Boards Need to Prepare for Societal Crises

January 9, 2019

By Deborah Brown

Over the past two years, we have entered a new era of organizational crises marked by societal crises.

These are different from “traditional” business crises in that they are sparked by any number of hot-button societal issues. A mass shooting, for example, demands an organization to enter the debate over gun control versus Second Amendment rights.

Last year, Dick’s Sporting Goods took a strong stand on tighter gun restrictions following the Parkland, Florida, high school shooting. Chairman and CEO Ed Stack, with the board’s approval, announced the chain would no longer sell assault-style weapons nor sell guns to anyone under 21.

A societal crisis often requires the CEO and/or board to take a stand on the issue, potentially alienating employees, customers, shareholders and other stakeholders.

Why should companies and directors care about getting involved with a societal crisis? According to Accenture, 63% of consumers prefer to buy from companies that stand for a shared purpose that reflects their personal values and beliefs. A survey from Glassdoor found that 84% of U.S. workers believe companies have an important voice in proposed government policies that could affect the employer’s business or employees’ lives.

How serious are these issues for directors? At the December Directors & Boards Roundtable, we conducted an informal survey of directors in attendance and found that 88% are extremely or somewhat concerned about a societal crisis striking a company of which they are a director.

A primary challenge facing directors is the many types of potential crises they face in today’s volatile political and social climate. Recent examples bear this out. CBS’ board recently announced, following its own investigation, that former Chairman Les Moonves, who had already stepped down, was not entitled to his $120 million severance package. Moonves was accused of allegedly sexually harassing a dozen women. Critics assailed CBS for moving too slowly in dealing with this #MeToo crisis. It’s difficult to know how involved the board has been since last July, but it does underscore the fact that boards are becoming more closely involved in these types of issues.

Given this volatile new reality, directors need to re-evaluate their roles on the board. They cannot sit on the sidelines waiting to see what happens; they need to be directly involved in societal crisis risk management to help shape the outcome. A board’s fiduciary responsibility to help protect the organization’s reputation now includes properly handling a societal crisis that could result in lost revenue via boycotts, as well as the loss of employees and customers. And the reputational damage could be long-lasting, with the company having difficulty attracting top talent and major customers in the future.

To be prepared, first, the organization must have a corporate purpose that guides it, like a North Star, through any societal crisis. This is different from a mission statement, which focuses on “what” the company does. A corporate purpose explains “why” a company exists beyond producing revenue, and “why” employees come to work each day.

Next, determine the societal crisis management team. This team needs to be comprised of the C-suite, including the chair of the board or another board member. It’s critical that the organization constantly monitor for social issues to make sure it is not blindsided by an issue.

It’s imperative that the team meet monthly to discuss potential issues and scenario plan. Putting certain issues through their paces will enable you to see how prepared the organization is and where the gaps exist.

As part of the scenario planning, make sure you account for all constituents and how you and the team believe each may react in a crisis.

Being prepared for a societal crisis is a must. As a director, you need to look not only at how taking a stand impacts the bottom line, but also how it impacts the company’s reputation and higher purpose.

Deborah Brown is a partner and CMO at Peppercomm, a communications and marketing firm with a deep expertise in managing and preparing for societal crises.