Character reputations are a great way to keep errant PCs somewhat in line. Reputation isn't as tangible as skill levels or spell lists or combat stats, so players tend to take less notice of it. In fact, many games don't even track reputation in any way at all.

But in a realistic world, people who go around doing the sorts of things that PCs get up to will attract attention. They'll make the news. Their fame will spread. Or their infamy, as the case may be. If they get up to nasty or unpopular things, then the public will start to turn against them. Before long, they'll find they're not welcome at any inn in town, or their money is no good at the local temple that offers healing (to sufferers they approve of).

And yes, you can even apply this in an undercover game, where the characters should by all rights stay well out of the public eye. If there was a real life James Bond running around doing the sorts of things he does in the movies, just how long do you think he'd stay a secret agent?

Transcript

Count Dookû: Ah 'ave not been working with ze Separatists since before our encounter on Zheonosis.
{flashback}
Count Dookû: Zis is all going wrong!
Count Dookû: Give moi back ze plans. Ah shall take zem to ze Senate mahself.
Nute Gunray: Prease yourself. Of course, I took the riberty of making a copy.
Poggle the Lesser: {handing over plans} The Senate won't listen to you anyway. They don't trust the Separatists.
Count Dookû: Zey will 'ave to. Zis is all ze proof Ah need zat Palpatine cannot be trusted.
Nute Gunray: Enjoy your moment of grory. I am sure the Senate's trust will be shaken indeed.
{end flashback}
Count Dookû: Alas, ze Senate 'as denied moi ze opportunity to speak.
Obi-Wan: So you kidnapped the Chancellor instead. Very honourable.
Count Dookû: Ah would sacrifice even mah reputation to secure Peace for ze Galaxy!
R2-D2: Not bad. All I got for my -2 Reputation was a lousy periscope.