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Saving a corporate reputation – Litigation and communication for Asian companies in the U.S.

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Litigation in the United States has faced companies from all over the world, among them major Japanese and Chinese enterprises that have included clients of our firm.

U.S. legal action initiated by government authorities and private parties creates severe risk of not only huge financial penalties and criminal sanctions but also terrible damage to a company’s reputation among customers, investors, political leaders and the media. In fact, the court of public opinion in America rushes to judgments as harsh as those rendered by a court of law, inflicting far more immediate harm to business reputations than the legal process.

Our firm’s three decades of experience with Asian companies have shown that their efforts to communicate to American constituencies about serious legal issues confront four basic challenges to understand and manage: America’s intensely public demand for accountability; the array of audiences that need to be influenced; the importance of an offensive communications operation; and the urgency of quick, efficient decision-making.

The high-pressure environment of accountability

Probably more than ever in our history, we see a confluence of forces in the U.S. that has enormous consequences for a company’s reputation: wide and hostile mistrust of corporate behavior; the demand that “the bad guys”- specific individuals as well as corporations - be punished for misdeeds; and the fevered rush to popular judgment, fueled by 24-hour media, that a company is guilty as charged. All this pressure rapidly unleashes a storm of negative press coverage around the country as well as loud calls for televised public Congressional hearings (aka “circuses”) and legal action by Federal regulatory authorities.

Further, the legislatures and attorneys-general in various states eagerly jump into the action initiated by the powers-that-be in Washington, complicating both the legal and public-relations environment, putting a company in a defensive posture on many fronts simultaneously. Meanwhile, the American financial community follows regulatory and legal events closely, with a negative impact on the sentiments of a company’s debt and equity investors around the world. And of course an organization’s foreign origin automatically deepens the level of public mistrust and suspicion in the U.S., intensified by the kind of anti-trade sentiment and xenophobia revealed in our most recent Presidential election.

The complex audience terrain

When a corporation’s top leaders come from a distinctively different cultural context, it is hard for them to map the American topography of constituencies who can influence business reputations. Besides regulators, prosecutors, judges, political leaders and media at both the national and state levels, there are vocal advocates representing interests of consumers, shareholders, minorities and other groups who generate substantial influence.

In addition, the U.S. media wield a uniquely strong influence on the general population, and reporters often need help to understand complex legal issues and the companies involved, especially if the latter are headquartered in a culture other than ours. So, communications work must concentrate on educating the press if a company can even hope for reasonably fair-minded treatment by these vital opinion-makers.

Two realities about working with the U.S. press are especially significant. First, the extent to which reporters and editors are hostile, aggressive and unrelenting, with little or no sense of deference to the status of a corporation or its leadership, is likely to be unfamiliar to those accustomed to dealing primarily with Asia-based media. Much of this adversarial nature of the press derives from the popular hunger for hard-nosed investigative reporting, and from its revered status within the journalistic profession.

Second, journalism in America emphasizes the development of stories that offer dramatic narratives focused on portraying people’s actions and feelings, creating an emotional linkage to the reader. Because such efforts propel much media coverage, a company’s communications to the press should to the extent practicable avoid impersonal, “corporate” or legalistic language. Nor should they reflect merely what an entity wants to tell its audiences, but in addition convey what will resonate with them, with increased probability of influencing their attitudes and behavior.

The need for offensive operations

In regulatory and litigious situations, careful calibration of what one says and does is particularly vital, and often there is a need for a disciplined use of “no comment” in response to the press. However, that is not the general rule, and even when public silence is necessary, it should never lull a company into a passive mentality toward its communications. With the guidance and support of legal counsel, the communications people must be constantly prepared to go on the offensive in order to convey a company’s messages before the opposition has a chance to establish theirs.

An aggressive mindset means, for example, that a company is able to intervene in the early development of a potentially harmful media article, conveying information from “informed sources” or “off the record” that softens or dramatically changes the piece. It also enables companies under attack to mobilize quickly individuals and groups of shared interests who agree to provide vocal public support. This kind of mindset also leads to good plans for managing “leaks” from the other side and rapid responses to inaccurate press reports before they metastasize into widespread misperceptions.

Essential to quick, effective communication action is the designation of one or two of the company’s American attorneys - usually outside counsel - to act as expert spokespersons, most often with the press. They are especially important for providing - frequently off the record or as anonymous sources - expert explanations of technical legal matters to reporters, helping to enhance the credibility and trust the press gives the company.

The bedrock of a proactive mode of operation is a well-thought-out communications strategy, which of course must be grounded in and support the legal strategy. A true strategy should define clear objectives, articulate the messages that can be used on the record, on background and off the record, and identify specific audiences, particularly the “influencers” among them. It should lay out the tactics to be used to reach and monitor each audience. And it should identify third parties who can be recruited to support the company’s cause, including, for example, securities analysts, technical and legal experts, consumer advocates, and retired political leaders. A good strategy also requires continual scenario-planning: thinking ahead, in concert with the attorneys, about possible new developments, doing research and drafting contingency plans, messages and materials.

Naturally, the strategy must be flexible, subject to continual review and revision as a case evolves. Such a thoughtful and systematic communications framework is critical to providing a clear sense of what the legal and communication teams are trying to accomplish together, and to keeping them from “crossing wires” or missing opportunities. The absence of such planning is especially perilous if the opposition is skillful at using the press and other communications vehicles.

Timely decision-making

Japanese companies in particular emphasize decision-making by building consensus among their leaders. This, plus the need for their executives in the U.S. to seek approval from superiors in Japan, can inhibit quick action, as does the lack of understanding of political and other cultural realities in America. To mitigate these obstacles, it is helpful to create a small core team of business, legal and communications leaders with as much decision-making authority as reasonably possible. This team needs well-defined procedures for convening quickly, getting approval for decisions and disseminating them.

Tight coordination between the lawyers and communicators is critical. To be effective, the communicators need ample advance notice of new developments – court filings, motions by the opposition, courtroom appearances and more. And the attorneys must be instantly available to advise on and approve actions by the communicators.

The emphasis on timely decision-making underscores the relevance of the old maxim that the best strategy is worthless if people are not executing it well. Of course, great execution of a bad strategy or none at all would be problematic, too. For Asian companies, the productive melding of communications strategy and tactics around major legal issues in the U.S. requires understanding the intensely public demand for corporate accountability, the complex audience dynamics, the value of being on the offensive, all with the need for expeditious decision-making. At least in our experience, an Asian company that absorbs and acts on these realities will adapt to the idiosyncrasies of the American communications environment, preventing disastrous harm to its reputation and business.

This article first appeared in Asian Legal Business.