Victims and Shareholders: The Dilemmas of Presenting Corporate Policy During A Crisis

Abstract

Corporate crises—such as accidents, scandals, and product safety incidents—exacerbate stakeholder demands in such a way that conflict can arise between the interests of shareholders and crisis victims. We show that such conflict arises in the case of accidents, in which (1) the needs of victims are immediate and concrete and the potential corporate liability is great and (2) management can plausibly claim there are mitigating circumstances and factors beyond its control. In the case of accidents, if managers are accommodating to victims, shareholders are likely to suffer. The conflict does not arise in the case of scandals, for neither of those conditions holds. Shareholders benefit when managers are accommodating. This article discusses the theoretical and managerial implications of these findings.