Starbucks, ABC responses to racist incidents show business value of decisive action

  • Written by MarketWatch
  • Published in Economics

The dual responses from Starbucks Corp. and ABC Entertainment to recent racist incidents shocked some onlookers, but corporate reputation experts and civil rights activists say the need for decisive action—despite the controversy it may cause—is now a business imperative.

At this point, all companies should be prepared for an inevitable corporate crisis. However, businesses must do more than simply pay lip service to an incident that has gone viral.

“You’re going to see a lot of this rapid corporate response to ‘reputation tornadoes,’” said Dr. Nir Kossovsky, author[1] and chief executive of Steel City Re, a corporate reputation risk consultancy. These responses should not just be a “marketing statement.” Rather, companies must take steps to reassure customers, investors and other stakeholders about the fitness of the company’s leadership and meet the need for a satisfactory resolution to an issue.

“Reputation risk is much more than the peril of negative media,” said Dr. Kossovsky. “It is the peril of economic damage from angry, disappointed stakeholders. Preparing to manage that risk requires a full, enterprise-level commitment.”

Read: Like Roseanne, all Americans are just one bad tweet away from being fired[2]

On Tuesday, Starbucks SBUX, -1.48%[3] shut 8,000 stores for anti-bias training[4], weeks after two black men, Rashon Nelson and Donte Robinson, were arrested in Philadelphia at one of the company’s locations while waiting for a business associate[5].

“Reputation risk is much more than the peril of negative media. It is the peril of economic damage from angry, disappointed stakeholders. Preparing to manage that risk requires a full, enterprise-level commitment.” Dr. Nir Kossovsky, author, CEO, Steel City Re, a corporate reputation risk consultancy

Starbucks enlisted the help of groups like the National Association for the Advancement of Colored People’s Legal Defense and Education Fund (NAACP LDF) and Demos, a public policy organization committed to racial equality and economic advancement, to design a curriculum focused on recognizing bias and creating a more inclusive environment.

And: Roseanne’s hard lesson: The First Amendment protects you, not your job[6]

“It’s about the bottom line of their business model,” said Heather McGhee, president of Demos, which gave its services pro bono. “It doesn’t work in America if a rising part of the population doesn’t feel welcome because of their skin color.”

Data shows that the U.S. is approaching a majority minority society, with whites projected to be the numerical minority in 2044[7]. According to a recent Weber Shandwick/KRC Research study, consumers are increasingly “voting with their wallets.”

“They are taking action in support of or against organizations that...

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