Unintended consequences

My humble nature prevents me crowing about it, but the latest development in what is now called the Panama Papers crisis, coming hard upon the heels of my post on the topic yesterday, does not surprise me in the least – see here – CAMERON OWNS UP

I feel justified in assuring those concerned that I have no intention of straying into my fellow Rust columnists’ territory – in this case, British politics and/or World Affairs – because the aim of my thrust was never so much about politics as about public relations or, to be specific, the practical application of them in the cause of what is sometimes called ‘crisis management’.

The origin of such public relations issues arises because it is a natural human trait to believe that, whatever weaknesses we possess, deep within our core is a fundamental sense of right and wrong that we apply to our own personal course through life. We are either entirely comfortable with our life choices or, even if we’re not, we convince ourselves that we are.

That’s why it’s so disturbing when things sometimes come back to bite us on the backside.

I don’t have it in particularly for company non-executive directors, but I shall take their example as my case in point to illustrate what I’m getting at.

Here’s a scenario:

You’re a professional man of some standing – say a lawyer, accountant or chartered surveyor – and have done pretty well in your career. You may have stayed in your ‘pure’ profession, or you may have gone into business in some form or another but (whichever it is) you’re quite flattered when a pal, or someone who knows you for your reputation alone, approaches you and offers a non-executive directorship on the board of a company, or even a group of them, called X Holdings Ltd.

It’s a part-time commitment – maybe just a board meeting, or perhaps just two or three days of your time (and possibly being on the end of a phone to be consulted) every month. Maybe you also get a regular excellent lunch with some pleasant people out of it as well, plus a stipend – and perhaps tickets to Henley, Wimbledon or Lords on top – the sum of which makes it more than worth your while.

What’s not to like?

Life goes on for four or five years. Your eldest daughter gets married. You and your wife have a fabulous 30^th wedding anniversary sea cruise in the West Indies. A horse you own half a leg in wins some minor race at Plumpton and you and your mates have a great day out. One season your football team, defying the low expectations of all its supporters, even has a sporting chance of making the promotion play-offs. Your practice or your business is doing reasonably well and you’re planning your retirement strategy.

Then suddenly something comes up. X Holdings Ltd suddenly becomes involved in a scandal. Maybe it’s going bust, or has done something that the financial regulators are upset about. People have lost money. Accusations are being levelled. The chairman has acted wrongly, possibly even negligently. There is talk of statutory body investigations, people being called to account, questions being raised in Parliament, even tortuous litigation being threatened.

And your name is being dragged in the frame. For something, even if it is only ‘And what were the non-executive directors doing all this while, for God’s sake?’

It’s all very embarrassing, especially on Sunday mornings when you’re being asked sympathetic questions in the golf club bar by your regular weekly foursome colleagues about what they’re reading in the Business sections of their newspapers.

You harbour a sense of unfairness. You were offered something which to all intents and purposes was nothing more than a ‘nice little earner’ ‘adjunct to your career’s associated social life. It was a case of ‘turn up, offer advice if asked, have some fun and take a little in return’ – and now this bad publicity (and perhaps worse) has come out of the blue to potentially haunt you.

By taking up the non-exec position, you were only doing what tens of others you knew, or knew of, were doing. And none of them have had this sort of trouble in consequence – why you?

This isn’t what was supposed to happen. Cripes, it might even damage your hard-won business and social reputation.

So you ponder how to deal with it. Journalists have been sniffing round, possibly asking for a reaction from you on the topic, possibly asking for what you knew ‘at the time’. At the time of what? (When whatever caused the crisis originated, presumably).

You want to ‘deal with the issue’ of course [translation: ‘Make it go away’].

You first instinct is ‘I’ve done nothing wrong, so I’ve got nothing to apologise for, nothing to confess … and anyway, if I ignore the crisis it may or will go away’.

That’s you first mistake.

When ‘something’ (i.e. some sort of scandal) gets out, ignoring it and/or adopting a blunt ‘No comment’ stance may make you feel temporarily good, but it’s just as likely to make things worse – especially if the ‘story’ continues to run. Either of the above courses of (non) action may make things worse because – in the dog-eat-dog world of the media – refusing to speak and/or saying ‘No comment’ can be taken as implying you have something to hide. If the journalist (or indeed his editor) want to take that line.

Next down the scale – which you can begin with you if you want, or may have to go to if your initial ‘fob off’ response doesn’t work, see above – is that of the ‘limited admission’, for example ‘Yes, I was indeed a non-executive director of X Holdings Ltd for a period, but the thing you’re asking about happened before my time and I was entirely unaware of it.’

That only works if in fact it is the truth, and the whole truth. If it is any less than the case, there is always going to be the chance – if the dice happens to roll that way – that someday, somehow, evidence will emerge to prove it.

And then you’re really in the mire because after that it’s a downward slope in which you make another ‘limited admission’ … and then possibly another … as each is challenged.

As David Cameron and those in charge of his ‘crisis management’ in the matter are now finding out.

An irony of the situation is, of course, that part of the human condition is a fundamental reluctance to admit that you’ve ever done anything wrong … even if [as was probably the case with the non-executive directorship of the fictitious X Holding Ltd example set out above] the only fault of the chap in question was simply that an all-pervading false sense of security led to him being ‘asleep at the wheel’.