Measuring Reputation Risk of Luxury Brand Business: Investor's Perspective

Abstract

Reputation risk is increasingly important concept in the boardroom because of its influence in creating stakeholder support and engagement with luxury brand businesses. Both researchers and practitioners would, therefore, benefit from having a rigorous instrument to measure reputation and the ability to develop predictive modeling of reputation’s impact on stakeholder’s future behavior. Using the case study method and a proven framework measuring corporate reputation, one of fastest growing luxury brand businesses was examined for its recent incident, media coverage from a real court case, that made the business suffer reputational damage. RepTrak is a widely used method to measure corporate or sovereign reputation. However, this methodology is not articulated well enough in the luxury industry if the method is valid for the luxury brand business, limiting researchers’ and practitioners’ abilities to use RepTrak for their respective purposes. This paper reports tests conducted to validate the measures empirically across institutional investors and retail investors groups in the U.K. Qualitative and quantitative surveys confirm the existence of reputational damaging event from the cause created by one of stakeholders and applicability of RepTrak, that is constructed from seven dimensional attributes to measure corporate reputation. The framework, therefore, validates RepTrak as a tool for measuring and tracking stakeholder perceptions of luxury brand business, especially with the eye of investors.