Research: Working for a company that’s been shamed can cost you money

When you work for a company that’s been up to no good, employers will start to think you’re up to no good — even if you’re innocent. Working for a company that’s been accused of misconduct can not only cost your professional reputation, it will literally cost you money, according to a new working paper from Harvard Business School.

Looking at the resumes and resulting pay of executives looking for new work, researchers George Serafeim and Boris Groysberg found that there is a guilt by association when you have worked for a company rocked by scandal.

“You have this great name on your CV, and suddenly it goes from being an asset to a liability,” Serafeim told Harvard Business School.

Research: Even if you’re innocent, your future job compensation goes down when you’ve worked for a company that’s been shamed

Using data from an executive search firm, the researchers looked at job-switching executives with work histories at firms that had committed financial misconduct.

Even controlling for factors like education, gender, and experience, they found that the executives with a stigmatized company on their resume —18% of the 2,034 executives placed between 2004 and 2011— experienced a significant decrease in pay, about 4% lower on average, after switching firms.

If the financial scandal had occurred recently, and if you were a financial executive when it occurred, interviewers were more suspicious of your involvement, and docked pay accordingly. The researchers found that the “stigma effect” increased depending on the employee’s seniority, the employee’s proximity in relation to the scandal, and how recently the financial scandal had occurred.

“If a candidate’s record generates sufficient concern to devalue, why entertain any risk when there is the safer option to shun?” the paper speculates about why the pay dock could occur. “Even when executives are free from wrongdoing, stigma costs can materialize out of the increased burden of scrutiny. Higher-ranked positions are more visible, and such scrutiny translates into higher costs for arbiters to promote such candidates.”

How to talk to future employers about having worked for a shamed company

If you’ve worked for a company that’s been shamed, there’s still a way for you to salvage your reputation. When you go in for an interview, acknowledge the elephant on your resume. You can tactfully acknowledge the scandal, without badmouthing your previous employer, by being upfront with an interviewer about how your personal values diverge from what happened at your company.

That’s the proactive advice Randy Conley, Vice President of Client Services and Trust Practice Leader at the leadership development company The Ken Blanchard Companies, advised. When asked what he would tell Uber employees who have worked for a company that’s been publicly shamed, he provided a script you can adapt for yourself: “I was afforded a lot of wonderful opportunities at Uber to grow my skillset, to make some really good contributions. My personal values were a mismatch with the organization. The way I conduct myself, the things I that I believe about how you should treat people, that wasn’t shared by the organization as a whole and some of its senior leadership.”

The bottom line

After you acknowledge the elephant, move on. You want to be spending your valuable interview time talking about your skills and goals, not your checkered work history.