OXFORD UNIVERSITY CENTRE FOR CORPORATE REPUTATION Michaelmas Term 2015: Issue 14

COMMENT 02
Lessons from the VW scandal
Stakeholders versus shareholders

RESEARCH FOCUS 03
Pop-up restaurants and authenticity

THE BIG INTERVIEW 04

Disgraced former Tyco CEO Dennis
Kozlowski on what he did wrong

CONFERENCE
REPORTS
Our sixth Reputation Symposium 06
Making Sense of Scandals 10
BEST PAPER 2014 11 CASE STUDY
08
The processes behind corporate rankings

News AND EVENTS 12

The extraordinary story of the
Market Basket boycott
Comment
BAD SMELL
What lessons can we learn
from the VW emissions
cheating affair - apart
from “don’t do it”? How
VW might respond and
go forward from such
a reputational nadir were set out by our
Director, Rupert Younger, in a recent interview
with the Financial Times (http://tinyurl.com/
qaywnhc), and there has been widespread
commentary elsewhere, of course. But it is
still worth dwelling on related questions. For
example, sitting in a conference in November,
Reputation was intrigued to hear a senior
figure from a top UK corporation bemoaning
the scale of the criticism of VW: the sacking
of the now-ex-CEO, the media witch hunt,
and stigmatisation of the entire company
for what could well simply be the actions of
a rogue engineer. It reflected, he implied, an
unwarranted blanket distrust of business and
opportunistic behaviour by self-interested
players, such as the business media.
Such a defence of VW was perplexing.
On what basis should one consider this an
isolated transgression? Is it more or less likely,
particularly in a company as top down and
rigorous as ex-CEO Winterkorn’s VW? In
any event, what underpins the extraordinary
decision to systematically rig a testing regime
– what pressures have been exerted, what
missteps made previously within a firm?
Identifying these forces, as our research often
tries to do, is key to preventing their recurrence.
Such a defence plays into the very narrative
behind the distrust of business that our project
with DLA Piper and Populus (p12) is trying to
address: that businesses are self-interested
Front page image courtesy of Lowell Sun/David Brow.
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and “all as bad as each other”. One media
commentator cited had criticised VW for
trying to issue an early blanket apology.
Such criticism is absolutely understandable:
yes, for self-interested reasons from a
professional critic, but also because the
media is not the only one beginning to tire of
the exposure, apology, reshuffle playbook.
Norms are forever shifting, and corporate
affairs directors, CEOs and boards must
be alert to what the public demands when
a business has stepped over the similarly
shifting line.
In another piece in the FT (http://tinyurl.com/
pvgr4d5), Rupert Younger identified speed
and intensity of scrutiny as today’s game
changers for reputation risk. Another element
is scale: nowadays, a single technical tweak
can affect millions of cars, several brands,
stigmatise a technology (diesel engines), an
industry – even a nation: billionaire inventor
James Dyson invoked the VW saga in his
recent failed European Court case against
German vacuum cleaner manufacturers.
As our recent Scandals conference (p10)
highlighted, pre-existing narratives are
re-energised when there is a negative hit.
As a Guardian newspaper commentary put
it: “Even before the scandal erupted, some
analysts thought Volkswagen’s dash for global
sales had masked underlying problems.”
The same commentary hit Toyota - and its
previously legendary quality control – when
serial braking and accelerator issues arose
from 2009. The chance to reheat distrust of
Germany’s industrial fiefdoms, and their lack
of transparency (suggestive of a culture of
wrongdoing, as our former Research Fellow Liz
David-Barrett’s work emphasises) has proved
irresistible. Companies must be pre-primed
against these narratives, and prepared for the
wide-ranging reputational repercussions of
relatively small actions, even when committed
by a competitor or, indeed, a neighbour. ■
FAIR SHARES
Our support for the
Global Governance
Colloquium (see
Reputation Issue 13 at
our website, below) is
informed by the idea that
the roots of regulation,
reputation, shareholder influence and
governance require concerted examination,
and that it is healthy to remind ourselves
that the current structures underpinning
shareholder influence were not always the
status quo – and may not be optimal.
The story of the 2014 boycott at the US
supermarket chain Market Basket (see
pp8-9), where a coalition of staff, suppliers
and customers – and even local politicians
– united to frustrate the machinations of
a small group of majority shareholders,
similarly makes a terrific contribution to
the stakeholders vs. shareholders debate.
Reputations, in the end, counted for
everything in this story: in the personal
relationships between store associates and
customers; between the employees and a
CEO prioritising value for money and staff
incentives as much as the bottom line; and
between long-time suppliers and a CEO who
valued loyalty and longevity in addition to
the profit margin. It is a unique tale, but the
underlying dynamics of this fascinating saga
provide many valuable insights into corporate
reputation and governance. ■
Research Associate Daphne Demetry explains how her research into pop-up and underground
restaurants sheds light on the corporate quest for authenticity.
Research focus
Authentic. Genuine. Real. These buzzwords
proliferate in the media as consumers
increasingly clamour for unique, distinctive
and eclectic goods from firms they want to
consider moral and ethical. Authenticity is a
slippery term: it means different things to
different people. This is because authenticity
is culturally and historically situated. There
is no single notion of authenticity: it is a
concept that is socially constructed by
people and organisations. Furthermore,
authenticity is relational. In order for there
to be an authentic reputation, it requires
that entities attribute some other firm
as inauthentic. In this sense, an authentic
reputation is never inherent to a firm or its
products, but often a performance, staged
by an organisation for its stakeholders.
Perhaps because of its elusive nature,
authenticity occupies a prominent place
in modern culture. We venerate authentic
products and experiences because we are
constantly searching for our authentic selves
through consuming them. In particular,
contemporary consumers are increasingly
making choices based on the attribution of
moral authenticity: when a firm’s public actions
reflect sincere choices that are true to the firm’s
mission statement, rather than socially scripted
responses. Accordingly, associating oneself
with morally authentic firms can be a method
to overcome one’s own anxiety over “sincerity”
and help discover one’s essential self.
