9 Pages Posted: 17 Jun 2014 Last revised: 8 Aug 2015
Date Written: June 17, 2014
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: 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