Product recalls: The effects of industry, recall strategy and hazard, on shareholder wealth

The purpose of this paper is to provide insights into the effects of product recalls on shareholder wealth of manufacturing firms in different supply chains. Previous research examining this phenomenon is largely uni-sectorial and/or does not consider the interplay of hazard, recall strategy and sector. By utilizing the event study method, this study examines investors\u27 reactions to key product recall characteristics: industry, recall strategy and hazard level, on a cross-industry sample of 296 product recall announcements. The results show a significant negative reaction of share values to product recalls and significant differences between industry type and hazard levels. More regulated and stringent supply chains, such as the automotive and pharmaceutical, showed statistically significant losses in share price. The results show that industry sector and level of hazard associated with defective products are significant factors impacting the shareholder wealth of manufacturing firms. Contrary to some studies, the impact of recall strategy was not confirmed, although proactive recall strategies led, in some cases, to an increase in share price. Further research would benefit from more detailed investigation of recall strategies on the value of companies in specific sectors, particularly ones which are susceptible to frequent and costly product recalls

The Corporate Purpose of Social License

This Article deploys the sociological theory of social license, or the acceptance of a business or organization by the relevant communities and stakeholders, in the context of the board of directors and corporate governance. Corporations are generally treated as “private” actors and thus are regulated by “private” corporate law. This construct allows for considerable latitude. Corporate actors are not, however, solely “private.” They are the beneficiaries of economic and political power, and the decisions they make have impacts that extend well beyond the boundaries of the entities they represent. Using Wells Fargo and Uber as case studies, this Article explores how the failure to account for the public nature of corporate actions, regardless of whether a “legal” license exists, can result in the loss of “social” license. This loss occurs through publicness, which is the interplay between inside corporate governance players and outside actors who report on, recapitulate, reframe and, in some cases, control the company’s information and public perception. The theory of social license is that businesses and other entities exist with permission from the communities in which they are located, as well as permission from the greater community and outside stakeholders. In this sense, businesses are social, not just economic, institutions and, thus, they are subject to public accountability and, at times, public control. Social license derives not from legally granted permission, but instead from the development of legitimacy, credibility, and trust within the relevant communities and stakeholders. It can prevent demonstrations, boycotts, shutdowns, negative publicity, and the increases in regulation that are a hallmark of publicness — but social license must be earned with consistent trustworthy behavior. Thus, social license is bilateral, not unilateral, and should be part of corporate strategy and a tool for risk management and managing publicness more generally. By focusing on and deploying social license and publicness in the context of board decision-making, this Article adds to the discussions in the literature from other disciplines, such as the economic theory on reputational capital, and provides boards with a set of standards with which to engage and address the publicness of the companies they represent. Discussing, weighing, and developing social license is not just in the zone of what boards can do, but is something they should do, making it a part of strategic, proactive cost-benefit decision-making. Indeed, the failure to do so can have dramatic business consequences

Exploring the Public Perception in Social Big Data: An Investigation in Mars Recall Scandal

Social media has become a popular platform of interpersonal communication in which users can search for news and convey real-time information. Researching into social big data, such as Twitter, can be an effective way to identify public opinions and feelings in risk emergence, as it provides rich sources of data for opinion mining and sentiment analysis. This study aims to investigate and analyse the public perception towards the Mars and Snickers product recall scandal. The study proposes a comprehensive data analysis framework, and utilises the dataset formed of 10,930 Twitter messages over the span of 10-day following the product recall announcement made by Mars Inc., to gauge public attitudes and opinions. The study finds that the overall attitude of Twitter users towards the scandal was negative, and Snickers were the most mentioned product in the 10-day periods after the announcement of the recall. The data analysis highlights that the Tweet diffusion (retweeting) has positive associations with the number of followers and the use of hashtags, hence companies should pay more attention to users who have a large number of followers, as their tweets will be read by a great number of other Twitter users. The findings suggest effective methods for practitioners in crisis management (e.g., how to use social media to disseminate information). The study also presents a progressive tweet-mining framework that can serve as a tool in crisis management to classify the tweet topics, identify and analyse the sentiment and comprehend the changes of the public attitudes

CONSUMERS’ REACTIONS TO NEGATIVE INFORMATION ON PRODUCT QUALITY: EVIDENCE FROM SCANNER DATA

We analyze consumers’ reactions to negative information on product quality using daily scanner data at item level from a well-known supermarket chain. We focus on a fraud that in 2008 has involved a number of Italian leading firms in the cheese sector. Exploiting the fact that only some brands were mentioned by the media as being involved in the fraud, we adopt a difference-in-differences estimation strategy and evaluate the effects of the negative media coverage comparing changes in sales for involved and for not involved brands. It emerges that the negative news on product quality have induced consumers to shift their demand from involved to not involved brands. These effects persist overtime, also once the media was no more giving attention to the issue. Retailers have suffered part of the costs deriving from the diffusion of bad news on product quality: the margin gained on brands directly mentioned by media has decreased after the negative publicity.Consumer Behavior, Product Quality, Firm Reputation, Scanner Data

Investigating people: a qualitative analysis of the search behaviours of open-source intelligence analysts

The Internet and the World Wide Web have become integral parts of the lives of many modern individuals, enabling almost instantaneous communication, sharing and broadcasting of thoughts, feelings and opinions. Much of this information is publicly facing, and as such, it can be utilised in a multitude of online investigations, ranging from employee vetting and credit checking to counter-terrorism and fraud prevention/detection. However, the search needs and behaviours of these investigators are not well documented in the literature. In order to address this gap, an in-depth qualitative study was carried out in cooperation with a leading investigation company. The research contribution is an initial identification of Open-Source Intelligence investigator search behaviours, the procedures and practices that they undertake, along with an overview of the difficulties and challenges that they encounter as part of their domain. This lays the foundation for future research in to the varied domain of Open-Source Intelligence gathering

