March 20, 2024

Exec Chair Misconduct Allegations […] TKO saw a "massive reputation value drop," according to Steel City Re's Resilience Monitor.

Exec Chair Misconduct Allegations Reputation Matters

“Before agreeing to join the board of a controlled or founder-led company, would-be directors need to have a “come-to-Jesus conversation,” one source told Agenda. It can be difficult to rein in a leader with so much sway – and the reputation of the board itself could be harmed if stakeholders believe directors sat idly, while the chief or other powerful exec engaged in bad behavior.

TKO attempted to set up governance guard rails around its former executive chair, Vince McMahon, who resigned in January following sex trafficking and other misconduct allegations. The young company’s registration statement carefully outlined how it would work with McMahon, who had already been embroiled in sexual misconduct and hush-money allegations. Those claims dated back to his former company, WWE. Late last year, WWE merged with an Endeavor spinoff, UFC, to form TKO. McMahon owned a controlling stake in WWE and the deal hinged on his collaboration, Endeavor top brass believed.

Still, after the new allegations emerged, TKO’s stock price and reputational value took a hit. Neither has fully recovered, even despite McMahon’s resignation.”

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“…TKO saw a “massive reputation value drop,” according to Steel City Re’s Resilience Monitor. It also suffered a 5% stock price drop.”

Agenda: March 20, 2024

About Steel City Re. With reputation risk forecasting, management, and insurance, Steel City Re helps companies build and prove to stakeholders their thoughtful risk management and dutiful governance over all that is mission-critical. It is an authenticated story stakeholders can appreciate and value.

Reputation is Mission-Critical

Today’s sophisticated risk managers are strategic corporate talents, helping the C-suite and board meed stakeholder expectations for resilience. They know that enterprise damage from reputation risks might be their greatest and longest lasting peril, so they monitor for red flags. They foster a culture that respects those warnings and facilitate processes to mitigate those risks. Their diligence strategically builds enterprise-wide resilience that informed stakeholders can appreciate, and they use insurance two ways: operationally, to foster resilience; and strategically, to authenticate their thoughtful risk management and dutiful governance systems.

The results of strategic reputation risk management are evident in reputation resilience. More than crisis recovery, they include customers buying, not boycotting; employees working, not fleeing; investors buying, not selling; lenders adjusting interest rates down, not up; regulators deferring, not enforcing; and social license holders acquiescing, not protesting.

Having a robust Reputation Resilience Program in place offers, amongst other benefits:

  • Protection for the company, its staff, executives, and board from litigation and regulatory challenges
  • Improved governance processes and better enterprise risk management protocols; i.e., measuring reputational risk
  • Establishment of an agile operating, communications, and decision-making team, with clear roles and responsibilities, trained and ready to handle all reputational threats; i.e., a reputation risk management framework
  • Proactive management of risks that could give rise to delays or derailing concerns around new product and strategic partnership launches
  • Captured behavioral economic value from stakeholders; i.e., value of reputation
  • Reduced costs of debt and risk transfer while boosting equity value; i.e., boosting reputational value

A hazard of reputation risk is a lurking gap between stakeholder expectations and reality. Another hazard is the emotional intensity associated with expectations. The expected surge in litigation in 2024 around environments, social and governance issues reflects both that emotional intensity and is one manifestation of the anger from disappointed stakeholders. This video explains the behavioral economic features of the many perils of reputation risk.

Mitigating risk strategically through expectation management and operational adjustments evinces thoughtful management and dutiful governance. Financing such risks evinces prudence, and doing so publicly enables stakeholders to appreciate and value the effort.

One Question

Reputation risks are prevalent, material, and place both corporate viability and profitability at risk. Is enhancing and promoting the quality of your risk management program part of your strategy?