One of President Donald Trump’s favorite Twitter targets is public companies, and as a result companies and boards face a risk that few anticipated: being in the crosshairs on social media. We call this the Trump Twitter Tirade.
Lockheed Martin made headlines when Trump took to the digital bully pulpit and blasted the “out-of-control” cost of its F-35 fighter jet program.
At Ford, market capitalization fell by $28 million after Trump took a 140-character swipe at the automaker for planning to move a plant to Mexico.
And on the flipside, a Trump tweet storm against Nordstrom – the retailer that dropped his daughter Ivanka’s fashion products – actually buoyed the company’s shares right after.
By using his @realDonaldTrump and @POTUS Twitter handles, President Trump has shown that almost any company is fair game for direct and unfiltered feedback from the “leader of the free world.” And it doesn’t matter if the tweet compliments or castigates; without a doubt, the risk far outweighs any possible opportunity. In addition to Lockheed, Ford and Nordstrom, just ask the CEOs and directors from LL Bean, Carrier, General Motors, Boeing, The New York Times, and CNN, who’s organizations have also been ended up on the president’s Twitter feed.
We see the Trump Twitter Tirade impacting three areas fundamental to a company’s business.
- First and foremost, there’s the reputational impact. A company can have a blow dealt to its brand if it appears unlikable at the hands of the president, which can ultimately affect bottom line.
- Second, consider the financial impact. Depending on how much of a punch a tweet packs, a company can take a hit to its market capitalization.
- And last but not least, there’s liability. Directors and management worry about shareholders suing the company over the loss in market capitalization due to a presidential tweet.
These three risks have even had the most prepared companies seeking external help. Professional services and law firms are working with companies to either create or update their crisis management plans.
For boardrooms, some wise advice about social media attacks comes from Cleary Gottlieb Steen & Hamilton (a member of The Conference Board’s Governance Center). The law firm issued a recent client memo, Responding to a Politician’s Social Media Attack. We see the following recommendations as a blueprint – one with precautionary steps that directors can have a hand in shaping.
Identify weaknesses. A good start would entail boards and management, together, evaluating the areas of potential vulnerability. Whether they admit it or not, every corporate constituency has blind spots. Directors need to get out of the board seat, and managers out of the office chair, and start looking at vulnerabilities through the lens of a politician: among the issues associated with a company, which could strike a chord and risk ending up on the national stage? And if the nightmare scenario were to ever turn into reality, who would serve on the response team?
Address the timeliness factor. A tweet reaches a company’s stakeholders at lightning speed. Likewise, a company’s reputation can start taking a turn for the worse at lightning speed. To maximize responsiveness, it may be wise to have a standing committee of two or three board members for consultation before companies enact a plan to put out the fire. Equally important is realizing many instances will fall short of warranting the board’s involvement. Setting a threshold for board involvement will undoubtedly expedite the plan of action.
Keep a watchful eye. Whether the challenge at hand includes or excludes the board, directors also should advocate their companies use real-time monitoring systems. In fact, the president’s social media behavior actually compelled Bloomberg to enter into an agreement with Twitter. Now, the 300,000-plus Bloomberg terminal subscribers can monitor Trump’s tweets in real time, right alongside quarterly earnings and other market news.
When the next Trump Twitter Tirade occurs is beyond anyone’s guess. In the face of uncertainty, boards can inject some much-needed certainty on their end by ensuring their companies have a plan of response. In doing so, they can help fortify their companies against reputational, financial, and liability risks alike.
Doug Chia is the executive director of The Conference Board Governance Center. Previously, he had served as corporate secretary of Johnson & Johnson and board chair of the Society of Corporate Secretaries and Governance Professionals. Gary Larkin is a research associate for The Conference Board focusing on corporate governance. He has been a governance thought leader for more than 12 years, having worked in the governance practices for KPMG and PwC.