Beware of these 5 Deadly Corporate Sins

One study that looked at more than 16,000 earnings conference calls, indicated that analysts had uttered the phrase “great quarter” approximately 3,000 times.
One Wall Street analyst, Dan Davies, skewered the typical earnings call with this spoof: Analyst: “Great quarter, guys! I’d like to drone on for a bit, and make it perfectly obvious that I had a meeting with you before the close to discuss my numbers. I’d also like to remind all the other analysts on this call that I’m the most experienced analyst with a ‘buy’ recommendation, which is why you took my question first. So my question is, what do you think about how the quarter went?”

Management: “We thought it went pretty good, Jim! Thanks! See you at the conference in Boca!” As for those analysts less likely to provide a “buy” recommendation, they experience greater difficulty accessing company management teams—to their investors’ chagrin. Certainly, this is no way to build confidence in the investment community.

“Companies should have a very cohesive way of describing how they are going to create value for shareholders over the long term, and should be proud to tell that story and support it with facts,” says Ruggeri. “You either push the envelope of transparency in your narrative by opening access to all analysts, or you end up ignoring relevant stakeholders to your long-term peril.”

5. Abusing the Patent System to Restrict Competition

Companies that file overly broad patents or acquire patent rights merely to restrict competition are guilty of committing our fifth and final sin. Such “patent trolls” used to roam the backwaters of business until President Obama outed them in his 2014 State of the Union address as “phony patent filers” costing “some of our best innovators tons of money in court.”

“if the public perceives you’re filing a patent infringement case with the purpose of restricting competition, you’re in for a backlash.”

While thousands of legitimate patent infringement lawsuits are recorded each year, a few are filed solely to limit competitors in their development of innovative products. “Some companies have asserted patents pretty blatantly to restrict competition,” says Josh Becker, CEO of Lex Machina, a provider of legal analytics to companies and law firms. He pointed to giant Honeywell’s 2012 patent complaint against tiny thermostat-maker Nest, claiming the startup’s smart thermostat violated its intellectual property.

After Google acquired Nest in 2014, the two businesses settled the dispute out of court, reaching a cross-license agreement. Was it worth it for Honeywell to be perceived as a Goliath picking on a David, particularly one with a highly innovative product? “It was pretty obvious that Honeywell sued with the purpose of putting the young punk startup out of business,” says Becker. “I understand when a company files a patent infringement complaint for defensive purposes—it would be a dereliction of duty not to do that. But if the public perceived you doing it with the purpose of restricting competition, you’re in for a backlash.”

Beware these 5 corporate sins as they can be deadly, corporate reputation experts warn. “Negative news travels fast, meaning you better have a credible
response ready if you’re caught with your pants down,” says Knowles. “It’s so easy now [for customers] to quickly switch to a competitor.”

Thanks to hashtag activism, when people turn their backs on a business they are likely to do so in droves, posing an immediate threat to the organization’s revenue stream. “Companies have to be more careful in their rhetoric and decisions, particularly in this era of rising populism and instant social messaging,” says Bridwell. To deter the risk of poisonous tactics infecting the workforce, he advises that CEOs establish, disseminate and champion permissible behaviors. “Clarify your organization’s purpose and values, and communicate these tenets aggressively,” Bridwell says. “Your reputation and brand depend on it.”

Quinlan provides a similar perspective, which rings especially true in light of United Airlines’ April fiasco: “One of the quickest ways to destroy market value is an incident that causes consumers not to trust you,” he says. “You only have one reputation. Protect it at all costs.”

As the embattled CEO of the aforementioned ride-sharing company would attest, removing the tarnish that attaches to a reputation is hard work. Better to
keep it sterling.