Reputation and social marketing: the legal stuff

I spoke at the Marketing Legislation Seminar in Rosebank this morning. My topic was basically online reputation management and related legal principles and issues. This area seems like something of a fuzzy marketing thing but the more I look into it the more it becomes an organisational imperative with serious legal ramifications. I've mentioned the King 3 ramifications previously and that is just the beginning.

Its a fascinating area of the law and many of the issues and strategies are still being developed. Here are my slides to give you a glimpse into my thinking:

Online Reputation Management is good corporate governance practice

Online Reputation Management (or "ORM") tools are remarkable marketing tools. They help provide insights into what customers are saying, virtually in realtime, about your organisation, your brand and even your competitors (well, just about anything you want to know about - you frequently get to choose parameters).

I recently wrote about ORM in the context of legal compliance, specifically about how ORM tools could be used to help organisations better comply with the myriad legal requirements they are faced with on a day to day basis. Until this point, ORM may seem like a "nice to have" option but not essential. Fortunately for ORM providers and the agencies that use their tools (disclosure: some of my clients come from both camps), ORM also appears to be part of good corporate governance and more important than many organisations would have thought.

The 3rd iteration of the King Code of governance is a fairly comprehensive and authoritative set of principles and guidelines for good corporate governance. It is not legislated although a number of regulatory and industry bodies recommend compliance with King 3. King 3 works on an "apply or explain" basis:

It is the legal duty of directors to act in the best interests of the company. In following the ‘apply or explain’ approach, the board of directors, in its collective decision-making, could conclude that to follow a recommendation would not, in the particular circumstances, be in the best interests of the company. The board could decide to apply the recommendation differently or apply another practice and still achieve the objective of the overarching corporate governance principles of fairness, accountability, responsibility and transparency. Explaining how the principles and recommendations were applied, or if not applied, the reasons, results in compliance. In reality, the ultimate compliance officer is not the company’s compliance officer or a bureaucrat ensuring compliance with statutory provisions, but the stakeholders.

Certain of the King 3 recommendations are particularly relevant to ORM and were highlighted as early as 2009 by Tim Shier of Brandseye (Tim pointed out his post in his comment on my post about ORM and legal compliance and inspired this post) and Deon Binnerman. Both Shier and Binnerman quoted sections of Chapter 8 which deals with "[m]anaging stakeholder relationships". The chapter essentially makes a series of recommendations about how organisations should engage with stakeholders. Just who are these stakeholders?

Stakeholders can be considered to be any group who can affect, or be affected by, the company or its reputation. Some of the important stakeholders include shareholders, creditors, lenders, suppliers, customers, regulators, employees, the media, analysts, consumers, auditors and potential investors. This list is not exhaustive.

A number of the principles in chapter 8 may as well have been written about interactions on the social Web and ORM in particular:

• Principle 8.1: The board should appreciate that stakeholders’ perceptions affect a company’s reputation;
• Principle 8.2: The board should delegate to management to proactively deal with stakeholders relationships;
• Principle 8.5: Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence;
• Principle 8.6. The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible

ORM, as a corporate governance practice, makes tracking and interpreting mentions; keywords and phrases an essential activity. It goes beyond a simple marketing activity and becomes the responsible thing to do at a senior level within the organisation. Put another way, organisations should seriously consider incorporating some sort of ORM methodology into their stakeholder management processes. While King 3 may have been prepared with more traditional channels and stakeholders in mind (I am guessing here), its principles apply directly to stakeholders on the social Web who may have their say through ephemeral tweets and somewhat more enduring blog posts. Those stakeholders are potentially customers, likely influencers to varying degrees and have the ability to have a profound impact on an organisation both individually and when they create communities of share interests.

