The Day after the Scandal [Part one]. A Theoretical Analysis of Liability Action and Reputational Risk

Abstract

This paper realizes a preliminary theoretical analysis concerning the correlation between the execution of a liability action and the increase of potential negative effects from a reputational point of view that undermine the company’s stability. The contribution concerns managerial, legal, and social points of view – because of the risky implications of liability action – and aims to bridge a gap that characterizes both corporate governance and the increasingly emerging issue of reputational risk. This work provides immediate practical feedback in order to draw the attention of corporate ownership in critical situations of liability actions to avoid increasing side effects due to potential reputational risks and it is even more useful to facilitate the provision of the arbitration clause for institutional purposes in those countries where it is not yet possible.