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David vs Goliath: Reputation management

by Antony Collins on 14 Apr 2014

David vs Goliath
For big business, reputation is king. High ethical standards, transparency and good practice are central to a successful brand. This has traditionally filtered into legal disputes, where companies will fight tooth and nail to avoid losing and being seen as negligent, unlawful or deceitful.

"It does not matter if it is a large corporation protecting their brand or a surgeon being sued for negligence, the biggest stumbling block in disputes is reputation,” says Paul Tweed from JAMS International. “Few defendants are willing to settle because of the potential damage to reputation so cases can drag on.”

This complexion, however, has started to change. In trying to protect reputation, companies can end up damaging it, especially with disputes involving members of the public or small businesses. The court of public opinion can hand down the harshest judgments in the land and this has intensified with the dawn of social media, where Twitter frenzies, Facebook campaigns, online petitions and boycotts can crush a company’s image overnight.

As such, when engaging in legal action against “the little man”, reputation management needs to be considered for the court case itself and not just the outcome. The wrath of social media tends to focus on injustice (whether perceived or misconceived) rather than the facts of a case so getting into lengthy court battles to defend a corporate reputation can actually hamper it. There is no escaping the “David vs Goliath” comparison; a bulking brute unfairly trying to crush a much weaker rival.

There was the case of Portsmouth publican Karen Murphy, who had a spat with the Premier League (which scooped more than £3 billion from Sky and BT during the last TV rights round) over showing matches via a Greek decoder. Or Richard Durkin, who has spent 16 years battling PC World and HFC Bank over a £1,500 credit agreement for a returned laptop. Or the infamous McLibel case between McDonald's and Helen Steel and David Morris. Such cases are more commonplace than might be imaged: a recent survey by Hogan Lovells on cross-border disputes found that the main sources of cross-border disputes were customers (55%), as compared with competitors (23%) or regulators (25%).

Does it benefit the reputation of a high street giant spending 16 years arguing over £1,500? The McLibel case is prime example. McDonald’s successfully argued the vast majority of allegations in a critical leaflet of the company were false (other than a few points on issues such as health, misleading advertising and exploiting children). McDonald’s was awarded £60,000 yet, in the court of public opinion, the defendants were heroes. They took on big business and the focus was on the few points the judge did agree with rather than the majority that were false.

Rather than bruising legal battles lasting years and costing thousands, these are the types of cases where mediation can benefit reputation.

Tweed thinks the key is striking a balance: “An ordinary man in the street will not have the financial means to fight a long court case so mediation is a cheaper option. For a big company, the fallout from the negative publicity of a court case can be expensive even if they win the case because they are seen as stamping on the little guy.”

Another benefit is that litigation is based solely on the legal facts and whether a matter is lawful or not, with damages issued accordingly. For individuals and companies, there is an ethical and moral dimension too but these are not the jurisdiction of a court.

As one mediator observes: “Mediation hears the “moral” case rather than purely “legal” case, unlike the courts. These “moral” issues can be discussed and factored in during mediation, rather than ignored in court and gives smaller individuals the ability to explain their concerns and try to find a common solution.”

Would the McLibel battle have been less painful for both sides if they had mediated? After all, £60,000 damages was not the rationale behind the action for McDonald’s. Would both sides have been able to sit down, discuss their grievances and reach an agreement for the defendants to withdraw the accusations while McDonald’s pledges to consult them as part of a programme to improve its business practices and increase charitable donations?

Impossible to know, but the case provides lessons concerning the possible reputational damage for those companies that remain reluctant to mediate. The public too would benefit from greater awareness of successfully mediated cases, though confidentiality clearly makes this problematic.

“It is important to try to massage the scenario so all sides can see the benefit of a mediated settlement, including maintaining a corporate reputation and also having the wider context of the dispute addressed,” Tweed summarises.

Rather like the biblical battle, David vs Goliath court disputes rarely end well for the big guy. Large companies may win the court battle but, more damagingly, lose the PR war. For the ordinary man, a successful court case means he is the victor while facing adversity against a powerful enemy. If he loses, he is a martyr; a victim of the bullies.

In reputation terms, it’s a win-win for David. Goliath on the other hand, needs to know when to fight and when to negotiate because his odds are not so generous.

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Topics: Mediation

Antony Collins

Written by Antony Collins