I do not believe that website wide links might positively damage your site, but can they negate the effects of links from that website? I will be finding out!
Some people question if website wide links might cause damage to your site, but I do not think that any search engine would open the back door for causing harm to another person's web site. But, I do believe that it is prospective that they negate the effects of good links on that site.
Take as for instance, a single link to another site from a well ranking home page. Possibly that single link does the job and pushes the target page into the top of the search engine results. But, what if the owners of the sites are working together and decide to get gready and create more links by putting the link into the trailer, or a side bar, of the website? Then there exists the website wide links.
This is what the search engines want to detect and remove and can cause them to ignore that initial good link and in doing so spread the gossip and rumour that website wide links cause damage. It is not so much damage, but preventing the good from being spread.
But, this is a theory and one that is hard to prove or to disprove. However, with a bit of patience and time and a couple of sites working together then it is budding to test. I have, for this reason, placed a link from a PR3 page to another site of my own based on a "random" string found on that page.
It needs to be something that other sites display, that I know the receiving site is currently being found for, but a little bit of work could push it much higher up the search engines. A tall order! Thankfully, I have a website that has a 'claim sentence' in it that is used by thousands of web-sites. It is a random sentence and not something that anyone in their right mind would be trying to optimise for.
Except me!
At first, hopefully my web site will shoot up from its current 35th position for the term (out of 30,000 results!). Then, I am expecting one of three reactions once I introduce web site wide links:
1 - it will stay at the improved position, showing that they cause no harm
2 - it will tumble below position 35, showing that website wide links are positively damaging
3 - it will return to around the 35th position, showing that, as I expect, web site wide links just cause the links between the sites to be ignored.
What good is knowing what these links do? Well, as a designer of loads of sites I might discover that I am being damaged by the copyright statement on the hundreds of web-sites that I have built because they have website wide links. Understanding more around their impacts will allow me to decide whether to remove links from trailers or whether they are safe to be left there.