Corporate Reputation and Collective Crises

CSR

publication date 30 / 06 / 2017

As business practices change and company supply chains become more complex and interlinked, there is a greater risk of collective crises where multiple companies are associated with the same scandal. Taking the perspective of the bystander effect, Professors Breeda Comyns and Elizabeth Franklin-Johnson of Kedge Business School argue that companies are likely to behave differently in a group setting compared to when faced with a crisis individually.

Organizations may feel less responsibility for the crisis and less urgency to react in a collective setting. They may wait to gauge the reactions of other companies involved before adopting a position post-crisis.  How organizations react and manage a collective crisis is likely to be different when compared to how they react to an individual crisis. Given that the company response post crisis can influence organizational reputation, the reputational effects of individual companies in a collective crisis are likely to differ from the individual crisis case. In this article, the authors investigate how crisis response strategies influence organizational reputation in a collective crisis setting.

The existing literature focuses on corporate reputation in the individual crisis setting and shows that an accommodative crisis response strategy (where the company accepts responsibility and apologizes) minimizes damage to reputation. Contrary to the individual crisis case, in the collective crisis setting, the authors find evidence that companies who adopt accommodative strategies (accept the burden of responsibility for the crisis) incur the highest levels of media attention and reputational damage and also pay the most in terms of monetary contributions post-crisis. Those who adopt defensive strategies (deny or minimize their involvement) suffer less reputational damage and pay less in monetary compensation.  The authors offer a refinement to the commonly accepted thinking in the crisis management literature that accommodative strategies reduce reputational risk. They argue that the relationship between crisis response strategy and reputation is in fact moderated by the crisis setting and will be different given an individual or collective crisis.

The results are interesting in that they highlight the distinction between an individual and a collective corporate crisis and the fact that the chosen crisis response strategy has a different effect on reputation in the collective crisis case.

The authors do not prescribe the strategies that companies should adopt in a collective crisis but rather they show how different strategies can influence corporate reputation in a collective setting. Therefore, they highlight the issue of the collective crisis and show that the effect of crisis-response strategies on corporate reputation is different when compared to an individual crisis case. This means that companies may require a different approach to crisis management for collective versus individual crises. 

Comyns, B & Franklin-Johnson, E. (2016) Corporate Reputation and Collective Crises: A Theoretical Development using the case of Rana Plaza. Journal of Business Ethics, DOI 10.1007/s10551-016-3160-4.

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