From India’s Infosys to MNC giant British American Tobacco, companies across the world have begun to realise the severe reputational risks posed by social media alongside the big business opportunities.
In their latest regulatory filings and investor communications, a large number of companies have started explaining the risks they face from the increased public scrutiny through the social media, regardless of the factual basis of the assertions being made on these platforms.
Some of these companies, including the IT giant Infosys, have expanded such ‘risk factors’ and feel that responding to such “inaccurate posts” and allegations could divert the attention of their boards and senior management away from the business and adversely impact the company’s reputation.
An analysis of regulatory filings made by the companies listed in the US shows that a large number of them have flagged such risks in the recent weeks for their reputation as well as for the investor sentiments and share prices.
In case of Infosys, its latest annual report filing with the US Securities and Exchange Commission (SEC) shows that the risk factor in this regard has been expanded considerably since the previous year to include the reference to the board of directors.
“Media coverage and public scrutiny of our business practices, policies and actions has increased dramatically over the past twelve months, particularly negative and in some cases, inaccurate posts or comments in the media, including through the use of social media,” said Infosys which has been subject matter of a plethora of reports about alleged rift between its management and some promoters.
The company further said that any negative media coverage in relation to its business, board or directors or senior management regardless of the factual basis for the assertions being made has in the past and may in the future adversely impact its reputation.
“Responding to allegations made in the media may be time consuming and could divert the time and attention of our board of directors and senior management away from our business. Any unfavourable publicity may also adversely impact investor confidence and affect the price of our equity shares and ADSs,” it added.
Similar warnings appear prominently in the regulatory filings made by British American Tobacco (BAT) and the Reynolds American Inc (RAI), two big MNC tobacco giants currently undergoing an estimated $50 billion mega merger.
Talking about the regulations the merged entity may have to follow in different countries, they said the combined group may be subject to claims for breach of such regulations or for failure to uphold standards of corporate behaviour from time to time.
“Even when proven untrue, there are often financial costs and reputational impacts in defending against such claims, in particular, considering the speed and spread of any accusations through social media,” one such filing said.