Tell the truth; tell it all; tell it first. That’s very often the credo for crisis advisers. Skeptical C-suite folks may very easily pooh-pooh the notion in favor of advice from a lawyer–however, what saves a company in a court of law may crucify it in the court of public opinion.
Such has been the case, recently, with Pinnacle Holdings (JSE:PNC), a technology company headquartered in South Africa. It seems Executive Director Takalani Tshivhase, the company’s greatest shareholder, has been charged with both bribery and corruption.
The nuts and bolts
Authorities arrested Tshivhase on March 5, 2014, for allegedly attempting to bribe a high-ranking official in the South African Police Service with five-million rand (approximately $472,750*) to secure a 180-million-rand (approximately $16,983,000*) deal.
The company was made aware of the arrest the same day yet made no statement to shareholders until March 25 after news broke online on March 24:
The Company hereby informs its shareholders that Mr Takalani Tshivhase, an executive director of Pinnacle, has been charged with alleged attempted bribery of a Lieutenant General of the South African Police Service, with R5 million. This alleged incident occurred some 14 months ago, around 16 January 2013.
Mr Tshivhase denies all allegations of attempted bribery, and will defend the charges.
From the evidence thus far available to the Company, the Company is satisfied that there is no reason to doubt the veracity of Mr Tshivhase’s denial of the allegations.
The Company will review the matter as further information becomes available and will inform shareholders accordingly.
While this crisis is not occurring in America where I am more familiar with the law, good crisis management techniques span the globe.
Once again, we come up against the issue of corporate transparency–my favorite topic. This time, the affected company’s reputation is taking a hit and so is its bottom line. Pinnacle Holdings’ share price dropped by an astonishing 43 percent on the Johannesburg Stock Exchange (JSE) in the two days following the news breaking on the Internet. By the way, that’s a value of 1.5-billion rand (approximately $141,525,000*). Not to mention running “Pinnacle Holdings” through Topsy returned a sentiment score of 38 out of 100 as of March 31.
It appears, once again, the people have spoken. Publics–and in particular shareholders (the people giving you their money!)–don’t like being kept in the dark with respect to material information.
The most important thing a company can do in a time of crisis or even a time of scheduled change is to get ahead on messaging. An organization should never let its key constituents hear bad news from a blogger because it immediately has those constituents call three things into question.
Was the company going to tell me?
The question of “Was the company going to tell me?” is the feeling of initial betrayal manifesting itself in the form of a logical question. If the media had to uncover the story before the company made a statement, when was the company planning to tell its publics? Was the company ever going to tell its publics?
This brings in the consideration of do the publics have a right to know. The answer here is “of course.” This is not anything the company had a right to protect. This was not a trade secret. This was one of the company’s officers being arrested and charged.
What is the company hiding?
A little crisis management 101 will tell you that if a company doesn’t put its side of the story out there for public consumption, the public will start feeding itself.
No conversation equals grand speculation. Once a story breaks, bloggers and even mainstream media sources will start speculating or bring in analysts to start speculating on what the company is thinking. Further, the speculating and natural human paranoia will question the depth and scope of the unscrupulous activities, which will call the relationship in its entirety into question. Why let that happen?
In a crisis, staying ahead on messaging and being transparent doesn’t mean making up information or even taking a side. It just means telling what you know. Pinnacle Holdings did not have to comment on whether or not it thinks Tshivhase is guilty. It just had to say he was arrested and the company will tell more when it knows more.
Can I trust the company, again?
This is a question with which a company should never let its publics grapple. There is enough competition and turbulence in the business world that may make publics question their relationship with a company. Therefore, trust is a commodity companies cannot afford to lose and must constantly work to manufacture.
If an organization is not transparent and does not stay ahead on messaging, it is more likely a public will call trust into question. It is that simple. The longer a company says nothing between the occurrence of the event and the breaking of the story, the more unscrupulous the company looks and the more likely an attempted coverup seems. It’s the Watergate principle.
With the above being called into question, it is no wonder shareholders are panicking. The lesson is a little transparency can go a long way to saving a company both in the court of public opinion and bankruptcy court.
Are the publics asking more than just these questions? Can Pinnacle Holdings recover? Did they act quickly enough? Feel free to comment below.
*Conversions calculated on TheMoneyConverter.com.