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July 24, 2011

“Hacktivists” | A New Term but the Same Old Game

by stevenwyer

Given the damage that anonymous hacktivists and minority shareholders have done to the values of small cap stocks while standing on the Constitution’s First Amendment, companies are becoming more proactive in their online reputation defense strategies. While many small public companies are unaware of what can happen in a twenty-four hour period on the Internet, Reputation Advocate hears new horror stories every week.

Take, for instance, the following scenario. An adverse decision upsets a shareholder. Historically, that shareholder (let’s call him Bob) would attend the annual shareholder meeting and voice concerns while evaluating management’s recommendations. No longer. Investor Relations professionals are only as successful as the shareholders are willing to communicate. A question arises – what happens when Bob grows impatient and is not satisfied with a company’s response? The answer for many is found on the Internet.

It is currently estimated that there are more than 300,000,000 blogs created and maintained on the Internet. Wikipedia says that, “Blogs are usually maintained by an individual with regular entries of commentary, descriptions of events, or other material.” Further, Wikipedia offers that, “Most blogs are interactive, allowing visitors to leave comments and even message each other via widgets on the blogs and it is this interactivity that distinguishes them from other static websites.” Interactive messages, regular entries of commentary (remember the First Amendment?) and anonymity; it sounds like a potentially explosive combination!

In another scenario, Bob is holding a small number of Founder shares of a company. He purchased his shares initially through a PPM, the company went public and since then Bob looks at the stock value weekly. He is impatient, has talked to the IR firm and a couple of senior management people and he sees no decisive movement.

Several times, and without even thinking about it, Bob decides to let the world know about his discontent. In the good old days people would work to get a stockholder list and call or mail them a letter. Investor Relations could counteract and try and get in front of them, so to speak.  The First Amendment to the Constitution provides solid footing for all those desiring free speech. Governing laws, however, look much different for the Internet than for other forms of communication. Bob can broadcast any derogatory message Loud and Proud! Short of specific personal information such as a social security or tax ID, specific banking information, child pornography or a threat against the government, anonymous bloggers, forums, complaint sites and various customer-rating sites can be used against a company, its officers, directors and employees.

Bob suggests on a complaint site that the current CEO would serve the company better if he focused on the shareholders’ interests more, and golf a little less. Next, a blog is found bringing into question the compensation of management and the justification for such pay given the poor performance currently experienced by the shareholders. Finally, someone posts a picture from the annual company Christmas party; not naughty, but not nice. You can see where all of this leads. A relatively small shareholder base – fear and mild panic when Investor Relations doesn’t return a call quickly – possible shorting. And finally, as everyone knows, aggressive downward pressure on a small cap stock is always of interest to regulators.

This scenario is a competitor’s dream. Interest from a regulator, doubt about the viability of the company on a blog or two and a company that is not prepared for any of this, for after all they are busy running the company! If you are an officer or director of a public company what you are reading may sound like a doomsday scenario that could never happen. Really? Let’s add the dynamic of time; say three days.

In dealing with private and public companies, Reputation Advocate has seen many things happen that the proud and the powerful didn’t see coming and that hit with such force that the viability of the business faltered. These are often attacks that can actually be tracked back to ROI. Real cash flow constriction, real share value, real debt to income ratios impacted and real legal action. This is not a fantasy marketing pitch; it is real business in today’s climate of change.

An old saying asserts that an ounce of prevention is worth a pound of cure, and so it is. All companies must keep a keen eye on digital threats. Proactive action and planning can provide a baseline of online reputation management that enables companies to defend themselves. I had a client recently refer to online reputation management services as the equivalent of digital liability insurance. There is a critical difference in this perspective, however. When damages are demonstrated, insurance provides payments that address the damage. Absent a company accepting the need and costs of online reputation defense, when damage occurs there is no compensation to offset damages. Only the damages remain.

While it is said that people are innocent until proven guilty, Steven Wyer experienced first hand that the Internet has interrupted such long held notions of justice. As managing director of Reputation Advocate, an online reputation management company, Steven Wyer now helps others who have been slandered online as he was. Adding the title of published author to his string of professional accomplishments, Steven Wyer has written Violated Online. In the book he offers more than 50 specific tips on how the reader can better prepare for an unexpected online attack. For more information about how Reputation Advocate can help you repair your online reputation, call 888-229-0746 or go online to http://reputationadvocate.com 

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