Partnerships: The difficult truth
By Scott Ng | May 2nd, 2018
Companies spend a lot of time talking about their values – expounding them to the public and to consumers. They filter them into their advertisements, include them in communications with media and investors, highlight them through community involvement, and even display them on the packaging of their products. Presumably they do this to inspire an affinity with consumers – create a personification around the company and its brands that people can relate to. Perhaps that’s a cynical view of corporate values but it’s undeniable that many companies have profited from this strategy. It’s also undeniable that there are numerous examples of these values ringing hollow when compared with actual corporate behaviour – recall Enron extolling its core values of integrity and truthful communication. So in an environment of increasingly skeptical consumers, how can a company prove the veracity of their values and illustrate that they are more than just words? One way they can do this is in carefully choosing their friends.
Now companies of course don’t have “friends” the same way individuals do, being that they are inanimate constructs – what they do have are brand partnerships and endorsements. But that distinction isn’t terribly important to consumers, particularly given how much effort many companies put into diffusing their brands with human characteristics. So in practice, a company may face the same consequences for partnering with a disreputable organization as a person would for having a disreputable friend. A particularly notable and recent example of this can be seen in the intense public pressure numerous airlines, insurance, car rental, and other companies faced to end promotional deals with the NRA following the mass shooting in Parkland, Florida. In another example several CPG companies were compelled to suspend their sponsorship of USA Gymnastics, an organization that failed mightily to protect its athletes from the horrific behaviours of Larry Nassar, one of its prominent physicians.
The larger question this raises however is why these companies were associated with these partners in the first place and why it took a cataclysmic event for them to drop ties. The NRA is undoubtedly popular among many Americans but is hardly an uncontroversial organization. And while USA Gymnastics does not carry the same stigma it cannot plead ignorance to Larry Nasser’s misconduct. Neither can any of its partners who ought to have done a more thorough diligence of the organization. Moving forward it’s not unreasonable to expect companies to review their current and potential partnerships with the increased level of scrutiny demanded by the public. They will continue to be held accountable by their consumers and it makes business sense to ensure they are only associated with organizations whose behaviours they are comfortable with. Further, if companies want to demonstrate an earnest commitment to their values, their partnership spending is one place to start. To an increasingly discerning public it would be refreshing to see a company proactively shed a partnership or avoid making one based on their own values and not as a reaction to something else.
Scott Ng is a capital markets professional that is interested in the expanding role businesses are playing in social impact. He would like to be a part of increasing the importance businesses put on different stakeholder groups outside of their capital providers. He is originally from Calgary and moved to Toronto for the weather.