Academic journal article Journal of Management and Organization

After the Scandal - Recovery Options for Damaged Organizations

Academic journal article Journal of Management and Organization

After the Scandal - Recovery Options for Damaged Organizations

Article excerpt


The paper advances into a new field of multi-disciplinary inquiry called scandal scholarship. The general thrust of this scholarship should be to understand what factors are determinative to the management of scandals in organizations. The specific focus of this paper is to address the question: what options do organizations have in the immediate period following public exposure? First, a typology gleaned from relevant literatures, attempts to classify the variable ways troubled organizations attempt to extricate themselves from scandal. The typology, in its naïve form, was then applied to a recent case of corporate wrongdoing of international significance. As a result the framework was refined to achieve stronger congruence between case realities and classification. With more development this typology may be able to forecast the scandal management strategies of troubled organizations through an identification of the remedial responses they deploy. This would be great assistance to those who must engage with the troubled organization such as regulators and stakeholders.

Keywords: scandals, typologies, organizational change, options, governance, ethics, remedial response


Raising standards of governance is the great ethical challenge of our time. Worldwide, governments, regulators, professional associations and stakeholder groups are forsaking the errors of a past festooned with nonchalance and complicity about corporate wrongdoing to enter into fresh commitments to clean up what many see as the Augean Stables of corporate life. Amongst these initiatives are new disclosure laws for boards (Parum 2005; Holder-Webb & Cohen 2007), heightened levels of legal liability for corporations (Taylor 2007), new standards of accountability (Warren 2000; Pye 2001), ethics training (Tuana 2007; Frisk & Kolb 2008) and new protocols for audit independence (Carcello & Neal 2005; Holm & Laursen 2007).

These (largely structural) reforms appear to have attracted a disproportionate amount of academic interest. What is missing is complementary research on the progression of organizations through and out of scandal. Of these (non-lineal) phases the least understood is the post-scandal period. It is here that the paper hopes to make its contribution. The paper responds to the gap in our knowledge about how organizations manage out of scandal by conceptualizing the post-scandalized organization (henceforth PSO). In this paper PSOs are morally troubled entities responding to the public exposure of unethical and/or illegal practices within their governance systems in the period immediately following the exposure. This focus needs to be justified on two fronts. First, what is the rationale for an interest in PSOs? Second, why is the period immediately following a scandal so important?

There are many reasons for establishing an academic interest in PSOs. The wider community now expects businesses to positively position themselves in wider social contexts (De Schutter 2008; Lee 2008). When organizations fall into legal and ethical disrepair there is an obvious public interest in understanding how such things happen and how to correct them. It stands to reason that businesses in scandal management mode act differently to when they are in periods of planned growth. In scandal mode, businesses are exposed to media attack, low morale, ethical confusion, falling share prices, reduced sales and contracts and conflictual relations with the state (specifically courts and regulators) (Houge & Wellman 2005; Taylor 2006). The sooner these organizations respond to their scandals the sooner they can return to mainstream operations and make positive contributions to society. Thus there is a vital knowledge interest in how organizations 'fall' and how (and whether) they 'rise' again. The focus of the paper is also justified because the period immediately following a scandal may be change evocative. …

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