Warren Buffet famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
This quote was the inspiration for NIRI Boston’s recent session on crisis management, which was held on January 18th and featured a panel of IR pros and senior counselors with expertise in crisis communication, disclosure, and compliance.
Moderated by Jim Hillier, VP of Investor Relations at IPG Photonics and a NIRI Boston board member, the panel included the local experiences of Chris Powers, VP of Investor Relations, Staples; and Josh Brodsky, Associate Director, Investor Relations and Corporate Communications at Alnylam Pharmaceuticals. In the case of Staples, Chris primarily focused on his company’s defense against a well-known activist investor who demanded Staples acquire a competitor – something the company was already confidentially considering at that time. In Josh’s case, he led Alnylam’s recent announcement to halt development of an experimental drug after results indicated an imbalance of mortality in patients. Both crises brought considerable media and Wall Street attention to the respective companies, leaving each of our panelists to serve as the first line of defense for shareholders seeking answers and an honest response from the company. For Josh, establishing an open and honest line of communication with the investment community was essential, and he advised IROs make it clear what is known and what is unknown at any given time with the shareholders to avoid confusion. Staples’ unique set of circumstances made it difficult to communicate the strategic vision of the company without compromising ongoing deal negotiations. Chris recommended IROs listen to their top holders and assure them that the management team is acting in the best interest of its shareholders.
The panel also included representation from crisis experts Deb Wasser, EVP, Financial Communications & Capital Markets at Edelman; and Reginald Brown, Partner and Chair, Financial Institutions Group at WilmerHale; both of whom spoke about how IROs can take charge of their organization’s crisis preparedness while maintaining an open dialogue with shareholders and the media. To that end, our panelists encouraged attendees to assess whether their organization was fully prepared for the risks it might face and to ensure that a robust crisis-response plan is in place.
During the panel, Deb recommended companies consider the “4-Rs” of crisis management: Regret – apologize to the appropriate parties – and mean it; Reform – actions speak louder than words; Recovery – rebuilding your reputation takes time, don’t rush it; and Restitution – fix and restore your relationships. Reginald advised IROs to ensure that their company’s narrative accurately reflects the situation across all phases of a crisis. Your stakeholders will value your honesty far more than an immediate, but inaccurate response.
The evening concluded with our panelists providing IRO attendees with their best advice to avoid and overcome a crisis:
- Be Honest – Maintaining your credibility in a challenging situation is critical.
- Plan Ahead – Take time to review your business risk factors and understand where the danger may lie. Also, make sure you have a crisis communications plan on your shelf.
- Do the Right Thing, Fast – Consider your most important audiences and address their needs promptly and correctly the first time. Understand that you will have imperfect information, yet be prepared to tell whatever truth is known in a timely fashion.
- Be Brave – Ask your management team and Board the hard questions before the crisis hits. IROs have an important role to play in making sure risk assessment and crisis planning are part of the corporate priorities.