Public Perceptions of Corporate Criminal Sanctions: An Empirical Study of the Reputational Impact of Corporate Criminal Misconduct

Abstract

Corporations prefer to avoid guilty pleas in favor of more lenient resolutions, partly due to the greater reputational damage supposedly associated with a guilty plea. When possible, some corporations also prefer sanctions against their employees over sanctions against corporate entities themselves, similarly due to reputational reasons. However, it is unclear whether the form of the final resolution and the entity under investigation actually affect public perceptions of a corporation accused of criminal misconduct. Using a series of public opinion survey experiments, this study finds that in the United States, (1) a guilty plea and a non-prosecution agreement similarly affect public perceptions of corporations, but (2) corporate misconduct has a larger negative effect on public perceptions of a corporation than individual misconduct by corporate executives. However, in South Korea, such factors regarding U.S. criminal sanctions make little difference in consumer perceptions of a corporation. These findings suggest that a corporation under investigation by U.S. authorities should attempt to resolve the investigation by shifting criminal liability to its employees to reduce the domestic reputational cost, but it should not be as concerned about the reputational impact of U.S. criminal sanctions on East Asian consumers.

Keywords: white collar crime, corporate investigations, reputational cost, public opinion

JEL Classification: K14, K42