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When Scandal Hits, Stay Honest

When Scandal Hits, Stay Honest Credit: Embarrassed man image via Shutterstock

For businesses in the midst of a scandal, there’s nowhere to run and nowhere to hide. Companies that try to use celebrity endorsements or charitable donations to rehabilitate their images should consider a more straightforward strategy, a new study finds.

Symbolic actions may actually hurt organizations mired in corporate scandals. Instead, when faced with scandal or accusations of wrong-doing, companies should stick to the facts in post-crisis messaging, said Anastasiya Zavyalova, the study's lead researcher and assistant professor of strategic management at Rice University.

"Consumers are not that superficial," Zavyalova said of the symbolic actions. "They can actually detect when the company is doing it for PR purposes."

In the study, researchers at Rice University, the University of Georgia and the University of Maryland examined 10 years' worth of media coverage concerning 45 public U.S. toy companies and more than 5,500 press releases those companies generated during that time. Nearly half of the companies surveyed conducted a toy recall during the study period. The researchers considered these to be instances of “wrongdoing” because the events placed stakeholders at risk and violated consumer expectations for standards of conduct.

The research additionally revealed that damaging media coverage befell not only the companies who conducted the transgressions, but also other companies in the industry, who were considered guilty by association.

The key to managing the crisis differs depending on whether or not the corporation was directly to blame, Zavyalova said.

"If your corporation is directly to blame, it's best to stick to the facts," she said. "A media strategy that shares substantive information about how you're planning to address the problem can help change the tone of the media coverage."

However, for companies that are only indirectly involved, Zavyalova said it's better to send out press releases that take attention away from the scandal and differentiate the corporation from guilty peers.

"This type of communication helps shift attention from the media backlash," she said.

The study also found that when more than one company was conducting a recall, media coverage was less negative for each of the wrongdoing firms.

"It goes to show that there is some safety in numbers," Zavyalova said.

The study, which was co-authored by the University of Georgia's Michael Pfarrer and the University of Maryland's Rhonda Reger and Debra Shapiro, was recently published in the Academy of Management Journal.

Follow Chad Brooks on Twitter @cbrooks76 or BusinessNewsDaily @BNDarticles. We're also on Facebook  Google+.

Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.

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