Empirical research has begun to confirm
that consumers purchase based on these
“moral” characteristics rather than more
tangible qualities. For instance, research
on microbreweries found that consumers
were drawn to the authentic identity of
microbreweries despite the fact that in certain
blind taste tests, craft and industrial beer
were found to be indistinguishable. Similarly,
another study found that diners typically
consider independent and family-owned
restaurants to be more genuine than chain
eateries. If authenticity is what consumers
really want, how do organisations strategically
manage authenticity production?
In my research I look to answer this question
by studying pop-up and underground
restaurants – temporary social dining
establishments. Within the culinary industry,
establishments are increasingly trying to
achieve authentic identities by offering
distinctive goods that sharply contrast
with mass-produced alternatives. Here,
buzzwords such as natural, rustic, simple,
organic and craftsman have become prized
indicators of authenticity. Although an
unconventional case study, pop-ups provide
a rich empirical context to explore how
firms stage and perform authentically for
consumers, because their success hinges on
their authentic reputations.
“The success of
pop-ups hinges
on their authentic
reputations.”
After interviewing chefs, cooks, employees,
and diners, observing dinners, and combing
through online reviews, I find that the key
to enhancing an authentic reputation is in
the experience stakeholders have with an
organisation. Reputation scholars recognise
that the experiences stakeholders have with
a business, its products and employees, can
generate impressions of the firm and sway
the formation of reputation, yet we know
little about how this process occurs; or, more
importantly, why the experiences consumers
have with a firm have such a powerful
influence on the creation of reputation. I find
experiences provide an interactional space
for guests to become not just vehicles of
consumption, but also participants in their
own organisational experience.
These “authentic organisational experiences”
consist of both organisational actions
(for example, chefs telling a story about
how they cooked a dish) and the general
consumption environment (i.e., other
guests active in the dining experience).
By engaging directly with the firm, guests
search for their own authentic selves,
which in turn shapes their perceptions of
an organisation as authentic. In the case
of pop-up and underground restaurants,
this form of engagement occurs when
chefs provide open kitchens for diners to
explore and actively ask questions about the
production process. Many establishments
go one step further and ask patrons not to
bring monetary tips, but small tokens of
appreciation, like a pack of beer. Additionally,
shared tables encourage guests to talk and
build a community with others.
As my research indicates, authentic reputations
are not a one-way street. Organisations
cannot simply project authenticity claims
with hopes that stakeholders will take away
positive impressions; firms must engage their
stakeholders in a memorable and personalised
manner. Most importantly, organisations
must create a situation where a consumer
can generate his or her own authenticity so
that it elicits more positive perceptions of an
organisation’s offerings as authentic.
My research has implications for all manner
of firms who think there is a silver bullet for
authenticity. It confirms that authenticity
takes work, both on the part of the firm and
its clientele. Consumers are quick to pick
up on contrived “authenticity work”. For
example, Starbucks’ overt attempts to stage
authenticity in their coffee shops was met
with a consumer backlash, and immediate
accusations of inauthenticity. This example of
failure reminds us that authenticity is above
all a negotiation between firm strategies of
impression management and the broader
social context of consumerism. ■
WWW.SBS.OXFORD.EDU/REPUTATION 3
Dennis Kozlowski was once one of the best paid CEOs in the world; then he was
prosecuted for grand larceny and served a lengthy prison term. But how much was
complacency about corporate governance and managing his personal reputation to blame?
THE BIG INTERVIEW
Searching the internet for mentions of Dennis
Kozlowski is not for the fainthearted. The
former CEO of Tyco, sentenced to 8.5 years
for grand larceny (stealing $100 million from
the company he ran for 10 years) in 2005,
has become a poster boy for boardroom
excess, greed and wrongdoing in the 2000s
and now excites every kind of opprobrium -
the politest being listed at No.2 in a Time list
of Top 10 Most Crooked CEOs.
His release from prison in 2014 unleashed
a new wave of commentary freely mixing
fact (convicted of taking declared but
unauthorised bonuses) with fiction (stealing
paintings, using company money to fund
a $2 million Roman orgy-themed birthday
party for his ex-wife, etc.).
The Tyco scandal is routinely lumped together
with the Enron and WorldCom frauds that
occurred shortly before his indictment, though
Tyco continued, and continues, to prosper.
He will forever be remembered as “the guy
with the $6,000 shower curtain”, one of the
details that had no relevance to his indictment,
but which was used to illustrate his excessive
tastes, and destroy his character in court. A
reputation has seldom looked so unsalvageable.
So, it was fascinating to have him come to
Oxford to speak to us as part of our Scandals
conference (see p10), and to hear Catherine
Neal, an Associate Professor of Business
Ethics and Business Law at Northern Kentucky
University, who spent three years writing and
researching her book on his case, Taking Down
The Lion, back up her assertion that “I found no
evidence to support the charges”. Kozlowski’s
behaviour was certainly irresponsible, she
concludes, but it was not criminal.
What does the man himself say? First, to
make time for a proper interview, he has to
find space in his diary: his public reputation
may be toxic, but among former colleagues,
including former members of the Tyco
board, he is very much in demand, providing
consultancy services and advising on M&A,
particularly in the healthcare sector.
“People who don’t know me can have an
opinion of me and I’m kind of indifferent to
4 Oxford University Centre for Corporate Reputation
that,” says Kozlowski. “It’s more important
to me that… decision makers, policy makers
have an understanding of my situation.” While
his capability may not be in doubt, for his
character bona fides, somewhat remarkably,
companies have been coming to Neal herself
for a reference. Her reputation and word, it
seems, supercedes – or at least complements
- the verdict of the court. Reading Neal’s
book is a better place to weigh guilt and
innocence, to understand the two court cases
(one mistrial), 28,000 pages of evidence,
and the contribution made by complexity,
context and politics. This interview is rather
an opportunity to explore some of the forces
that brought Kozlowski low, particularly the
reputational ones.
The academic literature is full of the perils
of ego-driven and “star” CEOs, and there
is a growing literature on the phenomenon
of “targeting” of high profile individuals.
“I Thought my report
card would be
earnings. I should
have thought about
my image and profile.”
