Michael D. Moberly December 10, 2012
A question regarding reputation risk occurred to me over the course of the past two weeks, e.g., are political – ideological acts, behaviors, and/or verbal expressions uttered by senior (private sector) executives more likely to be overlooked and/or pardoned, hence having less, if any, adverse impact on a company’s reputation had they not been uttered in circumstances unrelated to an election cycle?
As readers recognize, a company’s reputation is largely comprised of relatively stable sets of expectations, held by consumers, stakeholders, and markets. Readers also know when managed correctly, reputation can be a substantial and consistent source of contributory value manifested through such expectations, in the form of competitive advantages, profitability, market space, and sustainability.
This recent national election cycle, has, one might assume due to several, primarily fiscal ‘game changing’ pieces of legislation, prompted numerous company CEO’s and senior executives, representing various industry sectors, to assume an unusual public voice, i.e., ‘gone on front street’ to express their opposition to, among other programs, the enactment of the ‘healthcare affordability act’ or Obamacare. That is, numerous senior executives have publicly stated they would either lay off employees and/or reduce employees work hours to part-time, along with various other overt moves to offset the presumed added expense required to comply with Obamacare. We can assume some portion of their expressions of frustration may also evolve from angst associated with how the ‘fiscal cliff’ issue will ultimately play out in the House and Senate.
For a particular act, behavior, and/or verbal expression to rise to the level of constituting a full blown (company) reputational risk, conventional thought is that there needs to be a direct and measurable ‘clash’, if you will, stemming from the adverse act(s) (events, expressions, wrong doing, etc.) and consumer, stakeholder, and/or market expectations (perceptions). This in turn, ignites some level of adverse consequence to a company’s reputation, e.g., in the form of losses in consumer loyalty, sources of revenue, company value, market position/share, stock price, etc., stimulated even further through social media. The bottom line is that reputation risk can ultimately and rapidly manifest itself as temporary, permanent, and/or irrevocable harm to a company.
I’m engaging in a little speculation now, but when such expressions are interpreted as originating from a CEO’s personal political ideology for example, adverse (reputational risk) consequences – impact, insofar as I can tell, tend to be minimal and sort of self-mitigating. On the other hand, CEO’s who express a politically ideological opinion publicly, in opposition to the current administration’s legislative agenda, particularly pinpointing aspects which the electorate and legislative bodies are already deeply mired and polarized, ala same-sex marriage, Obamacare, government’s role, expenditures, national debt, etc., these too can be a self-assessing, but, in the opposite (favorable) direction because, for a segment of otherwise loyal consumers, stakeholders, and markets such expressions are more likely to reflect an expectation n the growing ‘blood sport’ of not just politics, but the increasingly aggressive, globally predatorial, and winner-take-all business transaction environment which we are growing more accustom. As we witnessed numerous such examples in both pre – post (2012) election campaign, this phenomenon becomes a new variant to company reputation risk which we’re likely to see more in the future.
To be sure, I’m not suggesting all political – ideological views expressed by senior executives, in the midst of a political campaign cycle are welcome, will be embraced, or disregarded by consumers, stakeholders, or markets, as some may be inclined to assess such expressions as a poor reflection on the companies’ reputation and image and act accordingly.
The First Amendment to the U.S. Constitution not-with-standing, there may be legitimate questions whether politically ideological expressions as conveyed here by senior (private sector) executives are contradictory to a company and its boards’ fiduciary responsibilities ala Stone v. Ritter. In Stone, a Delaware court (2006) drew attention to board – director oversight (management, stewardship) of compliance programs and company assets. In part, the court’s decision read…
’…ensuring the board is kept apprised of and receives accurate information in a timely manner that’s sufficient to allow it and senior management to reach informed judgments about the company’s business performance and compliance with the laws…’
Thus, a not-so-outlandish interpretation of Stone may be particularly significant when senior executives’ political – ideological expressions carry many of the known requisites for producing at least some consumer push back, i.e., reputation risk. In these instances, political neutrality, at least publicly, may be the better, and more ‘expected’ course of action.
While I have accumulated no objective data as yet to support or invalidate the suggestive viewpoints expressed here, neither have I seen objective evidence that contradicts them.
To further speculate, this may prompt some to wonder if Citizens United v. Federal Election Commission, 558 U.S. 310 (2010) working in tandem with the exhaustive negative campaign advertising in the recent election cycle has anesthetized consumers, stakeholders, and markets to what may have otherwise been sure reputation risk, had the statements been uttered prior to the recent 18+ month campaign (election) cycle.
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