A reputation crisis is the perception of an unpredictable event that threatens stakeholder expectations of an organization. Organizations are expected to adhere to certain norms. When an entity’s action or inaction is viewed as contrary to the expected social norms, an expectation gap occurs. Negative stakeholder perceptions created by an expectation gap can threaten an organization’s reputation and even its long-term legitimacy, or societal approval to operate.

For example, in May 2013, celebrity chef Paula Deen admitted in a deposition that she had in the past used racial slurs and tolerated racial jokes in the workplace. Deen was an icon of Southern hospitality and cooking, and her stakeholders expected her to treat people in a respectful and congenial manner. After the deposition became public the ...

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