According to my late grandmother, your reputation comes by foot and disappears on a horse. My grandmother was born in 1890, back in the days that the airplane still had to be invented. Fifteen years after she was born, she saw the first car drive around in her village in the Netherlands. Nowadays we would say: your reputation comes by foot and does not disappear on a horse but is ruined through Facebook.

The essence of the matter is and was that you build a reputation carefully and slowly for years, but it is ruined very quickly. Rebuilding it after that is very difficult or impossible. So a good reason for everyone, including managing directors and supervisory directors, to cherish your and your company’s reputation and to guard it as a great treasure. Unfortunately, sometimes you do not have much say in the matter. How come?

Damage
In recent years we have seen more and more often, also in our country, that ruining someone’s reputation is not as much the consequence of his own actions. The damage to one’s reputation is caused by a willful act of others who believe to have an interest in it. This can be an alleged moral interest. We all know the characters who disclose incriminating matters without thorough knowledge of the facts. Why is often unclear. Sometimes they believe to have to express their moral judgment in this way. Other times political motives drive them. Questioning the integrity of your political opponent is a very effective way to disarm him. This is often a tragedy for the persons involved. What can we learn from this?

Risk management
To be very careful, so much is clear. Also as a managing director and supervisory director. In terms of governance, this is called ’risk management’. It concerns more in particular the management of ’Reputation Risk’. But that is not enough. One of the underlying problems is the fact that we all have a responsibility regarding this issue. It actually concerns the moral standard of our society. Journalism, for instance, can easily reduce the harmful effects of the moral crusaders and political schemers by not considering the mere fact of the accusation to be news, but by first independently and thoroughly verifying whether the accusation is indeed based on real facts. ’Hearing both sides of the argument’ is seldom applied. And even if both sides of the argument have been heard, it is not sufficient. After all, the reader or listener will actually expect the person involved to deny the accusation. At that moment, the damage has already been done. The reputation has been ruined. And that is what happens quite a lot in our country: someone makes an accusation in the news and the accusation itself is the heading in the newspaper and the first news item on the radio. Not until afterwards it is (sometimes) explained that it was X or Y who said it. The public does not think that subtly. By then, the accusation has already rooted in the public’s consciousness and subconsciousness. It cannot be repaired.

Handling it
How to handle it in the boardroom? That is not so easy. There are two ways. I generally advise against the first and in favor of the second. The first way is the hard contradiction. Sue the man! Two crucial matters are often disregarded in that case. First, it means that the contested comments are not quoted once or twice but at least twenty times by the media. They have then rooted, even though they later appear to be wrong. After all, that it is not correct, is no news. Secondly, it also means that the comment will be decided on in legal proceedings. We, fortunately, have very broad freedom of expression. So the court will not quickly shut up someone or order rectification. Even if it was not true, the court still reasons that you are allowed to say a lot if it concerns a matter of public interest or a public figure. Reputation ruined.

The second way is ignoring the accusation, not responding to it. That is difficult. Ultimately, it is often still the most effective way. For if the accusations are inaccurate (I do assume that in my examples!), they often fade away quickly. For there is no actual support and the newsworthiness has disappeared.

Conclusion: never underestimate the reputation risk in the boardroom. Dry run how to handle it when the reputation of the company is at stake on account of an accusation. Determine ample time in advance who will be the (sole) spokesman. And if it does not concern an accusation but a serious incident, something serious that has really happened with or in the company? There is only one remedy: disclosure. The alternative invariably leads to a ruined reputation. Not to be repaired.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost!

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