I recently attended the third annual FluidRock Governance Conference and this quote from Warren Buffett – arguably the world’s most successful investor – kept playing over in my mind.
Disclaimer upfront: I am not the type of person who wakes up in the morning thinking about going to a conference on “Governance” – but I had heard very good feedback on the 2024 event and the lineup looked interesting.
Early on, one of the speakers made a comment which highlighted the relationship between governance, reputation and the commercial value of your business. In a nutshell – businesses with good governance have better reputations which in turn allow them to drive profitability and ultimately create value for the owners and shareholders.
On paper this feels pretty obvious and self-explanatory.
Operationally, how does this relationship tie into your communications strategies?
Every management team will tell you the reasons they are better than their competitors, but are clients prepared to vote with their wallets or will they stick with the “tried-and-tested” in the industry?
This is particularly relevant in the financial services and investment universe
One of the big challenges we are seeing in South Africa at the moment is impersonation fraud of reputable financial services businesses as well as JSE-listed executives. In short, channels such as Signal, Telegram and WhatsApp are being utilised to solicit investments. Week after week, the Financial Services Board (FSB) releases announcements warning the public about a new asset manager, stockbroker or executive of a listed business which is being impersonated.
Whether you are sitting on the board of one of these entities or are tasked with managing stakeholder relations, these issues are difficult to respond to. These are not typically channels which your business utilises – so you are not tracking them – but the people behind them have the ability to hide behind the anonymity offered by these platforms.
Those who operate in the financial services sector know that one of their most valuable currencies is trust. People want to know their savings and investments are safe with you. Beyond impersonation, you can also throw in issues such AI-generated images of key staff, cyber-security and fraud – the world is a very complex one from a reputation perspective.
It’s not enough to just say: “It’s not us on the Telegram channel”.
Internal and external stakeholders need to know what you sound like and how you communicate across your channels.
Challenge yourself and introspect: How much time, money and agency resources are you expending on keeping social media turning over? Are these activities keeping a marketing team or agency employed… but not really giving you a tool that speaks to your governance, trust and reputation?
Will your board of directors be more satisfied with your LinkedIn engagement or knowing that you are thinking deeply about reputation, risk and using communications channels to bolster the value of your organisation?
The debate around the primacy of the shareholder and stakeholder engagement
Earlier on, I made the distinction between owners and shareholders, and this was quite an interesting theme which came through from the discussion with Mervyn King.
For those who are not familiar with King, he is regarded as the doyen of corporate governance in South Africa and is the man behind the King Code on Corporate Governance.
One of the interesting discussion points which came up is this one around what businesses and boards term “the primacy of the shareholder” – in essence, does the business operate and take decisions for the benefit of shareholders and should this be the focus of boards.
As a capitalist, the natural reaction is ‘absolutely’… but King made an interesting observation about drawing a distinction between owners and shareholders.
When you are the entrepreneur starting out your business and putting sweat capital in – you’re the owner. If you are the Exco team and you receive your annual share options, your motivations are different. What potentially happens is that the entire focus is on the profitability and share price performance, while the other partners in the ecosystem – including suppliers, creditors, policymakers, staff and others – are forgotten in the process.
While this is a topic which is more aligned with the US investment market, I suspect it will be language which will become more topical in South African boardrooms and communications teams in the coming months. However, it will be important to crystalise how this fits into your overall stakeholder engagement strategies.
Communications teams are spending a lot of time positioning their key people as “thought-leaders” and building profiles – and this is sexy because it gets leadership teams featured and there are kudos that come with that. Remember that this is just the tip of the communications spear and it is worth investing in the institutional muscle behind it to build reputation, margins and business value.
