Why do spillovers occur? Because stakeholders rarely evaluate organizations in a vacuum. Faced with limited time and information, they rely on cognitive shortcuts—grouping firms by industry, geography, product, governance ties, or supply chain relationships, then inferring that one firm’s misdeeds signal a broader category-wide flaw. The result is that well-run companies can suffer real losses from others’ failures.Researchshows that firms in industries touched by scandal often face stock declines, higher scrutiny from regulators, and activist campaigns, even if their own practices are sound. Customers, too, may turn away, not because of a company’s actions but because of guilt by association.