Social media. Boards spend far too little time thinking about it—and many directors shy away from it—opting for more formal and structured sources of news and information. Yet social media has fundamentally changed the way people interact and communicate, including democratizing the world’s information and revolutionizing the way we do business.
Every day, 1.73 billion people log on to Facebook, 500 million tweets flood Twitter, and users consume 1 billion hours of videos on YouTube. This mass of social data can be a fantastic source of information on a company, its competitors, and the landscape at large. Social media is a place where board members can listen to what customers, employees, and other stakeholders candidly say about an organization. But it’s also become a go-to space for consumers and activists to laud, derail and even destroy companies and reputations. Some examples:
• The #MeToo movement. The #MeToo movement against sexual harassment and sexual assault went viral as a social media hashtag following sexual-abuse allegations against Hollywood film producer Harvey Weinstein.
The streaming service Netflix reportedly lost $39 million for severing ties with actor Kevin Spacey, who played the lead character in the famous Netflix production House of Cards. In January 2018, hotel and casino company Wynn Resorts lost $3.5 billion in market value after the emergence of sexual harassment allegations concerning CEO Steve Wynn. And in the following month, shares in fashion retailer Guess tumbled almost 18%, and the company’s market value fell by more than $250 million in a day, after model Kate Upton accused the firm’s co-founder Paul Marciano via Twitter and Instagram of using his power to “sexually and emotionally harass women.”
• Greenpeace activists’ demands. In March 2010, Greenpeace posted a graphic video on YouTube claiming that Nestlé used palm oil in KitKats, and was thus contributing to the destruction of orangutans’ habitats. Nestlé asked YouTube to remove the clip, citing copyright infringement; environmental campaigners told CNN the copyright infringement claim was “a pretext for stopping the word being spread and an apparent attempt to silence us.” Greenpeace reposted the video on Vimeo, and many other users reposted it. On May 20, 2010, only 10 weeks later, Nestlé announced it would stop sourcing the unsustainable palm oil. This was a victory at minimal cost for Greenpeace and social networking.
Still, targeted activism isn’t the only social media peril board members should consider.
• J.P. Morgan’s failed Twitter foray. In late 2013, J.P. Morgan announced a Twitter Q&A with its vice-chair, creating a hashtag #AskJPM. Having received a barrage of negative and sarcastic comments, the bank canceled the event before the Q&A could go live. This has since become an oft-quoted example not only of misguided social media strategy but also of a major corporation supposedly unaware of and disconnected from its current public image.
Four compelling reasons to embrace social media
At present, most companies are slowly coming to grips with the task of finding optimum tools and systems for scanning, analyzing, and evaluating relevant social media content. Directors are learning how to ask the right questions, acquire the necessary capabilities for the organization, and attract suitable talent for making sense of its digital footprint. In doing so, they are able to:
1. Manage reputational risk. In April 2017, United Airlines stumbled with its social media response following the forcible removal of a passenger from one of its flights. The airline initially would not admit it had made a mistake. Its CEO later had to apologize, losing face and some credibility in the process. United’s share price tumbled as well. The airline later settled the lawsuit the passenger had filed.
2. Avoid blind spots. Social media can help boards pick up early signals. Different businesses have different cycles. A number of tools, such as Social Mention and Hootsuite, allow companies to scan social media and detect where rumors are coming from, enabling them to quantify the level of urgency.
3. Increase knowledge in ethical ways. How intimately do you want to know your employees or your customers? Glassdoor is giving access to employee perspectives that aren’t captured in typical corporate surveys. Target, the U.S. supermarket chain, were able to identify when its customers were pregnant, often before the women had made it public, through an analysis of their purchases. But should the firm have used this information for marketing purposes? Boards should be having ethical discussions about the use of private data.
4. Acquire independent intelligence. When BlackBerry announced it was pulling out of the consumer market, it could have avoided the backlash had it used a service like Meltwater to conduct a generational analysis. This would have demonstrated the differences in the product’s reputation between age groups and the potential liability of simply taking it away. Many companies, including Nestlé, have set up social media command centers to get a better sense of what employees or other key stakeholders are saying about the firm and its products.
What is your organization’s comprehensive social media policy? Which sources are you listening to? Do you have a response plan in place for a digital crisis? If the board hasn’t yet hashed out answers to these questions, now is the time to start.