WEATHERING THE STORM: THE GOVERNANCE OF REPUTATION PRE- AND POST-CRISIS PERSPECTIVES ON CORPORATE ETHICS

Abstract

An organization's reputation can suffer from serious and prolonged effects in the event of a crisis. These crises occur when an unforeseen incident or action that compromises the reputation of an organisation results in negative public reactions, loss of confidence and financial damage. This research examines the effects of a crisis, an unforeseen event which can disrupt the operation of an organisation, on consumer perceptions and on the resulting reputational damage to the organisation. In particular, it considers the impact of an organization’s pre-crisis reputation (both positive and negative) on the magnitude of reputational harm arising from a crisis. The results indicate that organizations with good status before the crisis experience less reputation damage than organizations with bad status before the crisis. People will turn to their first impression of the organisation, so if the organisation has a positive reputation before the crisis, then they will be less likely to blame it during the crisis. Moreover, this research suggests that a positive pre-crisis reputation can help organizations to manage the negative aftermath of a crisis by decreasing the amount of bad press and outside allegations that may result from it.