When is it Good to be Bad? Media Coverage of Serious Organizational Errors

While we know that a good reputation is generally an asset for the firm (although can also be a liability), we know little about the effects of a bad reputation. This matters because a bad reputation is not simply the opposite of a good reputation. In this study, we investigate the assumption that a bad reputation is necessarily bad by testing the effects of a firm’s record of errors on the media coverage of a subsequent error by the same firm. Due to a combination of expectancy confirmation and perceived newsworthiness, we predict the media will cover distinct events that augment a reputation, but ignore repeat events that merely reinforce it. We test this theory in the context of major oil spills in the U.S., from 1985 to 2016. Results confirm the media is more likely to cover spills by firms known for environmental violations (a category reputation), but less likely to cover spills by firms known for causing oil spills (a task reputation). Counter-intuitively, repeat offenders that cause larger spills and are more prominent are even less likely to be covered. We conclude that, at least for media coverage of organizational serious errors, being bad can sometimes be good.