was not overly affected by common knowledge of their failings environmentally.

The German brand’s Golf model was the second-best-selling car in the UK in 2019, suggesting that VW had worked hard to limit the damage of their now dented reputation.

Can you prevent damage during a corporate scandal?

The possible reactions to a scandal breaking out often largely depends on the nature of the incident, and if a criminal offence has been committed, the assistance of specialised white-collar defence can help to limit the damage.

If the scandal is of a financial nature and the company is ruinously into the red, then any kind of recovery might be impossible.

But in scandals of other natures, such as Volkswagen’s emissions cheating, Apple’s costly ‘Batterygate’ revelations, or Facebook’s ongoing dominance despite a litany of scandals over issues such as data security and the spread of fake news it has been shown that with enough clout and commitment to keep the wheels turning, companies can come back from scandals to keep trading.

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