Since the outbreak of coronavirus and the effective shutdown of the economy, there has been an intense amount of scrutiny – from the media and the public – on private and family wealth.
Over the last three months, many high-profile family business owners have come under criticism as a result of their response to Covid-19.
Coronavirus has caused a more hostile and toxic environment for family capital
Decisions to furlough staff or seek government funding is placing wealthy business owners under the media microscope. There’s a public expectation that wealthy business owners should use their own capital rather than government money, and this has led to UK-based Richard Branson, Jim Ratcliffe and Victoria Beckham being caught in the crosshairs of the media for furloughing employees at the taxpayers’ expense.
In times of crisis and economic hardship, the public want to know how successful individuals, with access to more capital than themselves, are contributing to the national effort.
This level of scrutiny is not new, nor surprising to families. Success brings attention and scrutiny, and families are used to being in the glare of the outside world, but the spotlight has never shone brighter on them than today, which poses them, their businesses and offices with new risks to their reputations to consider.
Of course, some families are more exposed than others. Those in public-facing, consumer businesses naturally attract attention, and individuals based off-shore often have a target on their back.
Coronavirus has caused a particularly hostile and toxic environment for family capital. In the eyes of the mass public, a few bad apples can ruin a perfectly good crop. Richard Branson received more negative press coverage for seeking UK government support for his airline Virgin Atlantic than the Grosvenor family, one of the UK’s wealthiest, did for donating £12.5 million to the NHS. Only last month, the family donated a further £1 million to Covid-19 mental health research.
Public attitudes to wealth will undoubtedly shift and hardened in some quarters as a result of coronavirus, notwithstanding the invaluable contribution UK-based families have made to the national effort – from pivoting their manufacturing lines to create hospital ventilators to the tens of millions donated through their foundations to philanthropic causes.
In the immediate term, the way families respond to the virus is being watched very closely.
Families that are highly associated with their businesses are at particular risk. Tough decisions taken by the business – particularly in those sectors disproportionately hit by the virus – can not only damage the business’s reputation but the family’s reputation.
This can bring unwanted press attention but can also leave the business and family open to negative activist campaigns or subject to brand boycotts. This is a prevalent risk which has been made possible by social media and “street journalism” – the concept that everyone can report to the outside world via their own platforms.
These risks pose a threat to family reputations and in some circumstances, they can undermine credibility from not just the public, but from stakeholders, suppliers, partners, employees and customers.
That’s what is at stake – your reputation – and you need to respond to the threat.
Be alert to modern-day reputational risks
Specifically, these are a toxic, hostile environment of family wealth in some quarters; an increased appetite for transparency and information from the media, governments and the wider public; and, a pressure on families to use their wealth in a positive way.
The direction of travel for UHNW families, whereby there’s an increasing expectation for transparency and information about their wealth, has been clear for some time, and the Covid-19 crisis has likely accelerated that process. Just as we’ve seen in many EU countries, governmental institutions are exploring ways to increase the transparency of private wealth through public beneficial ownership records. Scandinavian countries publish tax returns to increase transparency, too.
Families must start to recognise these risks and put measures in place to prevent them and protect their reputation.
Families need to change their mindset on how they communicate with the outside world, and they need to be cleverer in doing so
Burying your head in the sand is no longer an option. Hoping to fall from through the cracks and go unnoticed is no longer a strategy fit for purpose. Successful families need to set their own narrative – particularly online – or run the risk of someone else setting it for them.
Entrepreneurial families and family capital are a force for good in the world, but many are shy about how they communicate externally – and they are right to be. They don’t want to sacrifice their privacy in return for a positive reputation, nor do they want to be seen as ‘promoting’ their activity.
Families must be proactive and get better at communicating their positive impact on the world – jobs created, philanthropy, sustainable investing and much else besides.
There doesn’t have to be this tight-rope walking between privacy and having a positive reputation, because there are now more controlled ways for families to communicate externally using their own platforms.
Coronavirus has created a thirst for more information and the public want to know that those wealthier than them are having a positive impact on the world.
While the risks are greater, so are the opportunities. Those families that are having a positive impact on the world and using their capital as a force for good, while communicating their message in a controlled and balanced way will craft and sustain a positive reputation.
Luke Thompson is a Partner at Transmission Private. Transmission Private is a full-service communications and media relations agency for private clients and families, trusted to look after the reputations of successful individuals and families worldwide.