Communication with society: how to handle a scandal yet to come

Service: interim management, policy advice on legal, political & social license (policy and execution, inventory of media attention, communication with lawyers, sparring partner for the Board, second opinion, inspiration lectures, facilitation of working sessions, mirror meetings with the management).

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Suppose you have reason to believe there is a social storm underway. A storm in which your organization is not regarded as the Solution, but rather as the Problem. At least: In every tale around the world, including corporate tales, three figures are recognized: the Villain, the innocent Victim and the Hero. Every company likes to look at itself as the hero, the problem solver. The one produces medicines to cure, another builds roads for efficient traffic. The next provides mortgages for adequate housing and yet another supplies healthy food. Against all your odds, your company is not seen as the Savior nor as the Victim but as the Savage[1] on issues ranging from Human Rights to Climate Change, Child Labour to Food Safety, Tax Evasion to Money Laundering. Oil Companies such as Shell and BP, Chemical Industries such as Union Carbide, the Swedish furniture company Ikea, fastfood concern McDonalds, energy companies as Enron, financials as Arthur Andersen and Deutsche Bank, computer companies Apple and MicroSoft, automobile corporation Volkswagen: the list is endless. All accused of being the Savage. Some companies didn’t live to see the day. We’re used to calling these events ‘corporate scandals’, with devastating consequences for the corporate reputation. How does your company handle a scandal then, especially a scandal yet to come?  Or is your company immune for nasty events and harsh opinions? Maybe your license to operate is protected by lawyers and lobbyists covering your legal and political license. But maybe your company forgot public issues management, the discipline to work on ‘social license’. Question then is how to bring the three ‘licenses’ into line. The three together are the best insurance for scandals yet to come.

Political license

Political legitimacy is found in government and administration. After all, they make the laws. They do so on the national level, but the European and International level becomes increasingly important. The WTO takes care of trade and investment law, the IPCC of Climate Change, the UNHCR of Refugees and all have their Appelate Bodies, International Courts of Justice and so on. Political and legal licenses are thus intertwined. The social license however is the sum of all and everyone that constitute ‘public opinion’. Public opinion is influenced by media, NGO’s and other parties, such as consumer movements, the union, stakeholders, shareholders, employees and professionals. In order to cope with them one has to research who they are and what communication hubs they have. The company has to listen to the frame and the wording of the frame these parties use. UThey use these media to judge your company’s products and behavior. That being known, your company and your board is able to address the company’s policies  and the language used to communicate about these policies. That will contribute to your license to operate. A social license is like the basis of support: one can hardly see it when its there, yet the situation can get rather serious when it is lacking.

Social license

“As long as society accepts the product, we’ll continu to produce PVC” a former CEO of a global chemical industry said. He did not mean that society should be lured by Public Relations tricks into liking the products, but that the product should be appreciated as something contributing to the good of society. A social license for Akzo Nobel Base Chemicals. How does society reach a social license for a company, a product or president of the board? Most businesses are far too complex to comprehend for people outside the business. What we need here is the carrier of communication: language. Language that we need to enable society to judge on our company and issues surrounding it, preferably leading to legitimize, accept and appreciate the activities of the corporation. Companies need to work on a (different) frame orientation and the wording chosen needs to be in accordance with that frame, because it is language that we construe our reality with.

One need but look at the Libor scandal, where many banks were involved in, even the formerly well reputed Deutsche Bank, or the rise and fall of the American energy company Enron and its auditing firm Arthur Andersen that went bankrupt as well, to remember the beginning of the banking crisis in 2008 with the fall of Lehman Brothers. Yet confusion is among many stakeholders. Sometimes it appears that all knowledge is available. Stronger still, the knowledge readily finds its way in the public domain. There are books and speeches, traditional media, social media, academic presentations, political questions in parliament, even strikes, demonstrations and boycots. So basically it is not as simple as saying ‘if only we would have known’.

The incident: the scandal bursts out

What is the truth, or even: what different truths do we have at our disposal. The question might be more relevant if we ask to whom the truth is attributed. er gelijk kríjgt, staat telkens onder de streep. Karl Marx, the 19th century father of communism is often quoted as saying: “Capitalism is the system that privatizes profits and socializes losses.” The French economist Piketty, who conquered mainland Europe in 2015 agrees. One can easily recognize the discussion on bilateral investment treaties such as CETA and TTIP. Profits to business and investment funds, losses to the State, hence the tax payer. Proponents and opponents fight for public opinion, both using facts that fit their frame. There are many cases known, such as the British private equity fund Apax that, through a leveraged buy-out, became the biggest shareholder of a Dutch media company in 2004. The money was lent from the acquired company, that consequently almost bent down on its debts. By the time Apax is bought out, the company has lost half a billion Euro. Apax is bought out for a price high above the market value. There is an impressive amount of literature on the subject and many explain why this is a flaw in the system. But just as many others who explain that this is but an incident. In the summer of 2015 ImTech files for bankruptcy. Allegedly it is a matter of mismanagement and even fraud, mainly in Poland. For most people this is too complex. These means that only a small comprehensible ‘fact’ remains in the debate. The rest is interpretation, meaning and emotion.

Legal license  

A ‘license to operate’ is especially visible when the existence of an organization can count on sustainable acceptance or appreciation of society. It doesn’t equal sponsoring of charity or excellent PR policy. Legitimation consists of a political license, a social license and a legal license of the organization. But the fact that an organization has its political and legal license in place, doesn’t necessarily mean that society accepts the company as a reliable company. Many a politician, CEO, scientist or someone who is in the public eye in general knows the situation by now. What is legal is at times not regarded as a-moral, but rather as im-moral and therefore unethical. Lawyers have learned to reason outside morality, this has been placed out of order. However comprehensible, there seems to be a vacancy on the seat of  ‘morale’. Lawyers who, if only on request of the Board, take that seat, have to advise in a way contra coeur. Or contra their own professional standards: law and morals simply aren’t equal.

How to bring the three legitimations together

Most incidents seem to share that the Board considers their license to operate in place when the political and legal licenses are accepted by the institutions concerned. Many overlook the social license. The social license should provide that the company is accepted by the people, even those who are no shareholder or not even a stakeholder in the company. They may still have an opinion as to the right to exist of the company. Those who do not live in either the US or Germany, who are no shareholder, nor employee, nor member of an environmental movement, nor drive a car at all, might still have an opinion on the test scam of Volkswagen. The board has to ensure that the three licenses are all in place.

Complication we work on. Main issue is a concise taxation of the social domain, who the players are and who the hubs. What meaning they confer. Political license is not such a problem, once the Board manages its public affairs, including members of the Administration concerned with the company. Legal license is mostly conditional for every move of the company and lawyers tend to know their domestic, European and international business. Social license is the sum of everything and everyone ‘public opinion’ consists of. They in turn are influenced by the media, NGO’s and other interest groups, such as consumer movements, the unions, all kinds of stakeholders, shareholders, employees, academics and professionals. They need to share your frame and go along with your wording. If they don’t you have to shift either your communication or your policy.

Clients we worked for:

Banks, Insurance Companies & Law Firms     Housing     Packaging Industry