Undeserved Loss : The Spread of Legitimacy Loss to Innocent Organizations in Response to Reported Corporate Deviance

• This paper theorizes about why discoveries of corporate deviance that damage the legitimacy of the responsible organization may also have consequences for other organizations. We propose that audiences generalize from deviance by one organization to others that are similar. The result is a withdrawal from transactions even from non-culpable organizations as audiences seek to avoid organizations that they associate with a deviant act. We show that two scandals involving Skandia AB, a Swedish insurance firm that had a subsidiary offering mutual funds, affected mutual fund providers owned by other insurance firms in 2000--2004, as well as mutual fund subsidiaries of other firms with similar characteristics. The effect was greatest for firms more similar to Skandia and firms owning real estate, which was the context for one of the scandals. Thus audience members' categorization rules lead to spread of legitimacy loss in response to an isolated act of organizational deviance.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Keyword

insurance companies

scandals

mass media

massmediekontakter

skandaler

företagsetik

företag

massmedia

Business studies

Företagsekonomi

Publication and Content Type

ref (subject category)

for (subject category)