Kozlowski pleads guilty to the first, and
victim to the second. “Sure, it was ego all
the way,” he says. “I was greedy… I made
mistakes.” But, he says, he didn’t deserve
what he got. He was with Tyco for 27 years,
the last 10 as CEO. To begin with, he was
unprepared for the role. As is clear from the
recent Saïd Business School CEO Report,
co-authored by our former Research Fellow
Amanda Moss Cowan, the leap from CEO-
in-waiting to CEO is done in ignorance of
much that awaits. “I was equipped for the
mission, to increase shareholder value,” says
Kozlowski. “I knew the job from looking up
at it, but it was a far simpler company when
I took charge. We became a worldwide
company with 260,000 employees,
operating in 62 countries. Especially with our
rapid growth… by the late Nineties I had no
command of some of the details.”
Adding value both for his shareholders and
for his own hugely share-skewed incentives
was his overwhelming focus. “I thought my
report card would be earnings, but I should
have thought very carefully about my image
and my profile. I didn’t give a second thought
to any of that.”
He believed, as Catherine Neal put it, in
“incentive pay with no caps” for everyone. It
was a feature of his turnaround strategies,
a way of incentivising his workforce. To a
highly unusual degree, he would then leave
them to it, and get on with making deals.
The reputational risk is clear. Governance
structures went by the wayside as energy
was devoted to growth for “Deal-a-Day
Dennis”, spawning something of a free-
for-all in other areas, such as company-
employee loan agreements, and conflicts
of interest on the board that would now
be illegal (since the 2002 Sarbanes-Oxley
legislation), but which weren’t then.
The lack of a paper trail for bonus payments
is what ultimately put him in jail. But not
seeing the reputational perils behind his
behaviour, arguably, put him on the road to
ruin. The desire for more profile, driven by a
sense the company’s shares were not valued
as highly as they should be – the benchmark
was the industrial behemoth GE, and its
“star CEO” Jack Welch - led to Kozlowski
enhancing his own profile, including
appearing on the cover of Businessweek.
He joined an elite band of executives, and
came on to the radar of white collar scourge
and Manhattan D.A. Robert Morgenthau
- not a good place to be in the post-Enron
atmosphere. “Everyone would have been far
better served by keeping our heads down… it
was ego,” he admits.
His first indictment was for not paying
New York sales tax on millions of dollars of
fine art. The charges were subsequently
dropped, but the board had already fired
him. He is remarkably forgiving of them:
“They were worried about becoming a
target themselves. I’m not sure I wouldn’t
have done the same thing.” According to
Kozlowski, around this time an extraordinary
offer came through from the D.A.’s office:
“If you give us Michael Ashcroft, your life
gets a lot easier.” Five years earlier Tyco had
bought a company, ADT, from Ashcroft, the
controversial Belize-based British billionaire
tax exile. “I had nothing to give them,”
says Kozlowski. Robert Morgenthau, was
on a “fishing expedition”, in Kozlowski’s
eyes, and he was next on the hook. He
sees his conviction as a process whereby
the reputation of Robert Morgenthau was
invested in destroying his.
“I began to understand [this] when I saw
how hard they worked to surpress evidence
that could have benefited me,” says
Kozlowski. To this day, evidence he considers
“exculpatory” – “potentially exculpatory”,
according to Catherine Neal – consisting of
“THE JUDGE TELLS THE
JURORS NOT TO READ
THESE THINGS, AND
YOU SEE THEM IN COURT
WITH THE NEWSPAPERS.”
statements given by the Tyco board to their
lawyer, remains sealed due to procedural and
disclosure rules and client/lawyer privilege.
There were numerous missteps in the trial,
according to Kozlowski (and Neal), but
for Kozlowski one of the biggest was not
attempting to counter the “greedy crook”
narrative that was being fed by the D.A. to
the media: “The judge tells the jurors not to
read these things about me, and you see
them walking into the courtroom in the
morning with newspapers under their arms.”
But there were problems much earlier that
he needed to address: had he not fallen out
with the board, they may well not have cast
him adrift, as other companies rallied round
other embattled CEOs at this time. There
was plenty of personal tension and conflict their companies like this. And it was too big
within the board that had been masked
by Kozlowski’s success, but his reputation
a surprise.”
with the board took two critical hits: the
The share price dropped, and “when the
stock declined, the board decided we
first when he approved a finder’s fee of
$20 million to one board member in the
shouldn’t break it up. Once that happened,
takeover of finance company CIT (a deal
it was all over for me. Once I reversed that,
I lost all credibility.” Kozlowski remembers
that subsequently went sour).
Andrew Ross Sorkin, a DealBook journalist on
In 2001, his golden touch let him down the New York Times, telling him later: “The
again, this time in strategic communications, biggest mistake you made there was not
as times turned harder: in January 2002, letting that leak out to the market.”
Tyco had announced publically that it had
His has been an extraordinary journey, and
plans to break the company into four or five
he has learnt some very hard lessons along
segments, and "instead of warning the market
the way. Those clients retaining Kozlowski
ahead of time, we totally surprised [them]
for his M&A expertise now might get even
and that was a big mistake,” says Kozlowski.
more value from him if they look up from
“We should have said we were considering all
their spreadsheets for a moment to ask him
options.” He was hoping it would simply go
about the consequences of not keeping an
over as the most natural thing in the world:
eye on your various reputations, of putting
“Look at all this value we’re going to create.”
buffers and structures in place to protect
Indeed, it was to some extent the strategy
them, of sacrificing governance for agility,
that his successors subsequently followed.
and the importance of managing critical
But instead, with the expectation frame that
expectations, before it’s too late. ■
had been built around Tyco as aspiring to be
the next GE, the analysts said, “There must Taking Down The Lion, by Catherine S. Neal,
be something amiss: CEOs don’t just break up is published by St Martin’s Press.
WWW.SBS.OXFORD.EDU/REPUTATION 5
Conference report:
Reputation Symposium 2015
This year’s Reputation Symposium, our sixth, covered the usual broad swathe of subject
matter, and broke new ground: with the introduction of a professional development workshop
for young researchers, and several key contributions from practitioners.
The phenomenon of online influencers and
the consumer revolt at US supermarket chain
Market Basket (see pp8-9) – provided very
stimulating sessions, and terrific exemplars
for future years.
• The opening panel, “The Business of
Influencers”, grew out of the work of the
Centre’s eni Research Associate Gillian
Brooks on the growth and impact of online
influencers, along with her co-author,
Professor Mikolaj Piskorski of IMD. One of
the leading US “vloggers” (video bloggers),
Blair Fowler, joined (via Skype and the big
screen) New York-based influencer agent
Karen Robinovitz and her Instagram influencer
client Pari Ehsan to explore the implications
of marketing relationships, the nature of
authenticity, and dealing with reputation risk
when influencers meet corporations.
