One bad apple can spoil a whole barrel of the fruit, or so the traditional saying goes. It's a useful piece of advice when shopping for food. Some suspicious shoppers might not just shun apples if they find one or two on display are rotten, but avoid other fruit at the supermarket too. After all, if the shop can't be trusted to sell good apples, what does that tell you about the quality of its oranges? And what about other shops that sell fruit -- should they be shunned too?
So how do consumers react when the ‘bad apple' is a scandal-ridden financial company? How much do sales suffer as a result of its wrongdoing? What are the effects on sales of other similar companies such as pension providers, fund managers, and insurers?
That's what Henrich Greve INSEAD-chaired professor of Organisation and Management Theory sought to find out with his academic colleagues Stefan Jonsson of Uppsala University and Takako Fujiwara-Greve of Keio University. Their results are published in a recent edition of Administrative Science Quarterly.
They focused on Skandia, one of Sweden's oldest and biggest financial groups. And, until 2002, one of the country's most respected companies. Then a series of scandals broke that led to the resignation of many senior staff, and the chief executive being given a prison sentence (although this was later overturned on appeal and charges were dropped)...
Andrew Woods writes at Insead Knowledge.
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