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Public Affairs Insights from the Centre

2 Apr 2009

The best of times, the worst of times

Wayne Burns

In ordinary times, stewarding corporate reputation can be a hard task.

In extraordinary times – which the International Monetary Fund now calls a great recession – this effort can be leviathan.

Witness the community angst about and media and political focus on corporate job losses, bonuses and remuneration during the past six months.

Earlier this month AIG executives in receipt of bonuses post the US Government bail-out received death threats and face Congress attempting to pass a special tax law aimed specifically at them. In France, the CEO of 3M was held against his will by disgruntled workers, after he announced job cuts.

Around the world, considerable political and social comment about corporations has been so acerbic that it carries a tone similar to what would be applied to pornographers.

A recession/economic downturn is what is politely termed ‘challenging’ for corporations and their reputation architects, the public affairs team.

For most of 2008, corporate announcements of product or project deferrals, executive remuneration arrangements, job losses or employment off-shoring did not attract the media, community and political comment and concern they do today. The socio-political lens through which these announcements are viewed now has altered radically.

This puts the public affairs management function – which interprets and advises on the socio-political environment – front and centre of organisational discussions about the economic downturn.

The legitimacy gap between corporate performance, and community expectations about corporate performance, has been racked by events and corporate responses to the global financial crisis.

This represents a material risk to corporate reputation. And this risk does not look like easing any time soon.

Experience of previous economic slumps (and that of entities operating in sectors and industries characterised by high stakeholder sensitivity to issues) suggests organisations that understand stakeholder attitudes and attributes are best positioned to engage those stakeholders.

This includes understanding socio-political nuance, and developing and crafting messages that will communicate corporate direction, actions and intent, as well as resonate with stakeholders concerned about the economic crisis.

The AIG snafu highlights especially how not engaging effectively with the public affairs function to understand the socio-political environment can get companies into a whole lot of trouble.

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