The speed of harm runs far and wide.
Shareholder derivative suits arising out of data breaches have opened a whole new front for suing corporate officers focusing on cybersecurity. Law enforcement and regulators have piled on to the cybersecurity breaches. Then there is the employee class action cases against Sony following the cyber attack on its data. The Department of Justice has also apparently come to the realization that deferred prosecution agreements with Wall Street were toothless and might bring more actions against past offenders.
All this poses serious challenges to boards. Legal teams have had to retool to meet the onslaught. But that means so should the litigation communications strategy and tactical planning. There are new rules for litigation PR and boards need to mindful of these changes or face a grim future fending off activists and other newly hostile parties:
* The Primacy of Real Time: Being timely in your responses has taken on a more urgent meaning. In August 2013, when Carl Icahn tweeted about his plans to have dinner with Apple CEO Tim Cook to discuss the "magnitude" of the company's stock buyback, a not so minor shockwave went through boardrooms. Activist public posturing designed to send a clear message to boards can have almost instantaneous and broad impact. Conventional communications strategy unfolds through short, medium and long-term timeframes. Driven by social media, real-time battlegrounds in the public sphere have become important. This heightens the necessity for close coordination between the PR and legal teams to be sure that if it has to be said quickly it's said right.
* The Speed of Harm Runs Far and Wide: It's always been the case that some of the biggest mistakes happen at the outset of litigation when the media pick up on one ill-considered statement made by an unprepared or undisciplined spokesperson "framing" the issue in a way that hurts your case. Making that mistake today not only happens faster but also reaches much further and wider across stakeholder groups--and you'll know exactly their response just as quickly. This results in a "boomerang effect" where PR missteps come back at the board from multiple directions. Social media has given just about any and everyone a stage to voice opinion--written and visual. This creates a kind of "fog of war" for the board in determining which views to take seriously, or not, and which to address publicly, when and how. Your PR team will have a way of assessing and prioritizing the universe of opinion to guide the board.
* The Return of the Stockholm Syndrome: Still, even a prioritized response strategy can feel inadequate. Enter the Stockholm Syndrome, a phenomenon first identified during a failed bank heist in Sweden in 1973 where hostages feel so much sympathy for their captors that they are unable to escape when given an opportunity. An activist attack, which today always comes with a sophisticated use of media, old and new, combined with the onslaught of stakeholder opinion, can easily lead to the feeling of being held "hostage" in your own boardroom. That has important PR implications. Boards must balance response against silence but that imperative is now amplified. Too much public engagement is like the old saw about wrestling with a pig in the mud--only the pig enjoys it. Too little opens you up to being seen as hiding hostage in your bunker.
* Tempered Resilience Is Now Even More Important: It's always important for the board to be seen as measured and temperate in its public responses to activist litigation--no matter how outrageous the allegations. This is even more important when a government action piles on. That can be hard to achieve consistently through the entire cycle of litigation through to trial. Litigation doesn't only use vital corporate financial resources but is also a psychological "tax" on the board and on management. Your PR team should be used to minimize the impact of that "tax" by focusing the board on the most important public issues to address and creating a sense that you have some control over the "story" as it evolves in the media.
* Budget Aggressively: While communications counsel by definition typically is less expensive than the legal costs, be prepared to spend what's required to achieve your goals. The new rules of litigation communications means more engagement by PR with legal, IR, and management, and more communications counsel to the board. More time means more money.
* Life After Litigation: All legal battles eventually come to an end. One of the most important contributions communications makes is to help "bridge" the organization back to normalcy with stakeholders after the matter is resolved. So when the battle is over the campaign continues.
Montieth M. Illingworth is president of Montieth & Company, a specialist communications advisor to boards and management teams on litigation. He can be contacted at montieth@ montiethco.com.
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|Title Annotation:||SHAREHOLDER RELATIONS|
|Author:||Illingworth, Montieth M.|
|Publication:||Directors & Boards|
|Date:||Jan 1, 2015|
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