Abstract
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? The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.
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