They were joined on the panel by Paul
Fox, Global Director of Corporate
Communications at Procter & Gamble,
who added his perspective on the origins
of influencer marketing, and P&G’s Tremor
programme (see Reputation Issue 13).
• For the first session of the first full day,
“Social Platforms”, Mikolaj Piskorski, Andrew
Stephen and Yakov Bart presented papers.
Mikolaj outlined a general theory of user
behaviour on social platforms, and the
implications for firms looking to use social
platforms for marketing.
Andrew Stephen, L’Oreal Professor of
Marketing at Saïd Business School, spoke on
the “engagement-boosting” attributes of
brands’ social media content, but had some
hard truths for firms: namely that from his
detailed research, industry best practice in
this area does not seem to make a difference
either to engagement or reputations.
Yakov Bart presented research on the impact
of seeded marketing campaigns, where firms
6 Oxford University Centre for Corporate Reputation
send product samples to selected customers
to encourage them to spread word of mouth.
The research identifies the spillover effects
that arise, and how WOM spreads to the
detriment of other related products.
• In a session entitled “Regulation,
Reputation and Governance”, Cristie
Ford took on the vexed question of
innovation among financial institutions,
and how complexity has confounded the
expectations of regulators. As she writes:
“Incremental innovation and its diffusion
present, almost by definition, not benefit
but challenge for regulation.” Christina
Skinner focused on the regulators’
preoccupation with quantitative safeguards
in the banking sector, in particular how the
focus on capital and liquidity to combat
systemic risk has been prioritised at
“INDUSTRY BEST
PRACTICE ON SOCIAL
MEDIA DOES NOT
MAKE A DIFFERENCE
TO ENGAGEMENT.”
the expense of an appropriate focus on
misconduct. To rebalance the approach, she
proposed “forward-looking, prophylactic
tools to regulate misconduct”, specifically
an approach she calls “compliance stress
testing”.
• As part of a focus on the importance
of historicisation – the influence of past
models, exemplars and inspirations on
current operations of companies – Tor
Hernes kicked off “Temporality: Connecting
Past and Future in Organisations” with a
consideration of how local time interacts
with historical time, and why it is important
to understand the live relationship between
the past and present.
The importance of historical icons and the
relationship between history, collective
memory and identity – through the likes of
corporate museums and an organisation’s
artefacts - was the focus of a presentation
by Davide Ravasi and Violina Rindova, which
highlighted “the cognitive and emotional
processes through which organisational
members engage” with such artefacts for
“sensemaking and self-enhancement”.
In the first session after lunch the historical
strand was continued with Majken Schultz
beginning a session on “Uses of Organisation
history: Why and How?” and the way in which
the origins of the Carlsberg brewery were
invoked in the “rediscovering, recontextualising,
reclaiming, remaking and re-embedding” of
the brewery’s history in the pursual of new
initiatives. Davis Dyer, as co-founder of The
Winthrop Group, brought a consultancy
perspective to bear on the growing importance
of “stories” (rather than history) being
deployed within companies, and invoked
through digital media and with increasing
customisation for different audiences.
David Kirsch reflected on the missteps that
companies make in trying to understand the
most appropriate uses for their own history,
thanks to a sometimes unhelpful preoccupation
with their own reputation.
• In a session entitled “Gender and
Leadership”, Danny Gamache examined
the effects of CEO and director gender on
acquisitions and the dynamics of individual-
level, firm-level and industry-level factors.
He argued that the presence of females on
the board reduces firms’ acquisitiveness,
but that the relative reputations, status and
visibility of the firms with female CEOs has
a bearing on their attitude to acquisition:
essentially that a high-status firm is more
 Food for thought:
Symposium attendees and
guests at Corpus Christi
likely to see more acquisitions by female
CEOs. Abbie Oliver’s paper focused on
whether shareholder activists target female
CEOs more than male, and how portrayals of
leadership internally and externally influence
shareholder perceptions, and the importance
of impression management in that context.
Felice Klein et al’s study, “The Gender
Gap Reversed: Gender and CEOs’ Original
Severance Agreements”, explores the
relationship between the salaries paid to
female CEOs, the likelihood of termination
of their contracts, and the disproportionate
impact on their reputation in comparison to
their male counterparts. With the additional
analysis of the most impactful “hits” on
personal reputations, she found interesting
counter-orthodoxy ramifications for the pay
packages of female CEOs.
• In a session focusing on theoretical
approaches, “Building Theory on the
Relationship between Reputation and
Identity”, Don Lang began by looking at how
individuals and organisations embodying
positive and negative exemplars for the
identities of those placing them under
consideration are themselves affected by
being put in that position: how being a foil
affects the foil’s own identity.
Jon Bundy’s paper with Annie Zavyalova began
with a theoretical consideration of the nature
of organisations’ “generalised” or “multi-
dimensional” reputations. Building on that
base, the pair explored how the difference in
those reputational assessments impacted on
stakeholder perceptions of negative events, on
core and peripheral dimensions of reputations,
and the implications for responses to that
damage. Annie Zavyalova went on to present
further work on organisational identity, and
how news media use stories to fit organisations
into their own dramatic narratives, and the
process of accruing celebrity among some
constituents and infamy among others.
• Two very different angles of analysis shared
space in “Socio-legal Analysis of Reputation”.
The origins of reputation in a legal context
came under scrutiny from Tim Hannigan and
Ken Okamura, as they formulated a means
to examine, through textual analysis, the
reputations of the UK judiciary as reflected
by citations. Christopher Yenkey’s paper took
as its subject a 2008 fraud in Kenya, where
the country’s largest broker defrauded a large
“HOW DO REPUTATIONAL
ASSESSMENTS IMPACT
ON STAKEHOLDER
PERCEPTIONS OF
NEGATIVE EVENTS?”
proportion of clients. The ethnic component in
the narrative provided a fascinating opportunity
to examine the subsequent preferences of the
affected group, and “the socio-relational factors
that contribute to individual-level variation in
negative reactions to corruption”.
