Case of Corporate Scandal (Essay Sample)

Case of Corporate Scandal
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Introduction
Scandals are not a new form of business threat hence a need for organizations to effectively manage their practices to avoid being involved in a crisis. In this paper, I analyze a case of corporate scandal using Luckin Coffee as the case study organization. I review the language used by the corporate communication department to manage the crisis and the overt and covert messages used to restore the public trust in the company's brand. Additionally, I evaluate whether the company accepted responsibility and how long it took before it did so. The paper also analyzes whether the message before the acceptance differs from those released after the acceptance announcement. The last section also reviews the interpretation of the language used as a possible shift of the blame from the firm to the isolated employee. Luckin Coffee effectively managed its corporate scandal, although there is still more to be done to ensure that it fully repairs its reputation and obtains a good brand image.
At first, the company was in denial after being accused of financial misconduct that the auditor from EY reviewed. The auditors found that some managers had been fabricating transactions, exaggerating its incomes, value and rates for over nine months (Crabb, 2020). However, despite being exposed to the public, they denied the allegations (Peng et al., 2022). The company's stock plunged immediately after these accusations but significantly improved, especially during the covid19 period (Selina &Matthew, 2020). Despite this, the company continued to be under scrutiny. Later, the auditors again had more evidence which led to the company's response that its special committee would conduct an internal investigation (Agnihotri & Bhattacharya, 2021). The chairman insisted on an investigation, expressing concern about the allegations' impact on the investors’ confidence.
However, after the company received threats of being delisted due to the fabrications, it changed its statement (de Boer, 2021). After four months, the company accepted the responsibility, considering it had been accused of fraud in late January and accepted in late May. In a statement released by the company's chairman, Lu, he insisted that the company "didn't play tricks" to influence the investors and instead insisted that "tens of thousands of employees are still working hard” to move the company to the next success level (Sherisse & Laura, 2020). The company's chairman apologized for the scandal and admitted that some of its revenues were forged. Lu insisted that as a company, they are in deep pain and remorse, and if the company gets expelled, it makes them face more difficulties (Sherisse & Laura, 2020).
The covert message that the company used to restore the public trust in its brand is through using apologia and remorse messages that were released through the company’s chairman. The company used this approach, as evident when the chairman admitted that the revenues had been fabricated and apologized to the public. The chairman’s act of insisting on the tens of thousands of employees working for the company was aimed to ensure that the public sympathizes and ensures support through continued business with the company. Even though this was not openly acknowledged, it was a strategy to ensure that the public trust was restored in its brand.
On the other hand, the company also used overt messages to restore public trust in the brand to achieve this goal. This was evident when its new chairman and chief executive released a statement that it was reflecting on its corporation and remediation efforts. Thus, he insisted that these were aimed at ensuring that the company adhered to the best practices by complying and cooperating with the government's requirements (Fortune, 2020). Guo, the newly instated chairman, added that the company had shifted its commitments to have control of its internal financial system for an effective execution of its business strategy (Fortune, 2020). This was a direct message to the public that the company is committed to ensuring that such fraud acts are not witnessed again; hence they should be assured of the same. In this case, the public's trust restoration was the main objective of this message, and it was done openly to ensure that they were persuaded.
The sort of language that could be interpreted as a possible shift of the blame to other parties, including subgroup and isolated employees, is evident in the Luckin Coffees scandal case. Following the use of the newly instated chairman