Reputation Gurus

Today’s FT has an interesting article featuring a survey conducted by accounting firm Grant Thornton that found that British businesses are not prepared for a PR crisis.  While most British businesses are well prepared to deal with operational threats, they are not prepared from a communications standpoint. 

In the day and age where a PR crisis can hobble a company (Northern Rock and Mattel being the most recent in the news), this seems incredible.  Corporate communications heads need to get themselves prepared quickly (GCI will gladly help!), or suffer the consequences down the line.

A study by GfK NOP research recently found that consumers in five of the world’s leading economies (including, of course, the US and the UK) believe that business ethics have worsened in the past five years.

The problem is that, as our society evolves, ethics and people’s expectations for how a company should behave have evolved as well.  What’s perfectly acceptable today may not be acceptable in a year — or even next month.

So what’s a company to do?  How will company directors know if business practices today will hurt their company tomorrow? 

This is where the right approach to influencer relationship building is critical.  Many companies today have concerted efforts to build relationships with influencers, but few focus on NGOs that could be considered critic groups, and even fewer are using their efforts to listen and learn about changing expectations — before they are changed.  Understanding the changing landscape is critically imporant to building, managing and protecting a company’s corporate reputation, and meeting the evolving expectations of its customer base.

Clients frequently ask us about corporate giving, and what the guideline is for how much a company should put towards its CSR intitiatives.  The general rule of thumb is about 1% of profits — at least in the US.

However, it’s interesting to note that some governments either currently mandate or are trying to mandate how much a company should give, as well as where they spend their money.  In the UK, the foreign secretary recently tried to launch a drive to ensure that British business is “socially responsible” in its international dealings, noting that the way British business behaves impacts the reputation of the entire nation.  I also learned last week that the small country of Slovakia mandates that Slovakian businesses donate 2% of their profits to a Slovakian charity.

I’m not sure if this is a trend, but global businesses should sit up and take notice.  I’m sure that there are no American businesses that would want a government mandate on CSR, nor would most companies. 

The trend of activist shareholders trying to force change in an organization has gained significant momentum.  It’s not new … Calpers (the activist Califorian pension fund organization) blazed this trail decades ago, but others are getting more aggressive and they’re out to win.  HSBC is the latest target (to improve corporate governance and evolve their strategy to focus on emerging markets), but companies like Home Depot have been targeted by activist shareholders like PETA (in which case, there’s an NGO buying stock so that they can make change), and other examples are becoming more frequent.

I am not an IR expert, so I’ll leave the IR commentary to others.  However, it’s clear that activist shareholders can clearly have an impact on a company’s corporate reputation, and that’s, of course, where my interest kicks in.  Just the mere thought that an activist shareholder is demanding change makes it to the front of the FT — including a story today (in HSBC’s case) that outlines all of the shareholder concerns. 

Part of me wonders what it would be like to become an activist shareholder — to be someone who can go in and rattle enough chains to make a company completely change the way it operates … if they’re successful.  A smart corporate reputation manager, though, would know what those changes should be before an activist gets wind of what might need to be changed … and a smart CEO and executive board would make those changes proactively.

This is where listening closely to a wide range of influencers comes in.  The ability to predict what might need to be changed — to understand the changing expectations of a variety of stakeholders – is key to being nimble enough to make changes before an activist shareholder group targets you.  Some may say that this is the job of the IR people, but it’s not.  It’s the job of the lead person in charge of the company’s reputation.