One of the most critical issues facing directors of financial services institutions in particular and other listed and unlisted entities more generally is how they deal with the management of reputation risk.
Directors from an older generation that had no access to encrypted applications and instant messaging are undoubtedly looking at the rate at which people are communicating with journalists about their entity’s affairs with their heads spinning.
Consider the recent issues faced by AMP during the Pahari saga that saw financial services stalwart David Murray leave the chairmanship of AMP along with former Treasury boss, John Fraser.
Boe Pahari was appointed as the head of AMP Capital earlier this year but that reversed itself within a couple of months once news of a previous disciplinary matter involving sexual harassment began to spread.
The fuse was lit by a story in the Australian Financial Review and it just snowballed. It spread to other media organisations and it became the open sore that festered in the pubic square until the board of directors took steps to find the ritual resignations from the board.
You can understand people feeling as if they are under siege when they begin to get phone calls from the media and other stakeholders about a decision that has been made by a board or senior management.
Reading between the lines published in the media you also begin to get the sense that there are times when crisis management may not be a strong suit for boards that are accustomed to dealing with things in a room when discussions are kept in confidence.
One of the critical issues from a governance standpoint is for boards of any entity – particularly those of businesses operating in the financial services sector – to drop the notion that silence is always the best possible answer when the arrows come raining down on your camp.
Managers in banks cannot just assume that a story will blow over within a few days and things will reach a regular tempo without consequence.
That might have been true in days gone past when the kinds of technology we were dealing with enabled boards to sit and contemplate for longer when a public relations problem arose.
The advent of social media and the ability of journalists and sources to use encrypted apps to communicate means that companies need to be more agile.
There may be reasons to make a judicious statement that clarifies circumstances where executives leave under a cloud because of conduct. Not everybody needs to know every lurid detail. Just because some folks like oversharing on Instagram, Facebook, Twitter and LinkedIn does not automatically mean a company should tell all about why somebody leaves a company.
Parties might be in a dispute, for example, but there are such things as clauses that relate to both sides agreeing to not disparage each other in public once things conclude.
Those agreements are critical because they allow the company and the staff member to part and for the person leaving to attempt to make a new start in another environment.
The onus is also on the parties involved in such discussions to be judicious about who they involve in their immediate communication. A dear mentor of mine once said that if you told three people, you may as well have told 111.
Something else also needs to be considered in these situations.
Companies need to have a better handle on what decisions they make are likely to cause a ruckus internally and externally.
They need to be able to have a strategy for a response and not just make things up on the run because they’ve remembered everything else except for what they might do it the word gets out early on a particular issue.
One of my favourite examples of all time of ill-preparedness was the appointment of a high profile individual to a professional firm. I found out along the grapevine and started making queries.
People within that organisation were genuinely shocked I found out and they asked the inevitable question.
I might have pointed to the fact that I had heard said high profile individual’s name was already on the internal phone directory of the organisation and people had begun talking about it.
The organisation concerned had 6,000-odd employees at the time. Each employee had access to the directory and, of course, they had access to a phone!
‘There,’ I said bluntly, ‘is your problem’.
Be prepared for anything you do to make it into the newspapers and get ready to answer tough questions because simply playing the strong, silent type is not going to work.