Even though Christo Wiese has taken the helm as the interim CEO and is trying to stabilise the ship through the storm, Steinhoff faces the threat of becoming the biggest bankruptcy in South African corporate history.
How does this happen? “It all boils down to lack of internal governance,” says Regine le Roux, managing director of Reputation Matters. “Reputations are ruined when values are negotiated, ethics are compromised and leadership actions are questionable. Having authorities investigating irregularities, and by associating the words ‘senior executive’ with tax evasion, documentary forgery and fraud, is never a good combination.
“If you keep your nose clean, follow policies and procedures and adhere to governance structures your integrity as a company will not be compromised."
“This should sound obvious; unfortunately with the increase in questionable business deals across the board and industries which has come to the light in this year alone, it clearly isn’t that basic.
“The only way businesses can grow and thrive is by having a solid reputation; people and other companies want to do business with companies that have a solid reputation. Reputations have a direct correlation with a company’s bottom line; with a solid reputation you are able to attract top talent, produce products or services that people want to spend money on which ultimately improve your financial standing. The contrary, of a negative reputation, is of course also true.
“Steinhoff have their work cut out for themselves to rebuild their reputation and trust in the brand. One of the key factors is to keep all their stakeholders in the loop,” says le Roux.
Communication is key. Besides the investment community that needs reassurance that their investments are safe, a very important stakeholder group that must not be neglected are their employees. An internal communication drive is imperative. Employees will want the reassurance of whether their jobs are safe, how the situation impacts them in the short, medium and long-term. When there is no communication people will draw their own conclusions and you can be sure that those messages and insecurities will be communicated to the outside world.
Steinhoff International's share price continued to plummet in heavy trade on Wednesday as fears mounted of long drawnout investigations by regulatory authorities in Europe...
7 Dec 2017
Check your reputation
How can a situation like this be avoided? Le Roux advises that regular reputation checks are highly recommended. Understanding your reputation and how your organisation is perceived by different stakeholders provides very valuable insights which help to identify and rectify gaps.
“I do think that if they had invested in understanding their reputation, questionable behaviour would have been highlighted and identified much sooner, and action taken to prevent the mess they are in now. Understanding a stakeholder group’s perception isn’t necessarily the truth, it is, however, someone’s reality. I believe that where there is smoke there is fire, so if one of the stakeholder groups knew that the dealings of the management team were questionable it would have been picked up in the research; warning flags would have been raised, and the board could have taken remedial action much sooner.
“Instead of waiting to see which paw paw is next to hit the fan, consider stabilising your reputation. In the end, reputations do matter,” concludes le Roux.