• In “Experimental Research”, Patrick Haack
presented work that sought to differentiate
between the influence of character and
capability cues, and their interaction with
product evaluation. The findings he presented
suggest that the way in which third parties
differentiate between character cues and
capability cues differs, that their importance
is assessed separately. In addition, those
assessments are subject to distorting effects,
such as the “boomerang effect”, where a
prior good character reputation suffers a
disproportionate negative impact in adversity.
Federico Aime’s presentation analysed the extent
to which social evaluations of CEOs’ legitimacy
and image affects firm valuations over time, and
how those effects diminish. The experimental
setting was a “novel laboratory media-based
measurement technique combining third-party
ratings of CEOs with psychometric scales”.
• On the last morning, Stephen Karolyi,
Walid Basaba and Richard Lowery tackled
“Reputation in Investment Banking”. Stephen
focused on personal lending relationships,
and the considerable extent to which they
benefit firms, from securing loans to acting
as a buffer in downturns, and limiting
negative impacts such as lay-offs. Walid
and Richard’s paper analysed the reputation
of underwriters in bringing IPOs to market,
and the relative reputational sanctions and
enhancements of: successfully completing
more problematic offerings; avoiding them
altogether; withdrawing an IPO; overpricing
an IPO; and aggressively pricing and then
supporting the price in the aftermath.
The Symposium concluded with a clutch of
younger scholars presenting ongoing work,
from authenticity in pop-up restaurants
(Daphne Demetry, see p3) to how inter-
organisational ties shape media coverage
(Jun Ho Lee), and a very entertaining final
debate around the assertion that aggregated
ranking scores are meaningless. The motion
was defeated, for the record. ■
The full programme can be found on our
website under "Events".
WWW.SBS.OXFORD.EDU/REPUTATION 7
The 2014 boycott of US supermarket chain Market Basket – by suppliers,
customers and staff – illustrates the dynamic power of reputations. The story, as told in
We Are Market Basket*, is a challenge to orthodox, linear ideas of relationships and
networks within corporations. It will be the subject of a forthcoming Centre case study.

Case study:
THE MARKET BASKET STORY
The roots of a boycott
By 9 A.M., thousands had congregated in the
parking lot yards away from a Market Basket
supermarket. The raucous crowd was a mix
of part-time clerks, truck drivers, office
workers, store directors and senior managers
from the corporate office. There were
teenagers for whom Market Basket was their
first employer and longtime employees for
whom Market Basket had been their only
employer. Also in the crowd were lifelong
customers as well as suppliers of produce,
fish and other goods.
It was the third rally in less than a month.
The DJ played a parody of Twisted Sister’s
song “We’re Not Gonna Take It” (with the
words changed to “ We Are Market Basket”)
over the sound system as cow­bells and air
horns pierced the air. An airplane circled high
above the parking lot, towing a banner that
read in red capital letters: “Arthur T. Save
Market Basket! Buy Them Out!” Borrowed
school buses were arriving regularly now
from all over New England, their passengers
cheering and waving signs through open
windows. Traffic on Boston’s Interstate 495
artery was backed up from Stadium Plaza
in Tewksbury, Massachusetts, where the
rally took place, to Interstate 93, five miles
away. While the rally was boisterous, it was a
different story inside Market Basket’s stores.
Shelves for perishables at the chain’s 71
stores were barren, most checkouts were
closed and 90 per cent or more of the chain’s
sales (in the neighborhood of $75 million
per week) had disappeared. The offices at
headquarters were quiet, too. Dozens of
office staff had walked out weeks earlier,
their cubicles now empty. The regional
supermarket powerhouse was, for all intents
and purposes, shut down.
Steve Paulenka climbed a few steps to a
makeshift podium built on the bed of his
pickup truck. Paulenka was perhaps the most
visible among a group of former managers
leading a rapidly growing movement.
Like so many in the crowd, Paulenka was
a “lifer” at Market Basket. Like nearly all
supervisors, managers and executives
at Market Basket, he worked his way up
the ranks, starting as a teenager bagging
groceries and rolling shopping carts in the
parking lot. Until a few weeks before this
rally, he served as the company’s facilities
and operations supervisor. As was customary
for employees who ranked assistant manager
or above, he normally wore a tie. Today, as
a former Market Basket employee, he wore
a baseball cap and golf shirt. He looked
out over the thousands of Market Basket
workers, shoppers and other supporters and
said,”We’re blowing the bugle again today,
“THIS WAS AN ACT OF
CIVIL DISOBEDIENCE - NOT
AGAINST A GOVERNMENT,
BUT TO SAVE A COMPANY.”
and you have to answer it. I’m sad to have to
ask you. You’ve given so much. But you have
to give more… we are firm in our resolve…
We stay where we are, doing what we’re
doing, until they return our leader.”
That leader was Arthur T. Demoulas, the man
who had overseen six years of double-digit
growth as Market Basket’s CEO and who,
over more than 40 years with the company,
had engendered extraordinary loyalty
from his management team, employees,
customers and suppliers. Yet Arthur T.
was now the former CEO. He had been
ousted just weeks before this rally by the
company’s board of directors. This created
a standoff with two opposing sides. On one
side stood the majority shareholders and
five of the seven members of the board of
directors. This side was led by Arthur T.’s
cousin and rival, Arthur S. Demoulas, who
used a slim majority stake - 50.5 per cent
– to take control of the board and propose
some radical changes. The plan was to
shift as much liquidity to the shareholders
as possible. This involved leveraging the
company: borrowing money and paying
shareholders an immediate and continuous
dividend of all excess cash, starting with
$300 million in the fall of 2013. Moreover,
the majority shareholders planned to sell
their shares, from all appearances, to a
Belgian holding company of supermarket
brands called Delhaize Group, which owned
local competitor Hannaford. Arthur T. had
been the key obstacle to their strategy. So
they fired him and replaced him with two
new CEOs: Felicia Thornton, who had held
executive roles at Albertsons and Kroger,
and James “Jim” Gooch, the former CEO
of RadioShack, with additional executive
experience at Sears and Kmart. After taking
the reins, the co-CEOs promptly fired eight
of Arthur T.’s most faithful managers.
