Goya CEO Censure Highlights Boards’ Responsibility For Communications

Deciding how the company should respond to controversial issues before a company official makes a gaffe can prevent reputational damage that could have severely negative impacts on company growth.

Recent news reports of the Goya board of directors’ decision to censure the company’s CEO Robert Unanue for making controversial comments in support of former president Donald Trump reignites questions about the board’s responsibility to monitor public comments by its highest company officials. If the board of a private company such as Goya saw the need to silence its CEO, public company boards should certainly revisit policies governing public comments by company officials and issue reminders of those guidelines companywide. Communication strategy should be a board agenda item in 2021.

Unanue repeated Trump’s unproven claims of voter fraud and a stolen election on national news broadcasts, causing the board to take action to silence him. The New York Post reported an unnamed source who said, “The company has never been political or politicized. He’s gone from bad CEO to CEO that has imperiled the future of the company.”

Public statements by the CEO and other company officials have consequences. In 2019, the SEC forced Tesla CEO Elon Musk to step down as company chairman after he made several tweets about potentially taking the company private, which caused the company’s stock price to spike. Tesla was also fined $40 million in penalties for failing to have required disclosure controls and procedures relating to tweets and other public communications.

In the current environment where companies are sometimes pressured to weigh in on many more issues that affect the public — including politics, religious beliefs, racial justice and issues of morality — it is important for boards to update policies and procedures on how the company should publicly handle these sensitive issues. Having conversations about how the company should respond to controversial issues before a company official makes a gaffe or the company is confronted by stakeholders can prevent reputational damage that could have severely negative impacts on company growth. Boards may want to consider:

• Review required disclosure controls and procedures for public comment by company officials. Failing to comply with regulatory disclosure requirements can get companies in trouble with a number of government agencies. Reviewing rules and guidelines for public statements and disclosures can remind company leaders of the seriousness of their communication with the public and give the board an opportunity to discuss what specific messages the company should send on important issues and by what means those messages should best be delivered. Making sure there are proper procedures in place to vet and approve public communications by the CEO and others before they are released is mandatory. Complying with current regulations avoids expensive fines and penalties.

• Make sure the board has adequate experience in crisis communication. Communication is often overlooked as a priority.  However, with shareholders asking for more transparency on a number of issues, the board’s ability to communicate with investors and the public has taken on greater importance. Also, the role that social media plays in shaping public opinion has made it essential for corporations to at least explore how they can communicate more effectively through social media platforms. Boards must make sure they have members that have enough knowledge to guide the board on such issues. It may be time to recruit a board with some experience in crisis management communications or at least assign certain directors to increase their knowledge in this area.

• Discuss legal strategies and crisis responses in case problems occur. Does the company have enough resources to deal with lawsuits or regulatory actions against the company that deal with misleading communications?  Several companies, including Oracle, were sued last year because their proxy statements claimed that the companies embraced diversity, but the actual hiring records conflicted with those claims. Boards must be proactive to determine if past statements made by the company can come back to haunt them in lawsuits or other regulatory actions. Furthermore, creating a communications crisis response team involving the board and management would go a long way to mitigating any damage that might occur due to errant communications.

• Consider developing communications strategies that make the company more comfortable with public disclosures. It is always better to tell your story before the media determines what happened. Having a strategy that involves communicating on a regular basis with the media can build trust that will help eliminate skepticism when officials address the media. Communicating positive news on a regular basis may also mitigate the impact of negative statements that may sometimes occur. Having a communications strategy to rehabilitate the company after a crisis is also critical to the growth of the company and is an important responsibility of the board.