A year after a massive data breach at its flagship Ashley Madison adultery service, Toronto-based Avid Life Media relaunched in 2016 under a new corporate name. The move was designed to help the business recover from the high-profile hacker attack that had exposed severe security and governance issues and dashed the desire of early investors to take the company public in Europe. It was also a strategic step taken to regain the trust of customers who had been attracted by promises of secrecy and then outed as would-be cheaters (male clients were also mocked for joining a service deploying fake female profiles to boost memberships).

Now known as “ruby,” the company has tasked new leadership with restoring confidence in the brand. “It’s a new day,” announced CEO Rob Segal in July, following an executive search that tapped him to replace controversial company founder Noel Biderman. According to Segal, the recovery plan is “to completely rebuild the company as a relevant, digital dating innovator that truly cares for our customers.” As part of this strategy, Ashley Madison dropped its signature tagline — “Life is Short. Have an Affair.” — and replaced it with “Find Your Moment.” The vague new slogan was billed as more fitting because almost 50 per cent of Ashley Madison customers are now single and the client base as a whole seeks a variety of connections, not just affairs.

While announcing these moves, however, Segal also assured wedding-vow breakers around the world that the most controversial business on the planet intended to remain “true to our roots.” And therein lies the rub. After all, as Juliet told Romeo, names don’t really matter when it comes to reputation. In other words, while a rose by any other name will still smell sweet, a business founded to help people in supposedly committed relationships deceive their partners will always fail the reputational sniff test regardless of what the parent company calls itself. And that’s why examining the trials and tribulations of Ashley Madison is a case study that just keeps on giving.

Long before the hacker group known as the Impact Team exposed Ashley Madison’s weak security and questionable business practices (along with personal information associated with millions of member accounts), we developed an Ivey case study based on Avid Life’s first attempt to go public via a reverse IPO in early 2010. Back then, the controversial nature of its business and the showmanship of its aggressive founder were seen as endless sources of free publicity. Furthermore, the company was considered a relatively well-run and profitable growth company in a market starved for investment opportunities. But Avid Life still had a hard time raising $60 million in a private placement offering being marketed to institutional investors to help it acquire a targeted listed company.

In fact, Toronto’s GMP Capital was the only investment bank willing to take Avid Life on as a client. And as Canadian Business magazine reported in “Abandoned at the Altar,” even GMP eventually developed cold feet and broke off the relationship — despite initially arguing that its Bay Street competitors were being hypocritical for refusing to get into bed with Biderman because investment banks regularly raise funds for companies that deliver porn, not to mention manufacturers of booze and tobacco products that contribute to costly social and health problems.

The blanket rejection of Avid Life by Canadian investment bankers in 2010 generated plenty of humour. As Canadian Business noted, Bay Street jokers playfully suggested the deal was doomed from the start because no fund managers wanted to go home and tell their spouse, “I liked Ashley Madison so much that I decided to buy the company.” The issues raised, however, were serious. And they provided highly engaging case study fodder for debating the function of firms from competing perspectives, meaning the shareholder perspective, which sees the firm as an instrument for the shareholder, versus the stakeholder perspective, which views the firm as an instrument of society.

Back when Avid Life courted controversy, Biderman billed Ashley Madison as a marital aid, arguing that men are not wired to be faithful and that sleeping around can restore a married woman’s lost sense of self-worth “when Valentine’s Day gets forgotten.” Under new leadership, the company has wisely toned down its marketing. But the flagship service is still rooted in promoting adultery. And that means the parent company still faces the reputational challenges that disrupted its initial attempt to go public. It also means the company’s first crack at an IPO remains an ideal case study for exploring the changing role of the firm and the rising importance of reputational risk management.

Not long ago, plenty of people bought into Milton Friedman’s argument that making money legally was really the only duty that corporate officers had to worry about. But times change. And there are no clear universally accepted rules about how far businesses should go when seeking profit today. That is especially true for businesses that sell sin. In the always quotable words of Canadian fund manager Stephen Jarislowsky, “I don’t mind investing in liquor, because without it, you’d miss something in life. I tell friends to stop smoking, and I still buy tobacco companies. But Ashley Madison shouldn’t be a public venture, because it can destroy families. And there is nothing worse than the effect of divorce on children. There are thousands of other stocks to buy, so why bother with this crap?”

There is no question that boardrooms still debate how best to balance the duty to generate returns for shareholders with growing public expectations of corporate social responsibility. And to help understand the reputational issues involved, there is perhaps no better case than the jilting of Ashley Madison by investment bankers, who are not typically seen as the moral compass of society.