International Journal of Japan Association for Management Systems
Online ISSN : 2188-2460
Print ISSN : 1884-2089
ISSN-L : 1884-2089
Why Does a Company Fail to Manage a Corporate Scandal?
Nobuaki MINATO
ジャーナル フリー

2016 年 8 巻 1 号 p. 17-26


Companies endeavor to manage corporate scandals, but cannot always recover from the downturns. The present paper aims to reveal the fundamental structure behind the lagged impact of a corporate scandal on its sales decline, and to identify systemic causes of management failures. To this end, a Systems Dynamics model is developed and simulated using data presented in a White Paper on the National Lifestyle 2008 published in Japan. The results show that corporate scandals are more difficult to manage when the scandal is followed by a temporal improvement without recognizing the steeper customer turnover induced by the time delay. Appropriate reactions to a corporate scandal are indispensable for prompt recovery, but their forms depend on the severity of the initial impact of the scandal. In cases of limited initial impact, no reaction may yield a more desirable result than taking some form of action. This implies that an overreaction to a small corporate scandal may ultimately accelerate the sales decline. Ethical issues aside, this fact may cause intentional concealment of corporate scandals.

© 2016 Japan Association for Management Systems
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