On the other side of this conflict - Arthur
T.’s side - were employees (all non-union
workers who call themselves “associates”),
customers, suppliers and a growing
contingent of lawmakers. They were fighting
for the man who they believed had always
fought for them and whose management
style had fostered a unique company culture:
he championed profit sharing; bonus checks
that often paid four figures or more each
year; paid days off if a worker needed to
tend to a sick loved one; scholarships to help
pay for employees to attend college; low
price, high quality and exceptional service
for customers; and flexibility and reliability
to suppliers. His supporters wanted more
than to save this man’s job, however. They

8 Oxford University Centre for Corporate Reputation


saw this as a struggle to save a culture
and business model that was important
for New England. Market Basket was more
than a grocery store for these people. It
represented an ideal, a “way of life” that
should not - could not - be tampered with.
The media narrative
Throughout the summer of 2014, the Market
Basket protest was front p ­ age news nearly
every day. The Boston Globe dedicated more
than a dozen reporters to the story. Television
news provided daily updates. Coverage
reached as far as New Zealand. Google tracked
80 -100 articles per week on Market Basket
during these six weeks; normally there are
but a handful. Despite extensive coverage,
the media struggled to find a simple way
to describe what was happening at Market
Basket. Was it a strike? Very few employees
had actually walked off the job. The vast
majority remained on the job, albeit with
reduced hours and a non-existent workload.
Was it a labour dispute? Associates were
non-union and, moreover, the dispute involved
managers and executives, people who are
not traditionally considered “labour”. Was it a
boycott? Yes, but normally boycotts would be
meant to show displeasure. This boycott was a
display of support for the company.
The events defied description. “We don’t
know what to call it either,” said Jim Fantini,
a vendor who had assumed a role as one of
the point people for the Save Market Basket
page on Facebook as well as the We Are
Market Basket blog. This was an act of civil
disobedience, not against a government, but
in order to save a beloved company. It was a
sort of “corporate disobedience”.
Whatever the term, everyone agreed that
this movement was unprecedented. What had
begun with a small group a year before had,
by the end of August 2014, grown to touch
nearly everyone in Massachusetts and New
Hampshire. During this period, the protest
was a topic of conversation in the workplaces,
banks and main street boutiques of quaint New
England towns. People across the region knew
that thousands of people’s livelihoods were at
risk. They feared that this could be the end of a
company many considered to be an old friend.
At every stage of this protest, the distinctive
pillars of the Market Basket culture provided
a foundation for the protest to take flight and
ultimately become successful. Its culture of
service to the community, its sense of family
and empowerment, and its unconventional
solutions to problems provided the movement
with the motivation, unity and resourcefulness
it needed to succeed.
Lessons from Market Basket
Market Basket challenges the traditional wisdom
of what the boundaries of a company are.
Most textbooks portray companies as simple
structures with clear boundaries. The insiders
are the employees, managers and investors
(who, it is argued, own the company). In this
traditional view, everyone else is an outsider.
Vendors provide materials; the company
cuts, moulds or arranges those materials into
some sort of product; and then they sell it to
customers. Repeat that process as many times
as possible, it goes, and you may become rich.
This way of thinking makes a company the
central player in a three-person chain. It is a
linear approach that, even today, describes
DANIEL KORSCHUN
Stand-up protest: State
Senator Barry Finegold
reads a list of lawmakers
joining a boycott of
Market Basket
how many managers think. The manager’s job
is to manage vendor expectations on one side
and customer expectations on the other. They
try to keep each group happy, but don’t spend
much time thinking about how the welfare of
one affects the welfare of another, or how the
welfare of either affects the larger community.
The Market Basket case illustrates an
emerging view that is quite different and
still somewhat controversial. People at
Market Basket have a starkly different view
of who is inside and who is outside. Based
on Arthur T.’s principle of reciprocal loyalty,
insiders are those who fully subscribe to
the company’s purpose. One becomes an
insider at Market Basket not by taking a
job or getting a new title, but by earning
it, preferably over time. If you were to
ask a loyal employee, customer or vendor,
“Who is Market Basket?”, they might draw
something like this: Arthur T., associates,
vendors, customers, the community, and
perhaps the B directors on the board would
be considered insiders, working together and
each contributing to grow the business and
each other’s welfare. ■
*Extracted from We Are Market Basket
by Daniel Korschun and Grant Welker
(AMACOM). A Centre case study is being
prepared with Daniel Korschun, Associate
Professor of Marketing at LeBow College of
Business, Drexel University, and Jim Fantini.
It will be available at www.sbs.oxford.edu/
reputation under “Research”.
WWW.SBS.OXFORD.EDU/REPUTATION 9
Our mini-conference, “Making Sense of Scandals: Purpose, Puzzles and Probabilities
in Organisational Wrongdoing”, provided an opportunity to explore a fascinating theme
from a variety of complementary perspectives.
CONFERENCE REPORT:
Making Sense of Scandals
The Centre has developed a penchant for short
conferences prior to our annual Reputation
Symposium (see pp6-7). This year, it was
“Making Sense of Scandals: Purpose, Puzzles
and Probabilities in Organisational Wrongdoing”,
which highlighted an area of great interest to
reputation scholars, and built on the positive
reaction to the opening panel of last year’s
Reputation Symposium on “What Do Scandals
Accomplish…?”. It is also at the heart of a paper
on the 2009 UK MPs’ expenses scandal, which
our former Research Fellow Tim Hannigan –
now an Assistant Professor at the University
of Alberta – has been developing with
International Research Fellows Joe Porac, Scott
Graffin et al.
• Tim Hannigan and Research Fellow Basak
Yakis-Douglas, along with Joe Porac, put
together a terrifically stimulating programme.
It began with dinner at the Oxford Union, and
a fascinating presentation from the disgraced
former CEO of Tyco, Dennis Kozlowski (see
Big Interview, pp4-5), who spoke revealingly
about his time caught in the media and judicial
headlights. With the help of law professor
Catherine Neal, of the University of North
Kentucky – whose book, Taking Down the Lion,
examines the facts of the case - we explained
the power of mythmaking, the relationship
between media, politics and the law in America,
and the importance of competing reputations in
the Kozlowski story.
The morning of the Scandals conference
proper began with Donald Palmer setting
out a framework of the relationship
between “wrongdoing” by organisations
and the “social control agents” who identify
that wrongdoing, how the boundaries of
behaviour are set, and why more analysis is
needed of that process.
