In a business context, a scandal is a moment of public crisis, a situation in which some wrongdoing – real or apparent – becomes the subject of publicity and public scrutiny. Scandals, of course, vary enormously. Scandals can pertain to large-scale corporate conduct involving the cooperation of many people (such as the Volkswagen emissions-falsification scandal), to an individual corporate decision (as when Turing Pharmaceuticals raised the price of one of its drugs from $13.50 to $750 per pill), or to illicit behaviour by an individual (such as a corporation’s CEO). In some cases, people use the term “scandal” to refer to a larger pattern of conduct in business generally or in a particular industry that is seen as being particularly worthy of criticism. For example, some have suggested that the current very high levels of executive compensation constitute a ‘scandal.’
How significant or important are scandals? Are they indicative of larger problems? In some cases, scandals may be effective in bringing a problem to light, and hence promote change. A scandal may force a company to change its behaviour. In some instances a scandal may result in regulatory changes (as when the financial crisis of 2008-2009 resulted in the US Congress passing the Dodd-Frank Wall Street Reform and Consumer Protection Act.)
It is also worth noting that attention to scandals can produce a highly biased perspective on corporate behaviour in general. By definition, scandals are instances in which corporate behaviour becomes the focus of pubic attention, typically through the media. The media and the public are seldom interested in everyday good behaviour. Attention to scandals may thus wrongly persuade people that bad corporate behaviour is more common than it really is.
See also in CEBE: