The scandal involving late-night talk show host David Letterman shows distinct signs of blowing over without causing significant long-term harm to Letterman's professional viability. Lines for tickets to the most recent taping of The Late Show stretched around the block at his New York studio, and viewership of the show continues to be quite healthy. There are several reasons why this may be the case.

1. Letterman launched the scandal on his own terms, and this has helped to contain the damage. By disclosing his transgressions in a self-deprecating manner, he has undermined the emotional intensity with which the most inflammatory aspects of his actions — sex with subordinates! — might have been viewed. Emotion tends to deepen a scandal's roots. But because of the context in which Letterman told his "little story," we think of the incident as Uncle Dave being a bit randy rather than vividly imagining young women being taken advantage of and harassed. Moreover, Letterman's slow reveal of the nature of his "creepy" actions — he saved the most damning details until late in his lengthy monologue — further promoted a sense among viewers of being underwhelmed: "Is THAT all? Some adults had apparently consensual encounters?" Again, potential emotional triggers were tactically neutralized, undermining the tabloid value of the incident.
2. The timing was key. Although the saga played out behind the scenes over approximately three weeks, Letterman chose to wait until he had all the facts before making his statement. That's a smart move: trying to tell your story before the truth is known can be extremely problematic. Witness the damage to the Perrier brand in the 1990s, when a premature explanation for benzene contamination significantly undermined the equity of the brand.
3. The medium strengthened the message. His jokey tone was risky, but it paid off. It's dangerous to use a bundle of linked jokes to deliver news of your sexual indiscretions with employees. Audiences can be unforgiving when they perceive that a celebrity doesn't fully understand the seriousness of his or her wrongdoing; or, worse yet, thinks he or she is above the law. In this particular case, though, the comedy served a special purpose, underscoring for us the nature of Letterman's "core business." He makes us laugh. And his performance that night — part confession, part self-deprecating comedy bit — reminded us that the product he offers nightly would not hindered by muddiness in his personal life.
4. There never really was an apology for the actual indiscretions. Letterman expressed regret that his staffers were being inconvenienced and said he needed to "fix" things with his wife. But he never said outright, "I'm sorry I slept with people who work for me." The decision not to offer a mea culpa is striking in the wake of apologies for similar incidents by public figures such as South Carolina Governor Mark Sanford, Nevada Senator John Ensign, and former North Carolina Senator John Edwards. Letterman seems to tacitly understand that apologies equal guilt in the public's mind. He is attempting to sidestep an association to guilt without making overtly defensive statements that may backfire.
5. He's allowing us to stereotype him — and that may be useful. Letterman has famously skewered admitted philanderers such as former President Bill Clinton and Senator Edwards. By sheepishly acknowledging the irony of those jokes in light his own situation, Letterman allows himself to be cast as yet another public figure who strayed. A side effect of that approach is that the public will recognize infidelity, broadly, as something that is all too pervasive among the rich and famous. And research shows that when people realize that a disgraced person or brand is doing something that others commonly do, too, they tend to give the scandalized entity the benefit of the doubt. In this case, we may be resigned to the idea that this is "show business as usual," and so we may be more likely to overlook Letterman's bad behavior.

Michelle Roehm is the senior associate dean of faculty and the Board of Visitors Professor of Marketing at Wake Forest University in Winston-Salem, North Carolina. She is the co-author, with Alice M. Tybout, of the upcoming HBR article, "Let the Response Fit the Scandal" (December 2009).

Barely a month ago embattled CIT Group, a New York commercial lender that provides funding to some 1 million small and medium-sized businesses astonished many when it announced that it had extended the contract of its CEO Jeffrey Peek until September 2, 2010. On Tuesday, the company made another startling announcement: Peek plans to resign at the end of the year.

This new twist comes just two weeks after the company announced a restructuring plan that is said to involve either a pre-packaged bankruptcy or a massive debt swap. In recent months, the 101-year-old firm has fought to stave off bankruptcy. However, in July, the company failed to obtain a second round of federal funding; CIT was already the recipient of $2.33 billion in TARP money from the Troubled Relief Assets Program. In a statement, Peek said “Now is the appropriate time to focus on a transition of leadership, and I look forward to working closely with our Board during that process.”

Over the past nine quarters CIT lost more than $5 billion. And the bad news continued to pile up as CIT posted a second-quarter loss of $1.62 billion.

Certainly the company has been battered by the economic meltdown that put credit markets in turmoil. However, it was Peek’s performance as CEO that was seen by many as taking it straight to the proverbial cliff.

Installed as CEO in 2004, under Peek CIT moved away from its traditional, conservative lending practices and expanded into profitable but high risk subprime mortgages and student loans. Hoping to remake CIT’s stodgy image, the company became a Metropolitan Museum of Art donor and a sponsor of the New York City Opera. Three years ago CIT relocated from its longtime headquarters near a shopping mall in Livingston, New Jersey to a gleaming 28-story glass office tower on Manhattan’s Fifth Avenue. During his tenure, Peek was known to throw lavish parties including an Edwardian themed Valentine’s Day bash at his Upper East Side penthouse last year.

In September, following the announcement of Peek’s contract extension, Sameer Gokhale, an analyst at Keefe, Bruyette & Woods, who covers the company, talked about the rationale behind CIT’s keeping Peek on as its CEO. “CIT’s issues are very specific,” he told me. “The company’s larger issues have less to do with the company deciding to enter a new geographical market and more about let’s rescue the balance sheet and fix near term liquidity and once we get beyond that we can think about moving strategically into a new direction.”

According to Gokhale, as CIT worked to negotiate with its creditors and regulators, leaving Peek in place “makes a lot more sense and minimizes destruction.”

However, banking industry consultant Bert Ely took a decidedly different view about the company’s future. “Barring a miracle,” he said, “CIT will end up in bankruptcy no matter who is CEO.”