Our thanks to Shearman and Sterling for hosing a fantastic WIM panel discussion on the 30th of March 2017. Our panel of experts focused in on how to effectively manage crises in the mining sector. Attendees were presented with the following scenario and invited to provide feedback on the main stakeholders and key issues within the scenario for discussion by the panellists.
“A mid-cap miner operating in a South American country is alleged to have been making payments to local government officials to cover up HSE violations. The allegations are gaining traction at a national level within the country in question as local community groups impacted by these violations are protesting against the company and appealing to lawmakers to bring the company to account.
The company’s US-based parent company (which is listed on the LSE in addition to the NYSE and has a London-based group of senior officers) is becoming concerned about its exposure to international anti-corruption legislation. Internationally based investors are also starting to ask questions having been notified by their locally based subsidiaries.
The company has a decent mix of local and expatriate personnel with their families based near the mine site. Some of these expatriates have contacted the parent company expressing concern for their safety due to intimidation by local action groups and unions. They are threatening to talk to the media if their concerns are not dealt with quickly.”
Our panel of experts was comprised of the following: Cynthia Urda Kassis and Jo Rickard (Moderator), both Partners at Shearman and Sterling, Grant Ringshaw, Executive Diretor at Citigate Dewe Rogerson and Stephen Withnell, Managing Director, EMEA Metals and Mining at Goldman Sachs.
Commencing the discussion, each panellist provided their first impressions of the scenario and its likely implications and impacts. Drawing comparisons to similar real life scenarios in Latin America, the panel discussed potential far reaching impacts of such a situation including wide ranging political and unrest in the local communicates thus highlighting how a crisis such as this, if not effectively managed, can quickly escalate. Addressing the scenario from a media perspective, the panel also addressed how companies can quickly manage and take control of the information in a timely fashion to prevent escalation. The companies must have practiced crisis management teams able to quickly distil the facts and take quick decisions ensuring the company can ‘write its own story’ as opposed to a media or locally created version that could distort facts and, in turn, the company’s image. From an investor perspective, the panel was quick to point how investors will want assurance that the company has the facts and is following protocol or plan of action that is transparent and communicated effectively to all stakeholders.
The panel reiterated the need to make early public statements specifying awareness of the issues at hand and outlining a plan to address them. Although the temptation is to keep quiet until all facts are known, social media can often exacerbate the issue and make early action all the more important. The company must be seen as a credible source of information and demonstrate an ability and willingness to fix the issues rather than making defensive statements which could later be proved false.
In such a scenario, and with the advent of social media everyone could be considered as a stakeholder, with some individuals and groups more directly impacted than others. Companies must not be seen to neglect local communities as well as making a plan to address any queries from the regulators as well as any business partners who may have concerns. The companies should, within such scenarios, prioritise and tailor messages working with an external and independent 3rd party to help to positively reinforce messages.
The panel proposed that the following were crucial elements to consider for all companies within such a scenario:
- Ensure that a crisis management team exists and is practiced dealing with such scenarios through detailed scenario planning. This would likely comprise of a streamlined group of senior managers such as the Head of Strategy, the HSEC Manager, the HR Manager, the CEO and the Chief Financial Officer. EVERYBODY should have an alternate in the event that people are unavailable (which is likely)
- Employees must understand and comply with the clear lines of delegation which specifies who is permitted to talk to the media about any allegations or internal information
- Do not neglect existing staff and employees – Maintain effective communication to all employees to address concerns and ensure they are briefed on what to say if targeted by media
- Try to maintain a personal approach (connect on a personal level) and not make false claims. Placing blame will come after the event; during a scenario, focus on managing the crisis.
- It is preferable to wait to launch an investigation to after the event and following consultation with independent advisors
The discussion came to a close following a Q&A session with some insightful questions from a number of the audience members. The evening was concluded with networking and drinks.
As a useful insight, our audience members provided their answers to the below questions on a white board. Very varied concerns detailing the very diverse concerns held by stakeholders.
What should the client be most concerned about?
- Reputation amongst all stakeholders
- Understanding the full dimensions of the issue
- Social license to operate
- Information gathering
- Developing a comprehensive strategic response
- Reputational damage
- Investigation by the DOJ for FCPA violations
- Health & Safety
- Concerns of investors
- Reputation amongst all stakeholders
- Validity of allegations
- Safety of local employees
- Directors caught under Bribery Act
Who are the stakeholders in the scenario?
- Local community groups
- Local government
- Company’s vendors in X country, suppliers, 3P contractors
- Local communities
- The board
- Parent company
- Local operating company
What initial observations do you have on this scenario?
- Press statement to be released indicating ‘Co’ is “concerned” and investigating and taking necessary steps to remedy the situation
- South American location
- Has the allegation been investigated? Listen-up recordings investigated
- On the verge of descending into a fiasco!
- Country manager of X Country has to appease local employees – has an internal memo been issued?
- Delicate balance between local and expat employees
- Potential for international escalation
- Investigation? Does the company know whether it actually occurred?