When values are infringed, corporates erode public trust and face reputation risk. Neeran Naidoo takes stock of the damage.
Photo by Daria Nepriakhina on Unsplash
Simon Susman, former CEO and chair of Woolworths Holdings, tells the story, as often as he can, about the frog in the Woolworths lettuce.
The story goes like this: A customer in Constantia, an upmarket suburb in Cape Town, calls customer services to say there’s a frog in her lettuce. The customer services consultant says no problem, we’ll deliver another lettuce to your door. It’s not the lettuce, the customer laments, it’s the frog I’m concerned about.
When Susman heard this, he arranged for the frog to be packaged and flown back to its home on a remote farm in Limpopo.
He tells the story to drive two values that, with others, embody the Woolworths brand. The first is that good customer service is not negotiable in a reputational economy. Secondly, environmental sustainabilty is what customers have come to expect.
Values drive internal behaviour and when it results in synergy it strengthens a brand and protects corporates from potential reputational damage and risk. Behaviour that is consistent with values becomes the culture of institutions and the basis on which decisions are made.
Values form the bedrock of the emotional bond by which stakeholders remember a brand; they drive decisions to invest their savings, work for or do business with a corporate they hold in high esteem. This is part of building and maintaining a sustainable reputation, as well as trust.
There have been serious transgressions exposed in recent weeks of corporate malfeasance at Sasol, Tongaat Hulett and Comair. Interestingly, a toxic culture was singled out in both Sasol and Tongaat’s declines.
Sasol’s failure on the US Lake Charles project was influenced by decision-making characterised by a “culture of fear”. Senior managers did not question one another and concealed key bits of information from senior leaders.
Tongaat’s woes were driven by a dominant former CEO whose tenure with the business spanned 41 years, dodgy land sales to artificially prop up its performance, and dubious accounting practices. Corporate governance was lacking and a cult of personality ruled its operations.
Following closely at their heels is Comair which, within a year, bought leadership consultancy Metaco; ensured a majority on the Metaco board; changed the strategy; secured loans for the new focus — then declared the business insolvent; withdrew its board members; and demanded its money back. For a consumer brand in a market with choice, such behaviour is a high-risk game of brinkmanship.
Such behaviour is inconsistent with Comair’s values and is sure to erode trust. Unfortunately, when these transgressions start at board and leadership level they are carried down the line of command. Ask Tongaat.
It seems the culture of lack of accountability and consequences runs deep in SA’s corporate life, which suffers from a severe trust deficit. A broken culture creates an environment for such practices to be pervasive and allows transgression of values at the expense of reputational risk and shareholder erosion.
Consistently, when corporate values are a mere blot of ink on paper, signifying nothing, reputations get compromised. Culture trumping values is a recipe for doomed institutions.
Comair’s recent AGM makes for fascinating reading. Excessive fees for the chair; directors nominating themselves for tenures of up to 40 years on the board, who still claim independence; and a bonus for one of the CEOs after eight months of service without a job description, targets or area of accountability, does not garner trust.
Comair’s homogeneous culture, reinforced over far too many years, does not allow for critical and independent thought, protect the values of the brand, or support ethical decision-making. One could ask how the board sanctioned its brawl with Metaco, a small business now reduced to a shell. It’s a festering toxic culture, which, if not curbed by the new chair Lindsay Ralphs, will expose the organisation to significantly more reputational risk.
The benefit of a culture that supports business strategy, trust and improved reputation is underrated in corporate SA. Bad culture is simply not good for business and will consistently trump strategy. Regrettably, reporting on culture is not yet a corporate requirement.
Naidoo is CEO of crisis communication and reputation risk consultancy Hewers.
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