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April01

Defamation damage control

THOSE of us who pay attention to corporate behaviour and follow trends know that we exist in what is commonly referred to as the ‘reputation economy’.

reputationThis means that apart from an organisation’s traditional assets, its reputation sits increasingly higher in the list of attributes that will make or break it. In other words, it trades on trust. Businesses that understand this invest millions of rands in structures aimed at protecting and enhancing their reputation. And by this I do not mean spin doctoring; that is what politicians and unscrupulous businesses do.

The serious ones know that their corporate well-being depends on the extent to which stakeholders hold them in high esteem. The attitudes of rating institutes will, by extension, influence decisions of lending institutions vis-à-vis companies seeking credit.

We’ve heard of recent adverse decisions by such rating institutes against the likes of South African Airways and Eskom. Floundering companies like Basil Read, even when the downgrade is blamed purely on structural and operational reasons, need to be on the lookout because if shareholder trust levels drop, so will investor goodwill and any prospects of a positive turnaround in trading fortunes.

Best bet is to come clean

But what happens if accusations, rightly or wrongly, get levelled at corporate wrongdoing? Whether such accusations are levelled at an organisation or an individual, the best thing to do is always to disarm the accusers by telling the truth right at the outset.

Thanks to the proliferation of digital media platforms – especially social media – online corporate watchers and ‘brandivists’ of all kinds, no brand can hide from public and stakeholder scrutiny anymore.

Big brother is all over the place. Once something gets out there and the watchers get hold of it, they will not let go until the organisation comes clean with the whole truth. Only the perceived level of sincerity accompanying this process will determine whether the stakeholders forgive and let bygones be bygones, or keep pressing for answers, dragging the organisation’s name in the mud even further.

Of course, coming out with the truth from the outset is easier in cases where the accusations are false. We also know that there have been many instances in recent years where accusations have been made which turned out to be true. A few years ago, Woolworths came out bruised after it was accused of behaving like a bully after it introduced branded soft drinks whose intellectual property was claimed by a smaller company on its shelves.

The jury is still out on what exactly happened in that case, but the retailer had to withdraw the products to keep the peace with its irate customers and other watchers. We’ve also seen cases that ended up in the courts and failed dismally, the most recent of which concerned Cell C in 2014, when it could not convince the court that the public rants of an unhappy customer were unjustified.

Cases involving alleged Ponzi schemes have also gained renewed prominence following Bernard Madoff’s $50bn plot. For a number of years, this fraudster had collected hard-earned savings from people who trusted him and lived a lavish life while he used payments by new investors to appease older ones.

READ: UPDATED WITH LETTER: Belvedere: Kellermann’s Basileus connection

But this could not last forever without being noticed. For this well-written script, reported to be the biggest Ponzi scheme in recent US history, Madoff lost everything – including a son who killed himself – and was sentenced to 150 years in federal prison, where he still languishes.

South African media is abuzz with a new alleged Ponzi scheme by a group of businessmen accused of taking millions of rands from unsuspecting investors to channel into one company, said to be co-owned by at least two of them. The jury is still out on the veracity of the accusations but, in the meantime, reputations are being damaged while friends and associates are said to be distancing themselves from the accused business men.

Ponzi schemes are usually structured like complex webs and mazes. Because of this, it will take some time for the whole truth to come out. When it does – after all the current accusations and counter-accusations cease – reputations will be shattered. But if the accusations prove to be false, the accused will still need to put a clever communication plan to work their reputations from under the dark cloud currently hovering above them.

After all, if they still want to conduct business and be trusted, there would be no other way but to comprehensively explain their actions and put the matter behind them; assuming that they will not be too incarcerated or on the run to do so.

While it is fair to expect the media to check its facts before publishing, going after the media in an attempt to stop it from reporting on the emerging story is never the cleverest way to protect and enhance reputation.

  • Posted by donvalley
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