Download this Paper Open PDF in Browser

Lululemon: A Sheer Debacle in Risk Management

9 Pages Posted: 17 Jun 2014 Last revised: 8 Aug 2015

David F. Larcker

Stanford University - Graduate School of Business

Sarah M. Larcker

Digitas Health

Brian Tayan

Stanford University - Graduate School of Business

Date Written: June 17, 2014

Abstract

In March 2013, Lululemon Athletica removed its inventory of women’s black yoga pants from its stores because recent shipments of the product were “too sheer.”

For a company reliant on a reputation for quality, the news was devastating. Worse, the recall set off a series of PR related disasters that were largely of the company’s own making.

We examine these events in greater detail, and ask:

• Why are companies so ill-prepared to manage risk?
• How can companies develop a reliable way to track and respond to risk?
• How can companies better manage social media risk?
• When do risk-related matters become a board-level issue?

The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

Keywords: social media, social media monitoring, corporate risk management, reputational risks, corporate governance

JEL Classification: G10, G11, G12, G14, L14, Z10

Suggested Citation

Larcker, David F. and Larcker, Sarah M. and Tayan, Brian, Lululemon: A Sheer Debacle in Risk Management (June 17, 2014). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP-41; Stanford University Graduate School of Business Research Paper No. 14-21. Available at SSRN: https://ssrn.com/abstract=2455983 or http://dx.doi.org/10.2139/ssrn.2455983

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Sarah M. Larcker

Digitas Health ( email )

33 Arch Street
Boston, MA 02110
United States

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Paper statistics

Downloads
710
Rank
28,684
Abstract Views
3,437