Disappointed stakeholders—the product of missed expectations and a feature of reputation damage—are a force to be reckoned with. Adidas chair in re-election fight as investors plot revolt. DWS, the asset management arm of Deutsche Bank, told the Financial Times that it would vote against Rabe’s re-election as chair of the German sportswear company’s advisory board at the annual meeting on Thursday because of a “repeated breach of expectations”.
DEI-linked stock price drop lawsuits may lead to painful board exit conversations and impair board member’s’ personal reputations. “Companies are going to be scrutinized for the statements and positions that they’ve taken in these areas,” said Troy Harder. “I wouldn’t be surprised to see a lot more lawsuits like this.” […] “(H)ow companies monitor risk matters just as much as how they disclose it,” Jennifer Wu, an assistant professor of finance at the University at Buffalo’s School of Management, told Agenda. That’s why Steel City Re developed a comprehensive reputation risk monitoring, management, and insurance solution.
Governance today is a balancing act necessitated by the backlash to ESG and DEI policies. Searches for “reputation insurance” are surging.
There are 45 companies (combined value $10 trillion) on the MAGA anti-DEI hit list.“The worst thing that can happen to a company is: You’re still on that list, but you’ve lost all your good faith and credibility with folks on the other side of these issues.” We call this situation a reputation crisis and a clear need for reputation insurance.
Great companies with the most sophisticated boards will sometimes disappoint stakeholders. In our increasingly chaotic economic and political business environment, some customers, employees, regulators or investors will feel betrayed and act. This class action was filed against Target and thirteen of its Directors. In May 2023, Target faced immense customer backlash to its ambitious LGBT- “Pride Month” marketing and sales campaign, one of its featured ESG/DEI initiatives. […] The Complaint alleges that during the Class Period, Target failed to warn investors of risks associated with its mandates regarding its ESG/DEI initiatives and that this deceit, through misleading statements in the Company’s public filings, caused Target’s investors to purchase Target stock at artificially inflated prices and to unknowingly support Target’s Board and management in their misuse of investor funds to serve political and social goals.
Securities class-action lawsuits increased. There were 225 filings last year, up from 215 in 2023 and 208 in 2022.
Public comments made by Cleveland-Cliffs’ CEO and chair against Japan and Nippon Steel that appeared to reference the 1945 nuclear bombing of Hiroshima and Nagasaki drew swift condemnation and underscore the precariousness of trying to win favor with the incoming administration, sources told Agenda. […] “Over the next few years, we will see a lot of strategic cultural posturing by executives like Mr. Goncalves,” Kossovsky said. “Whether they condone, condemn or ignore such comments, some dutiful and conscientious board members will paradoxically suffer personal reputational harm if aggrieved stakeholders feel betrayed.”
Reputational risk remains one of the most fearsome risks that board members and their institutions can face. Thousands of executives overseeing public firms are now just one reputation crisis away from losing all their board seats as well as future business opportunities. Captives may be a solid way of managing those risks.
Southwest Airlines reputation crisis. AAt crisis day 725, Southwest equity is under performing the S&P500 index by 62% and the US airlines index by 66.9%. Steel City Re’ Resilience Monitor warned that an operational failure was likely to trigger a reputation crisis.
Governance experts including the National Association of Corporate Directors and other authorities are encouraging boards to support management more closely in an “uncertain — and possibly volatile — environment,” even at the risk of appearing to micromanage. But with engagement comes culpability for the reactions of already-angry stakeholders. Simply put, the costs of leaning into a reputation crisis may include the dispensation of board members whose personal losses will not be covered by D&O liability insurance. Board members need personal reputation insurance.