Organisational learning and food safety crises : a critical case study of the Sanlu and Fonterra crises : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy, Massey University, New Zealand

This study explores crisis-induced organisational learning in the Chinese and the New Zealand food safety authorities, or CFSA and NZFSA. While many crisis management scholars have sought to examine food safety crises, including the 2008 Sanlu melamine infant formula scandal and the 2013 Fonterra botulism scare, from the perspective of business organisations, food safety government agencies’ role in handling such crises, especially crisis-induced learning in the food safety authorities to prevent or better prepare for future crises, has been neglected. This thesis seeks to address this research gap by examining the two food safety crises under the lens of crisis-induced organisational learning to investigate changes in CFSA and NZFSA triggered by the biggest-ever food safety crises happened in China and New Zealand. Qualitative content analysis approach is employed to analyse the data corpus consisting of news articles and government documents recording the dairy food safety incidents and their socio-economic and political contexts and ensuing policy changes. A comparison between the two cases offers a deep understanding of the dairy food safety landscapes in the two countries and approaches employed by the government agencies in handling the dairy food safety crises. It also provides insights into dynamics of internal and external factors facilitating or inhibiting crisis-induced organisational learning in the two dairy food safety authorities. Though the two crises in this research have different socio-economic and political roots, they both caused unprecedented reputational damage not only to the dairy industries but to the whole food sectors in China and New Zealand. This research identifies multiple loopholes and underlying problems in the two dairy food safety regulatory systems leading to the incidents in question. It also finds systemic changes in the food safety authorities and the dairy food safety regulatory systems to address the loopholes. Political pressure and social emotion provoked by the dairy product crises are found to be the main factors facilitating learning in the public organisations. Conflict of interest incorporated into the dairy food safety system is seen as a key factor inhibiting deep learning in the two food safety authorities. This study therefore argues double-loop learning needs to happen in CFSA and NZFSA to uproot the underlying problem that led to lax regulation and other dairy food safety regulatory problems

Corruption scandals, press reporting, and accountability. Evidence from Spanish mayors

We analyse the effects of local corruption on electoral outcomes with Spanish data. Based upon press reports published between 1996 and 2009, we are able to construct a novel database on corruption scandals and news related to bribe-taking in exchange for amendments to land use plans. Our data show that local corruption scandals first emerged during the 1999-2003 term, but that they peaked just before the 2007 elections. We estimate an equation for the incumbent’s vote share at this electoral contest and find the average vote loss after a corruption scandal to be around 4%, and the effect to be greater for cases receiving wide newspaper coverage (up to 9%). The effects found for the 2003 elections are much lower. When we consider cases in which the incumbent has been charged with corruption and press coverage has been extensive the vote loss can rise to 12%. However, press reports have a negative impact on the vote even when no judicial charges have been brought.voting, accountability, corruption

Corruption scandals, press reporting, and accountability. Evidence from Spanish mayors.

We analyse the effects of local corruption on electoral outcomes with Spanish data. Based upon press reports published between 1996 and 2009, we are able to construct a novel database on corruption scandals and news related to bribe-taking in exchange for amendments to land use plans. Our data show that local corruption scandals first emerged during the 1999-2003 term, but that they peaked just before the 2007 elections. We estimate an equation for the incumbents vote share at this electoral contest and find the average vote loss after a corruption scandal to be around 4%, and the effect to be greater for cases receiving wide newspaper coverage (up to 9%). The effects found for the 2003 elections are much lower. When we consider cases in which the incumbent has been charged with corruption and press coverage has been extensive the vote loss can rise to 12%. However, press reports have a negative impact on the vote even when no judicial charges have been brought.voting, corruption, accountability

The Stages of Scandal and the Roles of General Counsel

This Essay examines the roles of a general counsel, as the corporation’s chief legal officer, in responding to scandals when they happen and in developing and enforcing internal preventive practices prior to the occurrence of any particular scandal. The Essay differentiates between scandals and crises more generally, emphasizing the integral connection between scandal and jeopardy to reputation and tracing the interrelationships between a corporation’s reputation and that of its general counsel. The Essay argues that risks associated with scandal may strengthen general counsel’s power within the senior management team, in particular in general counsel’s relationship with the corporation’s CEO. Although general counsel’s position as a member of the senior management team may imperil counsel’s ability to bring detached judgment to bear, counsel’s position within the corporation is a critical component of effectiveness in anticipating and addressing scandals

RIVAL BRANDS’ RESPONSE STRATEGIES TO MITIGATE THE NEGATIVE SPILLOVER EFFECTS DURING A BRAND CRISIS

Effectively managing a crisis is highly essential to any company to protect or restore its reputation, including consumer faith and loyalty to the brand, after the crisis has occurred, especially to competing brands. It is also essential that the rival brand approaches the situation with the correct response strategy (Veil, Dillingham, & Sloan, 2016). Extending Rohem and Tybout\u27s (2016) research about the Negative Spillover Effect (NSE), this study’s purpose is to examine the effective communication strategy a rival brand can employ to lessen and or prevent negative spillover from competing brand scandal and or crisis. Furthermore, exploring differentiation and bolstering strategy, by using controlled and uncontrolled group via online experiment to determine the most effective response strategy in crisis messaging framing. This paper will contribute to crisis response research, and it is hoped that it provides a useful and an insightful look into effective crisis response for rival brands in shared industries such as airlines. Implementing descriptive online experiment method to assess consumer\u27s responses to competitive brand response strategy using two research questions, crisis messaging evaluations (PART), brand attitude, and purchase intent. Stimuli will be developed based on a real-life case of a brand crisis that warns of negative spillover to the competing brands