This process involves more than just listening to what stakeholders are saying and extends to developing sound strategies for engagement with those stakeholders, where appropriate, and processes to manage evidentiary requirements should engagement fail and a dispute arise. Tweets, updates and posts on Web-based platforms largely exist outside corporate networks and yet those seemingly trivial messages can have real value should a dispute arise and the organisation find itself in court with a stakeholder. The Electronic Communications and Transactions Act deals with how digital evidence must be collected and preserved. This may seem somewhat extreme where the stakeholder concerned is a disgruntled customer tweeting his dissatisfaction but those tweets could become pivotal communications in legal proceedings which only really gain momentum several years later when the original communications may have faded from public timelines or the platforms themselves may have closed and disappeared. Organisations should prepare for the possibility that they may need to develop processes to collect and store those tweets, updates and posts in a manner that complies with the law dealing with such things because those digital bits could be critical years later.

Its worth pointing out that while much of the general discussion about the social Web tends to focus on consumers, the traditional group of users, ORM is equally important in a business to business context, although possibly for different reasons. There are ancillary legal issues (such as unlawful competition) which branch off from the central reputation oriented approach and which also require attention.

Thanks to King 3 and the growing influence social media users could have, both directly and indirectly, on an organisation's brand and the organisation itself, ORM becomes an essential tool as not just a legal compliance tool but as part of good corporate governance.

Legal compliance through Online Reputation Management

Online Reputation Management (commonly referred to as "ORM") solutions are popular with companies that have social media initiatives. These solutions enable companies to monitor the social media landscape for keyword and brand mentions that they often select based on their areas of interest. Two local solutions are BrandsEye and saidWot (Disclosure: saidWot's sister company, Virtuosa, has been a client).

I came across an American solution that has an interesting approach. Hearsay Social appears to combine ORM with US financial services industry compliance solutions to provide a more holistic approach to the social Web. I have no experience with the product but their introductory video explains their approach nicely:

ORM solutions tend to do a good job monitoring the social Web for specified mentions. The emphasis has tended to be the marketing benefits this sort of monitoring brings to the table but there is another, perhaps more important, function these services could (and, to an extent, perhaps already do) perform: legal compliance. Legal compliance requirements vary from industry to industry and are fairly well addressed in conventional contexts. Financial institutions, for example, carefully monitor what their employees say in mainstream press and restrict communications about their financials over certain times of their financial year.

While some of these businesses are taking a greater interest in relevant mentions on the social Web, its not clear how many businesses regard ORM as a compliance tool in addition to a marketing tool. Well, the nature of ORM services does speak to a compliance aspect in that they often conduct some form of reputation scoring but, as I understand these solutions, the purpose of that scoring is more for marketing purposes to facilitate improved engagement and help shape marketing strategy than it is to ensure better compliance with the myriad legislative and regulatory compliance requirements.

The challenge with the social Web is that communications on the social Web exist outside corporate networks and are subject to third party control, variable user privacy settings and are distributed across a range of services (although probably concentrated on a few large ones like Facebook, Twitter, LinkedIn and, to a degree, Quora). Many businesses have implemented systems that help them monitor employee communications using email, instant messaging and perhaps even internal social media implementations but few seem to be tackling the social Web and what employees and customers say on the social Web from a legal compliance perspective.

A compliance-oriented approach to ORM could extend social media policies meaningfully and help companies track and store detailed reports setting out the extent and scope of resulting interactions. Such a solution will need to cater not just for specific legislative and regulatory requirements but also for businesses' own compliance programs (for example, programs to ensure Consumer Protection Act compliance through best practices). Records compiled by these solutions would also need to be detailed enough to fulfill an evidentiary role should interactions prove to be contentious down the line and be stored in an appropriate form and mechanism to meet evidentiary requirements.

ORM is fascinating work and just as social marketing should integrate a legal component, so should ORM. In fact, ORM solutions are potentially ideal compliance solutions too, with appropriate features

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Compliance can be tricky, especially when it comes to social media. Get in touch with us to discuss your business' requirements in more detail and how we can help your business be more legally compliant.