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To the letter: How truth speaks to stakeholders

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Technological change is blasting us forward and continues to solidify the role reputation and trust play for typeorganizations of all kinds. Even some news organizations, entities multiple stakeholders look to for unbiased information, can succumb to what is less than best practice.

According to Gallup, distrust in the media has hit a new high, with 60 per cent saying they have little or no trust in the mass media to report the news fully, accurately and fairly. Pew found almost “one-third of the respondents (31%) have deserted a news outlet because it no longer provides the news and information they had grown accustomed to”.

In the New York Law Journal, 2009 was referred to as “the Year of Investor Anger”. FAIR Canada published a report in 2011 called A Decade of Financial Scandals highlighting fraud as a problem and making recommendations for prevention, detection, prosecution and compensation. Edelman‘s recent study on trust revealed trust in banking and financial services has dropped 50 per cent even amongst global, informed publics.

Against this backdrop, where investors both small and institutional are looking for a return but also an investment they can believe in, Laura Rittenhouse looks beyond what is reported in most public companies’ financials. She looks for innovation in communications.

Rittenhouse writes about CEO communications. She focuses on strategy, culture and performance with the idea of truth key in her audits.

Truth as competitive advantage

Today, forward-thinking companies are embracing the opportunity to really “talk” to investors and other stakeholders. There’s so much noise surrounding annual general meetings and annual reports that investing in communicating regarding contentious issues pays dividends.

An organization that sees the light on corporate transparency thinks in a more holistic way. Organizations stepping forward to be thought leaders are creating best practice not rushing to engage in best practices because others have already set the agenda for them.

Truth in reporting is so obvious that it bears more focus. Sometimes, it’s the obvious issues that fall out of the cross hairs of what’s important for managements to do.

Richard Edelman notes how logic becomes oxymoron:

[CEOs demand] … less regulation while CEOs suggest that enforcement of the new regulations has restored trust; this is a baffling logic problem.

Yet this is part of the duality of the human being. Although we know what’s right, we don’t always do what’s right.

Anyone who doubts what negative sentiment or negative media attention can do when an organization is held up to pursue less than best practices, and what that can do to reputation, might want to take a look at what legislators are calling “egregious” and “outrageous” regarding Apple’s “web of tax shelters”.

[While other companies have taken advantage of loopholes,] … I’ve never seen anything like this, and we don’t know anybody who’s seen anything like this.

              — Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations

Business culture suffers due to lack of transparency. The reputation of business is left to the media which will tend to focus on the worst rather than the best. The media plays a vital role in highlighting tremendous failures in business but it’s up to businesses that are engaging in innovative practices to tell their story.

Business needs to get better at communicating. Business needs to communicate true innovation and best practice. It may have been the best of times with respect to some companies, but the organizations that showed up most often in the wake of the financial crisis are the ones that reflect a “worst of times” operational execution.

In such an environment, companies operating in a forward-thinking manner will be best positioned to gain from stakeholders’ need for a positive story. While it’s important to reveal worst practices, corruption and other failings, there’s a decided human need for the positive, for the feel-good story wrapped in the long-term resilience of truth.

Rittenhouse is a big proponent of a new wave of letters from directors and boards. She feels it’s a “powerful opportunity” to make a statement about governance.

A letter may be traditional but it’s impact can be revolutionary. Truth is the revolution. Companies need to tell the truth not only for the advantages truth will bring from a long-term operational point of view, but because it’s absolutely the right thing to do.

 

Part Two: Why boards need to deal with the issues

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