Ignorance is not an ethical policy

On paper, the advent of a global trading system has enormously increased the power and profitability of those companies best able to exploit economies of scale: the multinationals. And yet their reputations have become more vulnerable than ever before.

This paradox has been all-too-evident in the events of the past few weeks. We have seen BP’s chairman barracked by shareholders for alleged links with unsavoury Third World regimes; and the confectionery companies Cadbury, Nestlé and Mars mired by a presumed association with slave labour. Look back a little further and you will find that these are only the most recent in a long line of blue-chip public relations disasters. Shell, Marks & Spencer, Gap, Nike have all come croppers.

Never mind that specific allegations may be weak, partisan and to some extent misplaced. Companies do nothing at their peril. Nestlé is still struggling with the albatross of the infant formula scandal nearly 25 years later, mainly because students won’t let the issue go away. It’s no good arguing, as Nestlé does, that infant formula products haven’t been sold in the UK for years: the folk memory is implacable, with results which are literally incalculable for the food manufacturer.

But much worse than a slightly eroded brand image may now be in store for companies that fail to play the PR game effectively. The fate of Huntingdon Life Sciences is an awful warning of what can happen to a company’s main assets – its people and shareholder value – when it is persecuted by a determined and ruthless “environmentalist” lobby group armed with a useful knowledge of the Internet. Politicians deplore the use of violence, police protection is bolstered, but the investment community still walks away.

What, then, can companies do to protect themselves and their reputation? A little more realism would be a start. Evidently, it is not their responsibility to play Sir Galahad in, say, the politics of the West African slave trade. But nor should they delude themselves that consumer and human rights lobbyists are going to be fobbed off with a scrap of paper entitled Corporate Ethical Trading Policy.

At heart this is a management culture issue. Multinational companies are dependent on rigid command structures. They see the world from the inside out – and that “inside” is one very much constructed around the mentality of the bean-counter. It’s a mentality that’s good on “hard” issues, such as asset management, cost control and margin-building, but weak on “softer” issues, which are typically the province of marcomms. Not surprisingly, the latter are assigned lower priority – they are less tangible. Until, that is, the barbarians start hammering on the gates: whereupon pandemonium breaks out in the citadel and the problem is pressed into the hands of a “crisis management” team, which is expected to perform miracles.

Only such mental compartmentalisation can explain the unjoined-up thinking behind, say, BP’s gung-ho espousal of a new “caring” corporate identity not that long ago and its complete bafflement last week when accused of conniving with the corrupt and brutal Sudanese military regime.

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