Whole Foods CEO John Mackey recently learned of the power of blogs, for good or for ill, when he blogged while concealing his true identity. In the postings, he extolled Whole Foods (surprise!) and knocked his chief rival, Wild Oats. Concerned over disclosure of insider information, the Federal Trade Commission investigated and the matter publicly embarrassed the fast-growing organic food supermarket.
Mackey's blogging illustrates that, despite the benefits offered by the Internet, one drawback is that it has no eraser. Blogs are an increasingly popular form of cyber expression. Blogs are Internet postings that are often — but not necessarily — third-person musings on any subject about which one prefers to write. Some might say blogs are electronic "bully pulpits" for the opinionated, blending virtual diaries with barstool confessionals. Often associated with sports, politics, or teen angst, blogs are increasingly business related. Some come from individuals, while corporations sponsor others. They are proliferating on a daily basis.
According to Business Week, as of late 2005, seven percent of all CEOs engaged in blogging, and 18 percent stated that they expected to host a company blog within two years. Each hour, 2,000 new blogs are born. Between 7 and 8 million blogs or online diaries exist currently, and that number grows by the minute. Some estimate that one out of every 20 adults in the U.S. is a blogger.
Blogging has risk management implications that companies and individuals must ponder. Some liken blogs to setting up a booth in the planet's largest trade show. Blogs give corporations the ability to monitor feedback from external businesses and consumer environments. Many provide forums that document complaints about companies and their business practices. This offers a voice for the customer, however nettlesome or unwelcome. Feedback enables those in corporate cocoons to hear just how well their products or services perform in the real world. Based on such data, companies can fine-tune products, services, and strategies.
Blogs have a dark side, though. Irate customers or competitors can fulminate and write defamatory content. Blog postings may or may not have merit, but even inaccurate postings can receive wide currency, threatening a company's products, services, reputation, and market share.
Cyber Weathervanes
In the Internet Age, companies should monitor blogs — even if they disagree with the content — in order to make sure that nothing false or defamatory is being spread electronically. By tracking what blogs say about their organizations, risk managers can identify areas where companies need to preserve the good name of their business enterprises.
Further, if an employee posts a blog comment that another company perceives as defamatory, a claim could arise for advertising injury against the employee and possibly his employer. For example, employee Milton posts a blog comment that says, "Competitor B sucks and is teetering on bankruptcy." Competitor B learns of this, becomes aware that Milt works for a competitor, and sues Milt and his employer.
Time Bandits
With the popularity of blogging, productivity waste is another peril. Time spent blogging could otherwise go towards more productive corporate pursuits. Blog surfing can cause employees to fritter away valuable time. Thus, companies might consider reasonable policies that govern or even restrict employee access to online blogs during work hours. These are similar to "fair use" Internet policies that bar employees from porn and other commercial sites during work hours. (Many IT departments have controls that automatically block employee access to certain types of web sites. Management might extend such controls to employees surfing or posting blogs during work hours.)
Companies that act against blogging employees also can face risks, though. In one case, a Delta Airlines flight attendant posted suggestive photos of herself in her uniform. Delta fired her, which led her to file a still-pending employee grievance. She plans to file a suit in federal court for sex discrimination and retaliation.
Employment Law Issues
Liability issues persist in employee privacy and employment practices. For example, can employers fire employees for blog content that they developed outside of work hours? Discharged employees could file employment practices liability claims against employers, alleging invasion of privacy or violation of First Amendment rights. Welcome to employment practices liability! Even frivolous claims will cost thousands of dollars in legal fees to defend, underscoring the need for insurance coverage or other funding mechanisms to address the risk.
Corporations can launch their own blogs to counter negative publicity, to simply promote good PR about a company, or to project a brand's image. When one considers the financial and balance-sheet value of corporate goodwill, enterprise risk management involves preserving a corporation's good name. If proactive measures through blogging obtain this result, corporate-supported blogs may advance the aims of enterprise risk management.
A recent ad bore the following headline: "The Ugly Truth: Bloggers and Customers are Talking About Your Company." The advertisement's subtitle? "Do you know what they are saying?" Malcontents can write about your company every day. Some postings can be damaging if undetected and unanswered. Inaccurate or slanted blog dialogue can jeopardize a company's reputation (and stock price). One company — Factiva — offers to send customers blog postings that could represent business threats.
Employees can post anonymous blogs that contain scathing critiques of employers for the whole world to see. An unnamed Microsoft employee runs a blog — Mini-Microsoft (www.minimsft.blogspot.com) — that harshly criticizes corporate life within the software goliath. This may hearten Microsoft rivals and undermine morale of rank-and-file Microsoft workers.
Distractions and low employee morale are two additional risks posed by blogs. However, the peek into Microsoft offers upper management an opportunity to step back and reassess its policies, procedures, and culture. Painful as that may be, feedback via blogs can spotlight areas and opportunities of needed improvement. The problem may not be the blog, but the underlying conditions that spawned the blog.
Cyberspace faux pas can travel quickly. If something salacious gets blogged about, other bloggers can link to those postings, which then get transmitted around the world. This lets defamatory comments travel at warp speed. The Internet's perceived anonymity may cause employees to forget that publicly badmouthing a boss or competitor may be grounds for a defamation lawsuit or job termination.
Some predict that companies will soon ask or require newly hired executives to sign non-blogging agreements when they commence employment. Perhaps these will become as common as non-compete agreements.
Blog risks are anything but blah. Take steps to manage them now. If you find the right combination of tactics, you can post it on your own risk management blog!
Kevin Quinley is an insurance claim executive and blog author of The Claims Coach, which can be found at http://claimscoach.blogspot.com. For more information, e-mail him at kquinley@cox.net.
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