When a scandal scars a company's brand, the repercussions can be fatal.
American Apparel never recovered from the improper, some might say, criminal actions of its founder and former CEO, Dov Charney, whose exploits of sexual harassment forced the company's board to remove to him. American Apparel was de-listed from the New York Stock Exchange in 2015. It filed for Chapter 11 that October, and its successor returned to bankruptcy last November to sell its intellectual property.
Over the years, Nike (NKE) and Adidas (ADDYY) have had to navigate crises tied to the rough treatment of workers making their shoes in China and elsewhere. They also had to respond to the corruption scandal involving top officials at FIFA, soccer's international governing body, which they've long endorsed.
Yet unlike American Apparel, Nike and Adidas largely withstood the negative publicity.
21st Century Fox (FOXA) is betting that its advertisers and its viewers will stick with Fox News after the company on Wednesday dismissed star anchor Bill O'Reilly, some nine months after its longtime chairman, the imperial Roger Ailes, was forced out of the company also amid multiple allegations of sexual harassment and loathsome conduct.
"Scandals like this would destroy 99% of brands," said Drew Train, a managing partner at Oberland, a New York branding agency specializing in nonprofits and social responsibility. "If this is Nike's CEO and Michael Jordan in the 1990s, good-bye; hello, Reebok."
But Ailes' genius, or as Train said, his "evil genius," was to create an "enclosed media eco-system and position the network as the 'other' to the mainstream media." By doing so, Fox News is very likely to weather the media storm around O'Reilly's departure, a news story that The New York Times on Thursday put on its front page, roughly three weeks after a biting expose revealed the network and the anchor had paid women $13 million since 2004 in exchange for agreeing not to sue or talk publicly about the charges.
The decision to dismiss O'Reilly came after more than 50 Fox News advertisers including Coldwell Banker, Mercedes-Benz and pharmaceutical giants GlaxoSmithKline (GSK) , Bayer (BAYRY) and Sanofi (SNY) pulled their ads from The O'Reilly Factor, the most highly rated program on cable TV news for more than 16 years.
Though the Murdochs, who control 21st Century Fox, reportedly have known that O'Reilly had been accused of sexually improper conduct in the past, a combination of the Times' April 1 story, the advertiser backlash and pressure from employees within the company forced their hand. As with Ailes over the summer, the Murdochs dismissed O'Reilly just weeks after the scandal became headline news.
It remains to be seen whether the Fox News brand has been so affected that its ratings or advertising sales will suffer. Unlike a company that largely sells one product -- Nike's shoes or Starbucks (SBUX) coffee, for example -- Fox News is a network that features many anchors while pitching a consistent political message.
Volkswagon's (VLKAY) finances and reputation, for example, were sent tumbling in the wake of an investigation by Obama administration regulators that it had created software to cheat U.S. emissions tests. VW was forced to spend more than $7 billion after having to recall more than 11 million diesel-powered vehicles worldwide.
"In any brand crisis, there's a certain amount of time when the company has to weather the storm," said Jarrod Moses, CEO of United Entertainment Group, an entertainment-focused brand marketer whose partners include Edelman and United Talent Agency. "But Fox News is a news network; it has so many different personalities and opportunities to appeal to consumers and advertisers. O'Reilly was their franchise, but as trends have indicated in the past, there will be a rebound."
So far this week, ratings for Fox News evening programs have continued to surpass the 3 million viewer mark, according to Nielsen. Time Warner's (TWX) CNN, by comparison, has had viewership under 1.5 million.
Those numbers, Train said, speak to the uniqueness of Fox News as a brand that is also a news organization. Though much of the general public may have been outraged by the sordid details of sexual harassment allegations against O'Reilly and Ailes, the network's viewers are more inclined to view the criticism within the context of the country's larger cultural war.
"There aren't many brands that have this kind of control of their media eco-system," Train added. "They've spent 25 years making their brand position the victim of liberal media. All of this plays perfectly into their favor that if everyone outside their bubble is criticizing them for something, even if it's legitimate, they're the victim. A Nike couldn't do that, a Starbucks couldn't do that."