In March 2013, Lululemon Athletica removed its inventory of women’s black yoga pants from its stores because recent shipments of the product were “too sheer.” For a company reliant on a reputation for quality, the news was devastating. Worse, the recall set off a series of PR related disasters that were largely of the company’s own making. We examine these events in greater detail, and ask: Why are companies so ill-prepared to manage risk? How can companies develop a reliable way to track and respond to risk? How can companies better manage social media risk? When do risk-related matters become a board-level issue?
Copyright held by David F. Larcker, Sarah M. Larcker, and Brian Tayan. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
