Company share prices plummet 35.2 per cent on average following a reputational crisis, and companies take 425 days on average to recover to pre-crisis stock levels, SenateSHJ’s Crisis Index 300 found.

“The impact of a corporate crisis isn’t just a dent in reputation – it’s a direct hit to the bottom line,” Craig Badings, partner and head of reputation at SenateSHJ, said.

“Our data shows that when a crisis erupts, share prices fall fast, earnings tank, and recovery – if it happens – can take years.”

Following the PwC tax leaks scandal, the consulting firm’s revenue fell by $820 million – its worst slump on record – and the consulting industry underwent a seismic shift as government agencies reconsidered the merits of using large multinational firms to carry out government contracts.

The Crisis Index showed that 121 companies’ share prices never recovered following their reputational crises, 33 of which delisted due to acquisitions, bankruptcy or privatisations.

Mismanagement, white-collar crime, and environmental damage resulted in the steepest share price losses.

Industries that were most vulnerable to reputational crises included the telecommunications sector, which saw share prices plummeting by 64.3 per cent on average. The energy sector (55.7 per cent) and banking (37 per cent) were also badly hit by reputational crises.

The Crisis Index revealed that crises resulted in a 68.6 per cent drop of earnings per share (EPS), wiping out billions of dollars in shareholder value overnight.

“Earnings destruction is one of the clearest signals of long-term financial damage,” Badings said.

“Once EPS plunges, investor confidence takes a major hit, and reputation recovery becomes exponentially harder.”

As for PwC, the firm has continued to deal with the reputational fallout from its tax leaks scandal, replacing old business structures, strategies and leadership teams to rehabilitate its image.

PwC Australia welcomed a new chapter with its 2024 Transparency Report, which emphasised the firm’s renewed focus on transparency and accountability.

In the 2023–24 financial year, 38 serious misconduct matters were tabled to the firm’s People and Ethical Conduct Panel, of which 58 per cent were substantiated and resulted in a written warning, financial penalty or exit from the firm.

“This year was defined by the start of our significant reinvention journey during which we accelerated sweeping governance, business and culture reforms,” the report said.

“This Transparency Report reflects a difficult year for PwC Australia. While it will be marked as a period where we had to confront deeply troubling past failings, it is also the year we began our comprehensive reinvention journey and commitment to change.”

The Crisis Index data highlighted the business case for ethical governance – ignoring social and legal responsibilities can have large and long-lasting monetary consequences for corporations.

Businesses that find themselves in a reputational maelstrom should act quickly and take accountability for their mistakes, Badings advised.

“Ignoring reputational risk isn’t just reckless – it’s financially devastating,” Badings said.

“Our research shows three essentials for managing a crisis: be clear and transparent, act fast, and show real empathy – or risk losing control of the narrative.”