A lesson in how small decisions in one area can destroy a business in other areas and leave reputation hanging by a thread
The Yorkshire racism scandal has been well documented and discussed within the media for some weeks. Matters recently came to a head after a lengthy period of litigation including Employment Tribunal decisions that went against Yorkshire Cricket Club but attracted relatively little attention.
What did attract attention and has brought potential financial ruin upon a business are the decisions that were made after the event and the ramifications on reputation and contracts; with further problems being heaped on top of the County almost daily.
Yorkshire County Cricket Club, which is ultimately a business, has shown others how damaging decisions made in one part of the business, can impact upon that business’ reputation with its partners, key contractor partners; and the wider public and can cause enormous financial damage.
Having decided that a report commissioned into historic events did not justify any action being taken against any individuals, this was widely reported by Yorkshire Cricket Club apparently in the hope that this would draw matters to a head. Accusations of racism are, of course, extremely serious and extremely sensitive however the principles of dealing with the difficulties that Yorkshire CCC fall foul of apply to any and all businesses.
Would you want a business that you are linked with, be it in their case as a sponsor; but otherwise just as a contractual partner or someone who reflects upon your values to damage your reputation? The obvious answer is no and the law allows parties to protect themselves from such damage.
Yorkshire’s sponsors, who are ultimately parties to a contract with that business, were able to withdraw from their contracts, apparently without any fine or liability to themselves, bringing potential financial ruin to a business which previously appeared in reasonable health.
This is not the first time that we have seen businesses adversely affected by the loss of contracts due to actions which damaged the reputation of another party they were contracting with. Earlier this year difficulties were faced by online fashion retailer Boohoo concerning its supply chain and the alleged poor treatment of clothing workers by businesses in that supply chain and brought page headlines for several weeks. That led to a separate report monitoring efforts to improve conditions in the supply chain being published and a very significant reduction of the number of suppliers that Boohoo would deal with.
Both Yorkshire and Boohoo’s situations saw parties exercising contractual rights which we can assume included so called moral clauses which are becoming more common. Having originated in Hollywood in the 1920s, in order to take the interests of film studios from the private lives of actors, this has since become common place in other areassuch as sportsman’s sponsorship contracts.
The morals clause is ultimately a contractual provision that gives the party the right to terminate a contract in the event that the co-party engages in conduct that might negatively impact upon the others image, goodwill and reputation.
Such clauses have assumed even more importance in recent years. The prevalence of social media and the fact that any individual’s conduct can be immediately recorded on a smartphone and then distributed worldwide in seconds means such clauses are relied upon more and more.
The actions of those who were partners with Yorkshire CCC and Boohoo’s actions with its suppliers suggest that increasingly such causes allowing termination due to potential damage to commercial reputations are even more important and significant than they used to be. And that is quite correct. Any business that does not consider how it will protect its reputation and how it will show that it and its partners support their values or that there are consequences, are playing a very dangerous game.
In this era of social media publications what once might have been a small issue that was only picked up on the inside pages of one newspaper can now gain an unstoppable momentum and spread across the general public with incredible speed. Now with developing green credentials for example, new areas of reputational damage can be expected to be relevant.
It is also a salutary lesson that a business that does not consider the commercial impact and the reputational impact a decision it makes is not giving proper consideration to its actions. Indeed one can see a situation where a director making a decision without taking that step could soon be found to have been in breach of their duty as a director to promote the success of a company.
However the damage that a business without proper reputation management guidance can cause itself was seen even more clearly by the actions of Yorkshire CCC’s head of human resources. A day or two after Lord Patel, the new chairman of Yorkshire CCC had taken some sound steps to try to begin putting right the damage, only placed Yorkshire in the spotlight again for the wrong reason.
While social media can be a source of much criticism; a lot of it ill-judged or ill-informed and which requires dealing with; for a head of human resources to email such an individual calling him a coward is unwise and bad reputation management at the best of times.
That is not to defend the action of the individual who was called a coward whose actions on social media may well have been wrong, but this episode again goes to show active and proper reputation management is a key element to any successful business.
The team at Shakespeare Martineau can help you deal with adverse comments; how you deal with untruthful comments or campaigns against the business; or simply how to best manage your reputation using all the tools at your disposal.
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