PAUL HOLMES: Boards must assume greater responsibility in dealing with corporate reputation issues

Imagine you're the SVP of corporate communications for a Fortune 500 company. Imagine you're in the early stages of a crisis: your CFO has been setting up some fancy financial deals that don't show up on the balance sheet. Imagine your CEO is in denial, or worse, imagine he's complicit in the whole crooked scheme.

Imagine you're the SVP of corporate communications for a Fortune 500 company. Imagine you're in the early stages of a crisis: your CFO has been setting up some fancy financial deals that don't show up on the balance sheet. Imagine your CEO is in denial, or worse, imagine he's complicit in the whole crooked scheme.

So you go to the CEO, and he tells you to make the story go away. You're good with the media, right? You're pals with the guys at The Wall Street Journal? You try to explain that the media doesn't work that way, that this is a good story and they are going to follow it wherever it leads, regardless of the fact that they consider you a nice guy. You tell him the company needs to bring in an independent auditor, someone credible, to conduct his own investigation. It may unearth wrongdoing, but it's better to get the whole story out there rather than suffer the Chinese water torture of new revelations every day. It's good advice, but he won't listen. What do you do next? Chances are, you have only two choices: Respect his decision, though you know it's wrong, or quit. It's possible to rationalize either option, but neither will serve the interests of the company in the long run. That's why - especially in the wake of recent scandals - intelligent companies must start setting up mechanisms that allow their boards of directors to exercise some oversight over decisions that have major reputational or governance implications. To put it bluntly, corporate reputation is too valuable an asset to be left to one individual - even the CEO. We have seen in recent months, cases in which the CEO's personal PR interests diverged from those of the company (i.e. Martha Stewart), and others in which the CEO was in such deep denial that he ignored massive reputational risk even as his company fell apart (i.e. Ken Lay). When such circumstances arise, boards need to set up reputation committees, or at the very least monitor reputation risk through their governance committees. That may mean creating a mechanism through which the senior corporate communications professional can report on a regular basis to the board. It may mean putting more experienced PR professionals on boards. In extreme circumstances, it may even mean the board has to hire its own external PR counsel to provide objective, disinterested perspective on the reputational challenges facing the company. But if boards are going to take governance seriously, they have to start thinking of corporate reputation management as one of their most important responsibilities.
  • Paul Holmes has spent the past 15 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of http://www.holmesreport.com.

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