August 21, 2020

When expectations of responsible business practices meet the relentless spotlight of social media, reputations can suffer. No company is perfect. But by quickly and thoughtfully addressing the problem behind the headline – or clarifying that an issue may not be what it seems – companies can mitigate any potential damage.

On April 9, 2017, Dr. David Dao Duy Anh was booked as a passenger on a United Airlines Flight from Chicago to Louisville. Dao was forcibly removed from his seat before the plane left the ground after refusing to give it up for a United employee. Having declined a voucher for the inconvenience of being bumped to another flight, the 69-year-old Dao was subsequently forced off the plane by security personnel. He was seriously injured in the process.

Soon after the incident, a passenger-shot video went viral. Things just got a lot worse when United CEO Oscar Munoz responded to the video by lauding the actions of security personnel – claiming that Dao was belligerent and disruptive. The claim was refuted by eyewitnesses.

In the immediate aftermath of the incident, United’s stock fell 4% – knocking approximately $1B off its market value. To stabilize the stock and United’s reputation, Munoz was subsequently forced to issue two apologies, one for the incident itself and the other for the company’s response to it.

The lesson here is not about bungled crisis communications. It’s that the actions of companies today are highly visible. If your response to missteps, or mistreatment, is not aligned with what people – including investors – are seeing, the results can damage to your brand and your value. This is the truth of a world where ESG factors like brand reputation are material – especially when the general public has a tool in social media to call companies to account for their ESG-related missteps.

All this came into focus again recently when SumofUs, an activist group with the aim of stopping “organizations from behaving badly”, targeted the TD bank. They used social clout to call out the bank for what they characterized as increasing “its shares in private prisons giant Geo Group by a whopping 8,000%”.

TD’s response was swift and clarifying, claiming the holdings in Geo were not “proactive investments” but rather the result of the bank “providing investor services for third party Index and ETF clients (that resulted in holding) temporary hedging positions in these names as they are found in a wide spectrum of U.S. indices”. TD was not, as SumofUs implied, directly investing in Geo. Nor was TD providing financial services directly to the entity. In fact, the company definitively stated it does not enter into any proactive relationships with the for-profit prison system and it reaffirmed its support of the Universal Declaration of Human Rights.

Like a lot of companies, TD’s challenge is that it operates a complex business with many moving parts. And sometimes companies can get tripped up by outcomes that aren’t tied to any specific intent. This is especially true in a world where transparency is an operating necessity and social media tends to amplify missteps – intentional or otherwise – either with little discretion, or in line with a very specific agenda.

When we engage with companies on ESG risks (which, full disclosure, we have done and continue to do with TD on a number of ESG-related fronts), we envision many scenarios that could create headline and brand-related risks. Sometimes, of course, you can’t anticipate exactly what will happen. What’s most important when a company finds itself the subject of an unflattering headline, is to understand that a bad incident does not necessarily make a bad company. What really matters is how you respond to missteps, and especially the processes you put in place to mitigate repeat performances.