Rumors are ingrained in the culture of Wall Street and global markets. The very name of The Wall Street Journal’The remarkable daily column “Heard on the Street” (one of my favorites) illustrates the importance of what is whispered in the corridors of power.
I served on the executive and management committees of the New York Stock Exchange for nearly a decade. Back then, if you stood in the press box overlooking the main trading floor and watched someone spouting spicy gossip at one end of the trading floor, you could almost see them traveling from person to person. the other across this immense room.
Some rumors are credible. Some are patently absurd. Others fall somewhere in between. Countless ones prove true over time or come true on their own. Many disappear, but in today’s digital world, they never really disappear. These discussions are transmitted instantly by telephone, private email, social media and instant messaging platforms.
Regulators have tried to curb the use of unauthorized instant messaging platforms by businesses, hitting the financial sector in recent months with substantial penalties for misuse. Yet they are a reality and show no signs of disappearing.
Rumors are spread by haters, spread by fools, and accepted by idiots. It doesn’t matter
The stakes between the best and worst response to a rumor may be a collapse in stock price, declining sales, continued reputational damage, an inability to attract and retain talented people, and changes to the management of the company.
Today’s headlines and social media commentary show the damage that can be done by individuals or groups with ambitious political or business agendas and by savvy actors in assessing what kinds of assertions will be most destabilizing. businesses.
Rumors and speculation have become timely tactical tools for driving organizational change. Worse, speculation is often sparked within an organization or its immediate market – and where there’s smoke, there’s usually a potential conflagration.
Rumors spread without a discernible source or basis are easier to dispel. If it is obviously false, a company can dismiss the rumor and kill it quickly.
However, if subsequent reports lend any credence, these rumors lead to speculation.
“The only thing we know about the future is that it will be different” -Peter Drucker
Meteorological advances in communications and technology have converged over the past decade to make rumors and speculation an immediate threat to businesses.
Within minutes of an incident, many people come forward and offer immediate and sometimes uninformed opinions on the story. Today, just about anyone can be considered an expert or an “expert” commentator.
Fierce media competition drives stories, sometimes with little editorial control. Commentary and gossip, once reserved exclusively for showbiz coverage, are now a staple of economic and financial news.
It’s no longer boring, the investment turns into all-day cable commercial shows and non-stop headlines. As they spread across the Internet, opinions move from rumors and speculation to databases within minutes.
The excesses of the senior leadership, the corruption integrated into political demagogues, have added fuel to the fire.
Management is also constrained by Securities and Exchange Commission (SEC) Rule 10b-5, which requires executives to tell the truth. It is illegal for anyone to defraud or mislead investors, including through the misrepresentation of material information, with respect to the sale or purchase of securities.
“Great things are achieved by a series of small things put together” – Vincent Van Gogh
In today’s climate, management is guilty until proven innocent.
Businesses that understand the power of perception and maintain credibility and the loyalty of their constituents adhere to a handful of core principles in normal times and in times of crisis.
The comment “no comment” or “we do not comment on rumors and speculation” is not always an option. It may be easy to say and it seems comfortable for lawyers, but the markets no longer accept it. In most cases, these comments will not stop ongoing comments.
Answer with facts. Facts chase away fiction. Present valid reasons why the rumor or speculation is not accurate. It can be difficult for executives and lawyers to agree and use facts, but this approach is effective and sustainable in this digital environment.
Speak in simple English. Industry jargon and legalese significantly damage credibility. Express empathy and understanding, don’t be arrogant or obstructive because you don’t like the question. This will only fuel speculation.
Communicate consistently and earn a reputation with market participants and media. Rumors and speculation love an information vacuum. Collect, verify and share information with investors and other constituents. Don’t wait until you have legal requirements to make an announcement: you will have many more questions to answer.
Stay vigilant. Speculation has a long lifespan. This manifests beyond investor memory in databases and social media. Even after voters move on to the next story, the narrative can be co-opted and the issue reactivated by a troll at some point.
Establish a process and procedures to quickly convey information from the ground floor to the C-suite. Alert management to positive, negative, and even lack of discussion of group agendas both indoors and outdoors. outside the organization.
Black Swan Events Are Predictable
Rumors and speculation are not orphans – they arise from latent tension somewhere – and then someone pulls the trigger.
Faced with these critical moments, the preservation of a company’s reputation depends on its leadership. Grace and transparency under pressure are necessary to match the depth, breadth, breadth and speed of today’s online world and marketplaces.
Poorly prepared leaders will suffer more than 15 minutes of shame. If you don’t control how you are perceived, the markets and media will do it for you.
Richard Torrenzano is the CEO of The Torrenzano Groupwhich helps organizations control how they are perceived. For nearly a decade, he served on the management (policy) and executive (operations) committees of the New York Stock Exchange. Richard is a sought-after expert and leading commentator on financial markets, brands, crises, media and reputation.
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