Michael D. Moberly   December 3, 2010

The decision by Craig’s List to shut down its ‘adult services’

section, fell, in my view, into the no-brainer category.  I am confident

there have been numerous and probably on-going meetings over the past year

among the company’s hierarchy, in which ‘what to do about their adult

services section’ was a key action item on the agenda.  I am equally

confident the room in which those discussions took place had a fair number

of legal, public/media relations, reputation risk, and financial advisors

on hand, each offering their perspectives and projections about the

outcomes of various courses of action under consideration.

It’s not rocket science to assume the consensus reached in most of those

meetings, at least up to the September 4th decision to suspend the adult

services section, had something to do with the economic fact – business

reality that the adult service section was a consistent revenue generator

to the tune, we’re told, of $37+ million per year.

The situation Craig’s List eventually found itself in, was ‘company reputation

risk management 101‘, pure and simple.

I suspect during some of the initial meetings among Craig’s List hierarchy,

when the ’what should we do about the adult services section’ question was being

discussed, at some point, consensus was reached to ‘ride this out’ for as long as

possible which translated as, unless and/or until the adverse public reaction

rises to some pre-determined level, e.g. 15+ state’s attorney general’s

filing civil actions and going public with their admonitions, that the

remaining (last resort) option would be executed, i.e., shut down the

adult services section altogether.

In today’s extraordinarily competitive, aggressive, intertwined, and

web-based services arena, company reputation risk is global, often relatively

fragile, unless that is, your company’s reputation ‘bank’ is brimming fully, and generally vulnerable to a range of spontaneous, inadvertent, and/or purposefully executed acts or events. 

But, from a company reputation risk management perspective, the Craig’s List situation, was not specifically sparked or orchestrated by a single special interest group blog blitz that went viral.

Instead, the situation experienced by Craig’s List was entirely of their own making and their own decisions.  The adverse sentiment and reactions to their adult services section had been simmering above and

below the surface for many months presumably as Craig’s List decision makers made repeated business decisions, prior to the September 4th shutdown, to permit the adult services section to literally evolve with

the increasingly transparent and explicit offerings (content) for sexual services. 

Craig’s List hierarchy appears to have utterly dismissed, what, in my view, are well recognized best practices found in ‘reputation risk management 101’.  Now, some fifteen state’s attorney generals have joined in a ‘class action’ of sorts against the Craig’s List adult services section, describing it as merely a thinly veiled web-based advertising platform for prostitution and an array of other sexual services.

Among the many puzzling aspects about this situation is, Craig’s List decision to not remove the adult services section altogether from their website, rather than opting to insert, in its place, a bar bearing the

word ‘censored’?  While I pretend to have no special insight into decision making processes within Craig’s List hierarchy, the decision to use the word ‘censored’ in this instance, implies the suspension of the adult

services offerings may be more of a temporary patch, so to speak, with a more permanent ‘fix’ still under consideration.

Most reputation risk (management) experts agree that an effective starting point for conceiving – designing a company-wide reputational risk management program is to ensure it is thoroughly aligned with (a.) the company’s core business, and (b.) the perceptions and expectations of the various stakeholders.  When any component is not routinely monitored and assessed, a company can expect ill-feelings to fester, and in a growing number of instances, become significantly broader and deeper than they may have initially thought had decision makers given the matter its due attention.

Interestingly, with respect to Craig’s List, it’s not as if their adult services section was their only (service) offering, even though it served as a consistent and rising producer of revenue.  And, we must not overlook

the reality that if such (adult) services were not in demand, particularly in a semi-anonymous web-based format ala Craig’s List, it’s likely, from a business perspective, that Craig’s List would have discontinued  that offering perhaps at the initial hint of problems to come.  By doing so they could have leveraged that

decision to reap long lasting accolades from their stakeholders versus being on the receiving end of civil actions from a growing list of detractors, particuarly at the start of the mid-term political campaigns.  Bad timing on their part perhaps.

Reputation risk management is about being proactive, forward looking, and forward thinking.  It takes years to build a reputation, but today, a company’s reputation can literally be severely damaged, if not irrevocably

lost, in a single day!   Company reputation, says Jeffrey Resnick, is as much about perception and the perception of behaviors, as it is about fact.  It’s about ethics, trust, relationships, confidence, and integrity,

and interestingly, is built on the fundamental belief that management knows how to run its business and will win in the long run.  Perhaps we should ask decision makers at Massey Coal, Toyota, BP, and now Craig’s List about that.

Still many company management teams and boards hold the view that reputation risks are merely temporary public relations problems which can be pre-empted, mitigated, and/or quickly remediated through targeted public relations campaigns.  I find such perspectives out-of-step with the 24×7 realities of global news – talk show cycles and the global reach of the Internet and its highly connected social media platforms.

Reputation glitches, such as the one Craig’s List was in the midst, represent substantive ‘wake-up calls’ for management teams and boards to immediately, closely, and objectively examine how or whether

their company culture genuinely reflects their public behavior and meets the expectations of its customers, consumers, and clients?

It’s conceivable to assume that company reputation risk management will now be ratcheted up on Craig’s List to-do list!