For Clients and Friends of Potomac Communications Group, Inc.
Protecting Your Company's Reputation
Despite Rumors on the Internet
company’s reputation is one of its most valuable assets. But for many companies, it may be at risk as a result of rumors, innuendo and leaks that appear in chat sites and investor message boards over the Internet. Protecting a blue-chip reputation in the Internet Age is a delicate and difficult task.
Consider the following examples:
- Procter & Gamble is aggressively debunking false allegations – spread over the Internet – that a popular product is contaminated with dioxin. Through scientists and other credible third parties, Procter & Gamble is responding in customer communications and its product-focused Web page. But the rumor continues to unfold.
- The Wall Street Journal reported recently that the son of the CEO of a major mutual fund company – posting on a message board under a pseudonym (as most posters do) – made aggressively positive predictions about the company’s future performance while defending his father’s leadership. The article embarrassed the company and raised questions about whether the posting was based on insider information.
- Raytheon filed a lawsuit against 21 anonymous posters on Yahoo’s message board, using a subpoena that forced Yahoo to reveal their identities. Many were Raytheon employees, and four have since left the company.
An increasing number of companies have filed similar “John Doe” lawsuits aimed at unmasking message board critics, who often stop posting. Several companies have filed lawsuits seeking millions of dollars in damages for libel, defamation and “tortious interference.” The resulting media coverage can cast these companies in a negative light.
Investor chat sites are sometimes the first place that internal issues surface outside the company. Many include “informed rumors” about financial woes, management clashes, product development or performance problems, acquisitions, and restructurings.
Some rumors are nonsense. In fact, some are planted disinformation. But some are very real and competitively sensitive. And some postings may include “insider information” that could inadvertently put the company in violation of Securities and Exchange Commission rules on selective disclosure.
Who visits these sites?
They attract investors, who exchange information and opinions about a company. But investors aren’t the only ones.
- Competitors post opinions, rumors and innuendo that can create commercial damage.
- Company employees share their opinions and gripes.
- And journalists and securities analysts surf the chat sites of the companies they cover.
- Many companies monitor these chat sites. But more do not – at their peril – so they don’t know what is being said – and then spread – about them via this powerful medium.
One PCG client not only monitors investor chat sites, but also responds to rumors that are serious enough to compromise its businesses by posting the facts on the chat site. They present the facts in good-humored, conversational messages that avoid “corporate speak” or jargon. This approach helps readers identify the issues that management sees as potentially significant. And it protects the company’s reputation without creating additional issues, such as pitting the company against free speech through a “John Doe” lawsuit.
The value of reputation
According to Ernst & Young, the investment community sees between 30 and 50 percent of a company’s value as intangible, and some of that value is based on its reputation. The 1998 Fortune survey of the most admired companies indicates that the price/earnings ratios of companies with high corporate equity (i.e., a great reputation) were 12 percent higher than those with low equity. That means a $5 billion increase in market capitalization for the average Fortune 500 company – convincing evidence that a company’s reputation is indeed worth its weight in gold.
Clearly, preserving and enhancing a company’s reputation is one of the soundest investments management can make. And learning how to monitor Internet chat sites, identify serious issues, and neutralize or deflect them is now critical to successful reputation management.
NOTE: PCG monitors sites on behalf of several clients, reports trends and provides counsel on corrective actions.
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