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Reputation Management: Protecting One Of A Client's Most Precious Assets

Wendy Spires

4 January 2013

In today’s age of viral media, many ultra high net worth families, particularly those with business empires, are failing to protect what is in reality one of their most valuable assets: their reputation. Here, Niri Shan and Mustafa Hussain, partners at law firm Taylor Wessing, explain the growing practice area of reputation management and outline the strategies private client advisors should be making their clients aware of.

"Who steals my purse steals trash; 'tis something, nothing;

'Twas mine, 'tis his, and has been slave to thousands;

But he that filches from me my good name

Robs me of that which not enriches him,

And makes me poor indeed." (Othello, III iii)

The phrase “reputation management” is a relatively new entrant into the private client lexicon, but it is one which is now increasingly on the lips of both clients and advisors. While ultra high net worth families might have always zealously guarded their reputations and privacy, today’s radically different media landscape has made this a far more complex task. For better or worse, today virtually everyone (in the developed world at least) has some form of existence online and in cyberspace reputations can be made - and irretrievably marred - in a matter of hours. This is the reality private clients and their advisors need to grapple with, argue Shan and Hussain.

As a 19-year veteran at Taylor Wessing, Shan has been at the front line of developments in the area of reputation management and has seen his practice evolve in line with the media landscape. He began with what was purely a media practice, acting for media companies, but over the years he has been asked to take on more and more reputation management work.

This influx is down to several factors, the first of which is the still-looming shadow of the global financial crisis and the manifold difficulties facing businesses all around the world. Put simply, “the downturn means that people are much more sensitive about their reputations than when times are good,” said Shan, “this is because an article can make quite a big difference - whether that’s to a corporate share price or whether it’s to an individual, to how people regard them and whether they want to deal with them. People have become far more sensitive about what the media and third parties are saying because of the environmental conditions.”

“Going viral”

The world’s ongoing economic difficulties aside, the rising importance of reputation management has been fuelled by what Shan terms the “whole viral nature of media now”, referring of course to the way in which social media platforms like Facebook and Twitter disseminate news and opinions in wildfire fashion.

At the heart of the matter is the fact that today hardcopy is arguably no longer king when it comes to opinion formation, and that the democratisation of information wrought by the internet means that the top results of a Google search are likely to be taken as gospel in many people’s minds. As such, while those in (or looking to stay out of) the public eye used to be worried mostly about their portrayal in the papers, now a client’s top concern is often their online persona.

“When I started out people were really concerned about what was in a hardcopy newspaper and that was it. Now, while people are still obviously concerned about what’s in a newspaper or on a broadcast, actually what they’re more concerned about is the Google trail and what’s online,” said Shan.

As he points out, if a person is looking to do business with someone, often their first course of action will be to perform a Google search on their name. This will of course yield results from mainstream media outlets, but the subject of such a cursory “background check” will also have to contend with Wikipedia, Facebook and Twitter content.

Along with the myriad media platforms which may come into play, clients are also having to get used to the lightning speed at which news – of whatever degree of veracity – will spread nowadays. “The thing about social media sites particularly is that if someone tweets something, within a couple of hours that can go viral,” warns Shan.

So what is the business of reputation management about in essence? Shan explains that reputation management scenarios usually take two forms. The “worst case” scenario is that something defamatory is published about a client in which case their legal team will then petition for an apology/retraction and possibly sue as a last resort. Far better, he says, is a scenario whereby a client or their representatives get advance warning about an article or issue which may come to light, which then allows the client’s team to swing into action. Typically in this case Shan would work with the client’s PR advisor and the legal team of the media organisation in question to come to as satisfactory an outcome as possible for both parties.

One thing that tends to be forgotten is that a confrontational relationship with the media is rarely helpful, Shan points out, and instead clients’ advisors need to keep things as amicable and constructive as possible. “You shouldn’t burn your bridges with the media,” he warns, pointing out that over-zealous clamping down on what many would argue is the right to free speech can spectacularly backfire and make already inflammatory situations far, far worse. “It’s about proactively working with the media organisation,” he said, “it’s not just about closing a door”. (The unholy art of media manipulation is of course beyond the scope of this article, but it is easy to see how savvy cooperation with the press can yield dividends.)

This is a particularly valid point when we consider that many media maelstroms of recent times have been concerned with the ever-sensitive issue of the amount of tax the very wealthy pay – an issue which has of course become incredibly emotive in recent years. The key point to note here is that “allegations” of tax avoidance are in many cases referring to wealth structures which are perfectly legitimate tax mitigation strategies – therefore the problem is not that the accusation is untrue per se, but more one about how this information is portrayed by the media and perceived by the general public.

The hot topic of tax “avoidance” has meant “that many people who never thought they’d be in the media are suddenly thrust into the limelight”, notes Shan. In fact, public perception of their tax affairs is “one of the biggest issues” clients have to contend with when it comes to guarding their reputations today, in his view.

Even previously media-shy clients are “increasingly alive to the need to manage their reputations”, says Shan, but what are private client advisors, including wealth managers, doing about this? Not as much as they might, is the simple answer; Shan has never in fact had a referral from a wealth manager. The problem, he says, is that a lot of the strategies involved have to be “judgement-based” rather than rooted in pure legal expertise, and so in this regard many advisors to the super-wealthy are as at sea as their clients are.

