How Can Corporate Reputation Be Protected?

• Published date: 21 September 2023
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law
• Law Firm: Schoenherr Attorneys at Law
• Author: Ms Tijana Levakov.

Corporate reputation is an organisation's most valuable intangible resource and may be defined as the public perception of the company and how it operates. It has its monetary expression and influences financial and social capital as well as market share. It can be positive and negative. Reputation is an essential aspect of any business. In today's digital age, a company's reputation can be easily tarnished through websites, social media, online reviews and news articles.

Reputational damage can occur in many ways:

• due to unethical business practices;
• violation of duties and conflict of interest of the current or former employees and directors;
• poor customer service;
• data breaches;
• environmental issues;
• or any other negative event that puts the company in a bad light.

The consequences of reputational damage can be severe for a business entity. It can lead to:

• decreased revenue;
• reduced share price;
• difficulty in attracting and retaining employees;
• loss of board and shareholders' trust;
• diminished funding and partnership opportunities;
• negative effect on the company's supply chain.

Moreover, reputational damage can take a long time to recover from, and the process can be costly. The company may have to invest significant resources into rebranding, launching a public relations campaign or implementing new policies and procedures to regain the trust of its stakeholders.

Civil law protection in case of unlawful, intentional or malicious damage to company's reputation

1. Pecuniary damages

The company may claim pecuniary (economic) damages, which refer to the actual monetary losses incurred by the business. It is reflected in lost profits, lost sales and other financial losses that can be attributed to the negative publicity. These damages include the actual decrease in assets or increase in liabilities at the moment of the claim, as well as future lost profit. The case must be supported with adequate evidence and it may be challenging to prove the exact damages before the court, as a causal relationship must be established between reduced profit / outstanding losses and the actions of the wrongdoer.

2. Non-pecuniary damages

Non-pecuniary damages refer to the intangible non-monetary losses incurred by the business, such as damage to reputation, loss of goodwill and loss of brand value. These damages can have a significant impact on the long-term success of the business. However, Serbian companies may request compensation of non-economic damages only under...