• The second session explored patterns behind
when scandals gain traction and, importantly,
when they don’t. Robert Entman’s paper “When
Scandals Don’t Happen: How and Why US
Elites Get Away with Malfeasance” developed
10 Oxford University Centre for Corporate Reputation
ideas from his book Scandal and Silence, and
presented a “cascading network activation
model” that seeks to explain the non-scandals
among US political elites.
By contrast, Aharon Cohen Mohliver’s
fascinating overview of the trends in ethical
misbehaviour sought to put scandals in a
broader macro-economic context: how
trangressions across a number of fields - from
financial statements of firms, backdated
stock options of directors, and students
submitting plagiarised work - are more likely
in boom times, with detection more likely
as the economy falters. Nicholas DiFonzo
considered a number of questions arising
from rumour research: what are the contexts
and functions of scandal; what are the
psychological antecedents and aims of scandal
discussion; the factors that lead to accurate
versus distorted collective understandings
of organisational wrongdoing surrounding
scandals; and how might the reputational harm
from scandal be most effectively mitigated?
• In a panel entitled “Scandal Dynamics
and the Media”, Dennis Gioia considered
the case of Joe Paterno, the iconic football
coach at Penn State University under whose
oversight the Jerry Sandusky child abuse
scandal occurred; the process by which he
went from being “a moral beacon” to a “moral
disgrace”; and how previously underlying
negative narratives were triggered once the
opportunity arose.
Tim Hannigan presented a snapshot of his
work on “The Social Construction of Scandal:
The Role of the Media in the 2009 British
Parliamentary Expense Affair”, how the
application of sanctions evolved in relation to
the way the story unfolded in the media, and
the means by which big data text analysis
tracks these relationships. His analysis was
enhanced by the contribution from the
Centre’s Visiting Fellow Jeff Randall, who was
editor-at-large of the Daily Telegraph during
the period the paper published the story.
Violina Rindova gave a talk that considered
the role of media in the dynamics of scandals,
and their cultural influence, a strand Marco
Clemente’s paper, “Media Heterogeneity in
Response to a Scandal in an Organizational
Field”, took on: it focused on how bias appears
in the media in relation to the reporting of
a scandal, in this case the Calciopoli football
match-fixing scandal in Italy in 2006. In this
analysis, the increase in attention, and bias, as
particular media align themselves with their
audiences, has multiple impacts, including
assisting in “contesting the idea of normative
restoration post scandal”.
• For the final panel on “Stigmatisation and
Repair”, Margarethe Wiersema presented work
growing out of the precariousness of CEO
positions: where once they could enjoy a long
tenure, now 24 per cent of successions are due
to dismissal. Her paper dwelt on how managing
prior expectations buffers a CEO at a time
of negative events and helps them manage
stakeholders’ interpretations of “violations”.
Thomas Roulet examined the contrasting
perspectives of corporate customers and
stakeholders in relation to investment banks, and
how negative judgments in the media actually
bolstered banks’ reputations among the former.
Marvin Washington’s focus was institutional
leadership action in reaction to scandal; namely,
how far, and in what way, players within
the NFL must transgress for sanctions to be
applied; how normative forces, media coverage
and the critical mass of incidents within a small
window of time prompt institutional reaction.
With a number of speakers remarking on
the satisfying breadth of disciplines, and
staying on to contribute their insights to our
Symposium in the following days, the pre-
conference conference looks set to become
an established fixture. ■
The complete programme for the Scandals
conference can be found on our website
under “Events”.
Our Best Published Paper 2014 examines the proliferation of rankings for corporations,
and how the business media influence the criteria by which firms are judged, such as CSR.
RESEARCH FOCUS:
CORPORATE RANKINGS
In recent years, organisational rankings
have become increasingly institutionalised
status symbols for major corporations:
either focusing on a corporate attribute
(e.g., Business Ethics’ 100 Best Corporate
Citizens) or a broader assessment of
corporate quality (Forbes’ Best Managed
Companies in America). Studies have
shown that higher rankings can improve
an organisation’s ability to attract quality
employees and sustain superior profitability.
Surprisingly little research has focused on the
antecedent processes that generate these
rankings. Our study highlights how changing
beliefs about the legitimate indicators of firm
performance shape rankings, and we suggest that
these changing beliefs are influenced by prominent
intermediaries (e.g., the business press).
Research into commensuration - defined
as “the transformation of different entities
into a common metric” - suggests that
commodity standardisation is the result of a
complex social process that persuades market
participants that commodities of similar
value are in fact equivalent. Individuals have
cognitive biases that draw them to numerical
representations of complex reality, making
quantitative information more persuasive than
non-quantitative information.
The creation of organisational rankings follows
the very definition of a commensuration
process by quantifying the value of certain
organisational characteristics, and by using
numeric values to simplify decision-making
under conditions of uncertainty. Consider:
since US News began ranking law schools, a
law school that drops even slightly below the
“top 50 school” category faces a significant
decline in the quality of future applicants.
A firm’s reputational ranking emanates partly
from its financial performance, but metrics
of financial performance are also continually
reinterpreted by audiences and change in
popularity, and audiences may also take into
account other corporate actions, like social
responsibility. As the acceptability of a specific
performance indicator as a proxy of firm
performance wanes, evaluators will rely less
on that indicator when determining a firm’s
reputational ranking. For example, during
the run-up to the dot.com bubble, many
firms adopted a “Get Big Fast” strategy that
called for running a net loss for a number of
years in order to build on-line market share.
Many market actors, such as stock analysts,
believed that net income was no longer a vital
performance measure.
In contrast, corporate social responsibility
(CSR) has experienced a rise in popularity. The
general belief is that by engaging in socially
responsible practices, firms enhance their
image, improve relationships with stakeholders,
and improve their reputation. The returns from
CSR are believed to be especially valued during
times of crisis or reputational threat.
Commensurative products, such as rankings,
tend to have a strong influence on the
constructs they purport to measure. Indeed,
since their inception in the mid-1980s, the
Fortune rankings have influenced the evolution
of the concept of corporate reputation. For
example, studies have noted that a financial
performance halo exists, whereby a firm’s
previous financial performance will translate
into higher reputation scores in unrelated
attributes, such as social responsibility.