Financial costs

The consequences of ineffective reputation management can be disastrous, and go far beyond losing face, explains Hussain, who specialises in advising corporate/commercial wealth clients in the Middle East and the wider Islamic world. When their many business interests are taken into account, the wealth of his client families (who also hail from Russia and India) sometimes runs into the tens of billions of pounds, and in fact many of these families have the same worth as a FTSE 200 company, he says. In such cases of immense wealth and large, internationally-spread families the task of reputation management can be incredibly complex, but cannot be ignored, he cautions.

At this point wealth management professionals might be wondering if reputation management is in fact “their problem”, but it seems clear that it emphatically is something that they should be bringing up with clients. To illustrate, Hussain points out that even the massively wealthy can be highly leveraged with banks, drawing on huge credit lines to fund their lifestyles. If a scandal hit which was bad enough to make a creditor bank question the future financial health of a client family they could be cut off from their credit lines, and, in his words, “things could start to collapse like a house of cards”. “While these families might have a lot of balance sheet wealth a lot of them are dependent on bank lending for liquidity,” said Hussain.

Put simply, reputational hits can have a deleterious impact on the existing wealth of a client or their future wealth creation (as when a family business is foundational to this) and so neglecting this part of their “portfolio” is remiss in the extreme, Shan and Hussain argue. “Your reputation is as much of an asset as anything else so not taking care of it is the same as neglecting your tax affairs until the tax man calls,” Hussain quips.

Reputation management “101”

Shan and Hussain are not suggesting that wealth management firms should necessarily start to offer reputation management services in-house, nor that clients would necessarily want their relationship managers involved at all (we are of course talking about very sensitive topics) – but it is something that advisors need to have on their radar. They should also be familiar with the basic steps that should be taken.

The first (perhaps slightly unpleasant) part of the process is for the client family and their advisors to perform a “reputation management audit”. This, Shan explains, involves identifying exactly where a family’s reputational risks lie: is it in the investments the family holds, or the people within it?

“Clients need to sit down with their advisors and ask ‘what are the areas of risk for our family? Is it because we’ve got risky investments? Is it because we’ve got a wayward son? Are we paying all the tax we should pay?’,” he said. “They need to ask ‘where are we exposed from a reputational perspective?’ and then put in place plans to try to mitigate that risk.” If they think about things frankly Shan believes it would be relatively easy for clients to come up with a pretty comprehensive list of their areas of reputational exposure, of “the things that keep them awake at night.”

Once this nightmare list has been compiled, clients and their advisors should then formulate a crisis management plan to deal with any situation which might arise. Shan explains: “This means having your PR advisors in place, your lawyers in place, knowing who is going to speak on behalf of the family, who is going to give instructions – all those sorts of things.”

Having a clear action plan and lines of responsibility for when things go awry is imperative, but the problem is often that there are too many “chains of command” to deal with a crisis quickly, notes Shan. “Time is of the essence… you literally have hours,” he said.

Preventative measures

Of course, prevention is always better than cure, and to this end ultra-wealthy families would do well to incorporate some form of media and reputation management training into their family governance procedures - and embed them in next gen education in particular, says Hussain. Awareness, it would seem, is half the battle, since as Shan points out, “many people don’t realise that everything they do on social media platforms can be jumped on by a journalist.” (Witness, for example, the rather ill-advised Twitter posts made by the daughter of Bob Diamond around the time of his resignation as chief executive of Barclays earlier this year.)

As the aphorism goes, “forewarned is forearmed”, and the requisite amount of training to avoid reputational disaster is not actually that onerous, says Hussain. Just as the children of ultra high net worth people should know about things like asset allocation, but not necessarily enough to build a portfolio themselves, so it is with reputation management. “Basically, they just need enough training to understand the pitfalls surrounding social media platforms like Facebook and Twitter, and to know who to call when things go wrong,” he says. While he agrees that an outright ban on tweeting and the like is unlikely to be heeded, he also advises that media “behaviour” is acknowledged by the family’s constitution or governance articles (such documents are of course increasingly deployed by ultra high net worth families for a whole host of reasons). “Families need a guiding statement as to what the family and its wealth stand for… protecting its reputation is part of that,” he says.

For Shan and Hussain, the message that needs to get through to clients is that online and social media is here to stay, and needs to be taken seriously if families are to protect the important asset of their reputation and the standing of their businesses. This message is, however, taking a while to get through to some. “The trouble with family-held businesses and family offices is that they tend to be very conservative, but they need to move with the times,” said Hussain.

Ironically, reputation management services are an “easy sell” once a client has been through the media wringer, as it were, says Shan. In his words, “when they’ve been through a bad experience, then you’re pushing on an open door”. But clearly no advisor worth their salt wants their first conversation with a client around reputation management to take place when damage has already been done. The reality is that ultra-wealthy people have always been a target for unwanted media attention simply by virtue of the fact that they are ultra-wealthy - and the advent of online and social media has only exacerbated this. Reputational risk might be unpalatable topic for clients, but facilitating difficult conversations is arguably one of the most important jobs of their advisors. “Not that many advisors are ‘alive’ to the issue of reputation management at present,” concludes Shan. That clearly needs to change.