The public and media love a scandal. The higher profile the people involved, the more captivating it seems.
Why do we love a scandal?
There is no denying the momentum gained by a scandal, often the story will write itself, and the line between facts and rumor will often become blurred. The bigger the people involved, the bigger the story becomes.
But, why is this so?
Psychologists stated that scandals allow people to feel superior to those who misbehaved. There is also the element of sympathy or pity. People are captivated by the ‘victims’ story, and there is a level of satisfaction when there is punishment for the ‘perpetrator’.
However, there is also the element of ‘rebel worship’. Some perpetrators do things that we wish we could do; however, social norms prevent us.
The perpetrators and victims play a huge part in how the public reacts to them.
Big corporate scandals of 2015
Corporations left and right have been dishonest but we shift our focus to the following companies –
- Turing Pharmaceuticals
These companies have all been accused or found guilty of different degrees of corruption and have attracted varying degrees of outrage.
It was revealed by Volkswagen in September 2015 that they had kept the Agency of Environmental Protection emission testers in dark by installing software into millions of cars. The software was able to give the impression that these cars were made more eco-friendly than the initial plan.
The reaction to the Volkswagen scandal was of extreme rage, especially among the media, investors, and customers. There were speculations of lawsuits, damage to the economy, and loss of consumer confidence.
Despite the initial negative reactions various public opinion polls conducted have shown that worldwide Volkswagen’s public image has not been significantly affected. One poll suggests that 55% of German customers still have faith in the company while a separate poll shows that 50% of US customers still have a positive impression of Volkswagen.
There has been speculation regarding corruption in FIFA spanning years, so there was little surprise when the public’s suspicion became confirmed. The biggest surprise was when the US were the ones who affirmed the suspicion.
The FBI has uncovered corruption which involved several associates and officials from FIFA. In May 2015, fourteen people were indicted in connection with charges of money laundering, wire fraud, and racketeering.
The President of FIFA at the time, Sepp Blatter, received massive criticism surrounding his involvement in the corruption and his decision to stand down/ resign was positively received.
Some also believed that Valeant was using the pharmacy company, Philidor, to boost its sales artificially. These claims are yet to be officially confirmed. However, Valeant appointed a select committee to investigate the allegations brought against the company.
In October 2015 the company had received subpoenas in response to public concern, requesting documents surrounding drug pricing.
Stock shares for Valiant have plummeted in response to the allegations, several hedge funders for the company have suffered tremendous losses as a result.
Valeant has cut ties with Philidor and Walgreens Boots Alliance has taken over as the distributor for Valeant.
In September 2015, Toshiba revealed that they had overstated their earnings over several years by almost $2 billion. Private investigators established that the company had a disturbing culture of not questioning the company’s manager’s decisions, and staff members were forced into improper accounting practices.
As a result of the scandal the President and CEO of Toshiba, Hisao Tanaka resigned from his position. Sales for the company fell to their lowest point and the company stated that sales in TVs, home appliances, and PCs have been particularly poor.
Toshiba has been working on trying to repair its image as well as its TV and computer sales.
The Turing scandal mainly centers on the behavior and conduct of its CEO Martin Shkreli. The charges brought against Shkreli do not only involve his conduct at Turning but also his conduct whilst working at his former company, Retrophin.
Shkreli has been accused of committing fraud whilst he was CEO at Retrophin, it’s been reported that he used hedge fund shares to pay off investors. Shkreli was arrested for these charges in December 2015.
Shkreli also sparked controversy during his time as founder and CEO of Turing Pharmaceuticals. He raised the price of Daraprim (a drug used to treat HIV) from $13.50 to $750 per pill overnight; a raise of over 5,000%.
Shkreli has publically defended his innocence throughout.
Can corporations overcome scandal?
Corporate scandals may at first appear to completely destroy a company’s public image but this is not always the case.
There have been numerous examples of companies who have recovered from scandals. Such companies include Johnson and Johnsons Tylenol capsules scandal in 1982, Texaco’s lawsuit in 1994, and Toyota’s recent crisis in 2010. These companies are proof that you can recover from a bad reputation.