By Gary Larkin
In the first month of the new Administration, companies are facing a risk they didn’t expect: being the subject of one of President Trump’s tweets. While Trump is not the first Commander-in-Chief to use social media to reach constituents, the President is most definitely the first to make many CEOs and boards nervous with just 140 characters.
For many chief executives and boards, this Trump Twitter risk is just one layer of risks companies have to worry about. There’s also the policies of the new administration, which so far includes a travel ban on Muslim-majority countries and the potential rollbacks of Dodd-Frank Act regulations and the Affordable Care Act.
By using his @realDonaldTrump and @POTUS Twitter handles, President Trump has stayed in populist campaign mode in the first month of his first term. As many of his tweets have shown, it seems that almost any company is fair game. And it doesn’t matter if the tweet is positive or negative. It seems the risk far outweighs any opportunity that can come from a Presidential tweet. Just ask any of the CEOs and directors from the following companies: Nordstrom, LL Bean, Carrier, Ford, General Motors, Toyota, Boeing, Lockheed Martin, Amazon, The Washington Post, The New York Times, CNN. The list goes on. (And that’s only from December 2016 to present, which includes when he was President-elect.)
The President’s tweets have been taken seriously enough that Bloomberg entered into an agreement with Twitter back in December to allow its more than 300,000 subscribers to monitor them in real time. And for those who don’t have a Bloomberg terminal, several publications, including the Los Angeles Times, are posting the tweets on their websites.
The Trump tweet risks can be broken down into three categories:
- Reputation: A company’s brand can become a target due to a direct attack from the President and/or the company’s reaction to the attack. (See Lockheed, where there was a report that one Trump tweet cost the defense contractor $28 million per character.)
- Financial impact: Depending on the severity of the tweet and the company’ (See Ford, where its market capitalization fell by $28 million after Trump tweeted about the ’s plans to move a plant to Mexico.)
- Liability: Directors and management are worried about shareholder lawsuits that could result from the loss in market capitalization that results from the company’s response to the tweets.
The dynamic nature of these risks has many public boards scurrying to come up with crisis management plans to address the tweets. While some companies had already come up with social media crisis plans over the past five years or so, this particular social media crisis has even the most prepared companies seeking external help. Professional services and law firms are working with companies to either create or update those crisis management plans.
Many of those firms who are accustomed to helping companies with such problems as social media attacks have been cautious in what they publicly dispense as advice. (Most likely this is because of the fear of a Trump twitter attack on themselves.) But I did stumble upon a client memo that really analyzes the issue and gives some substantive advice. It’s from Conference Board Governance Center member Cleary Gottlieb. It is titled, Responding to a Politician’s Social Media Attack.
The memo has a term for Trump tweets: “jawboning,” which is an old political tactic where government officials use speeches to influence economic policy, such as wages or commodity prices. The memo provides guidance for public company boards to have a discussion on preparing for and mitigating social media attacks.
Cleary Gottlieb addresses three areas (governance, executive compensation and employment-related issues, and communications). But for the purpose of this blog, I am listing only the governance guidance. To read the whole memo, click here.
- Monitoring: Given the speed at which social media can “go viral,” a company’s monitoring system should be designed to pick up relevant information in real time
- Board and management alignment: Management and the board should evaluate areas of potential vulnerability, paying particular attention to the issues that seem to most draw the attention of political leaders. A response plan should be developed to address the risk of a social media attack at least with respect to those identified vulnerabilities, and a response team should be organized, leveraging the company’s existing crisis management team.
- Threshold for board involvement: Many companies may determine that a social media attack from the President or another very senior public official is presumptively material, and therefore should receive some attention from the board before a decision is made about a response.
- Method of consultation with the board: To maximize responsiveness, a standing committee of two or three board members who might be consulted, as a group or individually, may be appropriate.
- Understand the corporate decision: Why was the corporate decision that is under attack made in the first place? What benefits were expected to be achieved?
- Evaluate the criticism: Is there merit to the social media attack?
- Explore the alternatives, if any: What alternative paths are available to achieving the expected benefits and that could mute the criticism?
- Consider the costs and benefits of not adjusting in response to the social media attack.
- Consider the costs and benefits of adjusting in response to the attack.
- Consider management and board conflicts of interest.
- Decide on a timeframe for the response.”