Be wary of liability's changing face

The British consultancy SustainAbility not long ago issued a report telling of a new trend in business social involvement that seems equally transferable to politics.

The British consultancy SustainAbility not long ago issued a report telling of a new trend in business social involvement that seems equally transferable to politics.

It's a concept known as "moral liability," and it warrants consideration by public affairs pros charged with issues and image management, as well as damage control.

In The Changing Landscape of Liability: A Director's Guide to Trends in Corporate Environmental, Social, and Economic Liability, primary authors Geoff Lye and Francesca Muller explain: "Companies are operating in a new, more challenging environment where risks of legal action against them are greater than ever. Even if companies avoid trial and prosecution in real courts, society could put companies on trial in the court of public opinion."

"More is at stake than reputation," Lye notes in a piece by Marc Gunther in Business Ethics. "Moral liability often morphs into legal liability, sometimes very quickly. Laws are a lagging indicator. We're seeing rapid shifts in society's expectations of business."

Philip Rudolph, a partner with DC law firm Foley Hoag, helped sponsor the sustainability study. He told Gunther: "The bounds of liability are beginning to stretch in ways that traditional lawyering does not address. You see companies being sued by their own customers over the lawful use of a legal product" - such as the obesity lawsuits brought against McDonald's.

Gunther is quick to add his own observation: Companies are being held accountable not only for their own behavior, but also that of their partners and the host countries where they do business. "And all this is happening at blinding speed," he notes.

All of this emphasizes how companies must be extremely accurate in their portrayal of all manner of business activities and decisions. Mistakes simply aren't tolerated in this age of the lightning-fast Internet and its stepchild, the blog.

Errors in corporate reporting of any type are fodder for the critics who seem to lie in wait for certain companies to violate local, as well as international, expectations. The automatic case in point is Wal-Mart, of course. Anti-Wal-Mart Web sites and bloggers work overtime to denounce and magnify any flaw they profess to find in a Wal-Mart report or project.

At Wal-Mart, a campaign has begun to help create an image of a company concerned not merely with its day-to-day reception in the communities in which it operates, but with the welfare of mankind itself. It will be a tough sell.

As Fortune's Jon Birger and David Stires note, "Employee lawsuits, union scuffles, and local opposition to new stores have turned Wal-Mart into a media punching bag."

Wal-Mart's plans for image reversal are impressive, however. It is, among other things, seeking a "senior director of stakeholder management" who, it says, will "help pioneer a new model of how Wal-Mart works with outside stakeholders, resulting in fundamental changes in how the company does business."

High on the company's to-do list will obviously be the avoidance of any moral liability that can turn ugly and morph into a legal liability.

Wes Pedersen is leaving his post as public relations and communications director of the Public Affairs Council in June and starting his own consultancy.

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