The Role of Law in Recovering from Corporate Scandals

Abstract

Scandals—unexpected and harmful events with reputational consequences—may evolve into organizational crises that demand multifaceted responses. This chapter investigates the role of law in the recovery process following corporate scandals, emphasizing how legal resources may facilitate the restoration of both legal and social licenses to operate. Indeed, legal resources may serve not only regulatory compliance but also reputational repair through three strategic avenues: legal substance, symbolism, and information control. Legal substance involves the proactive deployment of legal arguments and precedents to reinterpret allegations and mitigate formal accountability. Symbolic strategies, including codes of ethics and public commitments, aim to reshape stakeholder perceptions, often straddling the line between genuine reform and impression management. Meanwhile, information control focuses on limiting or directing the flow of incriminating data to protect the client’s interests and influence public narratives. These legal strategies are deeply entwined with broader concerns about legitimacy. The chapter emphasizes the need to distinguish between symbolic and substantive forms of compliance and corporate social responsibility (CSR), cautioning against superficial gestures that may invite further scrutiny. Through case examples, such as the Samherji scandal, it illustrates how the legal actor’s role is not confined to courtroom defense but extends to shaping institutional narratives, managing external expectations, reassuring stakeholders, enhancing reputation management, and securing organizational resilience.