Market audiences search for new signals
of firm quality to improve their investment
choices. In the late 1970s and early 1980s,
scholars and practitioners began to critique the
claim that traditional income-based financial
indicators are reflective of firm value. This
trend was driven by the popular rise of financial
economics and agency theory. Agency theory
highlighted the problems in large firms when
self-interested managers make organisational
decisions based on their own, as opposed to
shareholder, interests. A recent survey found
that CFOs at public companies believe that
about 20 per cent of the firms in their industries
WWW.SBS.OXFORD.EDU/REPUTATION
“manage” earnings in efforts to misrepresent
the firm’s performance. Scholars also challenge
the appropriateness of traditional accounting
indicators of performance. The most commonly
cited shortcomings of generally accepted
accounting principles (GAAP) earnings are that
they are unstandardised and inappropriate for
between-firm comparisons.
Management fashion-setters such as the
business press shape the public agenda by
generating attention for particular topics
in the news. This, in turn, affects how
market actors make sense of organisational
phenomena. We argue that market actors
use the media to help make sense of new
financial performance indicators – such as
pro forma earnings and free cash flow.
Our study also demonstrates that less
straightforward measures of performance, such
as corporate social responsibility (CSR), influence
reputational ranking. In recent years, perceptions
about CSR have become standardised in ratings
systems – such as KLD Research and Analytics’
measure of corporate social performance.
These ratings hold enough sway to cause poorly
rated firms to change their behaviours in order
to boost future ratings. CSR is an increasingly
popular topic within the business media,
particularly after precipitating events.
Our results show that firms that benefit the
most from CSR are those that avoid being
rated negatively. Our findings suggest that
firms that avoid being targeted as poor CSR
performers are more likely to benefit in
reputational rankings, but that as CSR has
become a more prominent management fad,
there are decreasing returns. ■
Adapted from: “Under Construction: How
Commensuration And Management Fashion
Affect Corporate Reputation Rankings” by Y.
Sekou Bermiss, Brayden G. King and Edward
J. Zajac. Organization Science (2014), v.
25, No. 2, 591-608 (see http://pubsonline.
informs.org/journal/orsc).
11
News and Events
• In August, Research Fellows Basak
Yakis-Douglas and Tim Hannigan
presented a paper at the Academy of
Management Annual Meeting in Vancouver:
Trust Project
“Product Innovation Rumors as Forms of On 10 November, we held the second of our events with
Organizational Openness”. law firm DLA Piper and research firm Populus, continuing
our project looking at the breakdown in trust between
• The Centre hosted a  conference,
corporations, politics and the media. Our former Research
“Making Sense of Scandals:
Fellow Liz David-Barrett – now Lecturer in Politics at the
Purpose, Puzzles and Probabilities in
University of Sussex – prepared a report entitled
Organisational Wrongdoing”. See p10.
“Re-building Trust in Business”. Below is an extract from
• In September, Daphne Demetry joined the her presentation at the event:
Centre as a Research Associate. Her research uses
The networks in which business leaders are embedded are too closed. This creates
interview data to study trust, authenticity and
social distance between the general public and business leaders. Business feels that
reputation. See a summary of her work on p3.
society has unrealistic or ill-informed expectations, and that politicians fail to argue
• The Centre hosted our sixth annual three- their case. The public feels that business is out to cheat consumers, and that they lack
day Reputation Symposium. See pp6-7. power to defend their own interests.
• In October, eni Research Associate Gillian Many of the narratives about business that prevail in the media represent business as
Brooks attended the Strategic Management ill-intentioned or of bad character. Our research suggests that business leaders are
Society Conference in Denver, Colorado, where hitting back at journalists and politicians by criticising those groups’ own capability.
she presented a paper entitled  “Contested Businesses need to recognise their own role in this narrative [not appear to be]
Practices and Boundaries: Organizational Identity shirking responsibility.
in the Field of Online Journalism”.
The third factor is poor performance in keeping up with changing social norms.
Basak Yakis-Douglas also presented
Business leaders are sometimes reluctant to engage with emerging norms, arguing
her paper, “Managing Unique Acquisitions:
that the only legitimate constraint on their behaviour is the legal framework. Such
The Practice of Voluntary Communications
views are prevalent in debates on tax avoidance, zero-hours contracts and corporate
Deployment to Reduce Evaluative Uncertainty”.
disclosure requirements. This leaves businesses at risk of violating norms that have
• Basak Yakis-Douglas presented recently emerged, and exposing themselves to reputational risk. Our analysis suggests
“Cheap Talk? Strategy Presentations as a three directions for business to pursue to re-build trust:
Form of Chief Executive Officer Impression
• Build more open networks. The business community would benefit from
Management” at Harvard Business School.
engaging more widely to construct more open networks and build bridges.
• Research Fellow Jon MacKay presented a
• Address negative narratives. Business leaders should rebut attacks on the
paper, “Internationalization of the Firm: The
character of business as a whole, in the media. More monitoring and shaming by
Role of Social Capital in FDI Decisions”, at
business and business associations of companies or sectors that behave unethically
the Academy of International Business (AIB)
would help to build credibility.
Mini-conference in Milan.
• Embrace emerging norms. Business should think in terms of a “social contract”
• In November, our former Research Fellow
with the public, in which it needs to comply with emerging norms as well as laws in
SARAH OTNER joined Henley Business
order to maintain legitimacy. ■
School, University of Reading, as a Fellow in
Organisational Behaviour.
• Rupert Younger, Director of the Centre,
was a speaker at the Bloomberg Good Business
Conference 2015, on “Are government policies
helping or hindering business?”. He was also
interviewed by the Financial Times on how
companies – like VW - can deal with damaging Contact us
reputational hits, and on business and trust:
We welcome your feedback. Please send any comments to: reputation@sbs.ox.ac.uk.
http://tinyurl.com/o8ap9kp; http://tinyurl.com/
The Oxford University Centre for Corporate Reputation is an independent research
obsab6v.
centre which aims to promote a better understanding of the way in which the
reputations of corporations and institutions around the world are created, sustained,
enhanced, destroyed and rehabilitated. For full details of our research and activities,
see: www.sbs.oxford.edu/reputation.
Follow us on
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