Social media’s role in elevating corporate accountability

Author: Lara Sierra Rubia, Head of Data Solutions, DataEQ

This article was originally published on Business Day.

Enron, Lehman Brothers and Steinhoff are all well-known names synonymous with corporate crises and scandals. In the recent Steinhoff case, accounting irregularities exposed over $7.4bn in fraud. This misconduct prompted its liquidation in October 2023.

These cases point to the growing importance and awareness of corporate governance. It’s clear that mismanagement in the governance space poses both reputational and operational risks to firms. However, when companies get governance right, the benefits and yields can be significant.

There are several reasons for the increased focus on corporate governance. Globalisation has resulted in interconnected global markets, requiring consistent standards and regulatory practice across different jurisdictions. Scandals and economic crises, like those listed above, have also triggered governments to enforce stricter regulations to promote greater transparency and accountability. Furthermore, shareholders are demanding more governance protocols to ensure that their investments are safe and yielding dividends.

Perhaps most pervasive, the rise of technology in the form of social media has widened transparency about companies’ actions, policies and performance. This has increased stakeholder and consumer expectations of companies to behave ethically and prioritise social, economic and environmental sustainability.

Consumers can keep tabs on companies like never before and are taking them to task on social media over their policies and practices. Consumers expect companies to not only have policies promoting the principle of “do no harm” but also want them to actively work towards the betterment of society. These discussions frequently occur on social media platforms.

In the financial services sector, ethical behaviour in terms of the source of a firm’s investments is becoming ever more salient. In 2022, HSBC was accused of greenwashing in its advertisements underscoring its investment in the environment. Consumers pointed out that HSBC had invested $8.7bn in new oil and gas projects in the previous year, prompting the UK’s Advertising Standards Authority to ban the adverts.

Firms are also expected to treat consumers fairly and operate in a way that yields a positive outcome for all parties. In December 2023, the SA Reserve Bank fined Grindrod Bank just over R10m for failing to comply with regulated due diligence protocols. In 2022, the UK’s Financial Conduct Authority fined TSB Bank £48.6m for failing to mitigate operational risk during an IT system migration.

We see that this attention is overflowing out of the financial services sector — the emphasis on governance is also increasing in other areas, such as retail, logistics and telecommunications, where there is pressure to adopt frameworks such as environment, social and governance (ESG) into their company policies. Consumers expect companies to adopt strategies to ensure positive outcomes for all stakeholders. For example, Keurig was fined $3m in 2022 for providing misleading recycling claims about its coffee pods. 

On the other side of the spectrum, good governance results in better company performance. While higher profits and larger returns are one way to measure this, the key purpose of corporate governance is to ensure good outcomes for all stakeholders. Therefore, measuring shareholders’ purses is a limited means of assessing this. Social media can offer the standpoint of the consumer, not just in terms of complaints, but also positive outcomes.

Many companies that have used governance effectively and have seen the positive effects on social media. Recent examples of these include:

• Stanlib has R12bn of infrastructure investments that are committed to promoting ESG principles. The asset manager’s most recent partnership with Lyra Energy in January 2024 resulted in a one-percentage-point improvement in social media net sentiment, a metric that measures the overall sentiment of online conversations about a brand or topic.
• In August 2023, Spar SA launched a series of anti-gender-based violence workshops to counter social violence in the country. This initiative, using the hashtag #Sparweseeyou, boosted the retailer’s social media net sentiment by more than 60 percentage points.
• Absa’s soft skills programme titled #ReadytoWork drove up its social media net sentiment by 2.4 percentage points in February. The bank’s programme is aimed at supporting youth as they transition from higher education into the workforce.
• Similarly, Capitec Bank launched its own free financial education courses to help consumers improve their financial literacy and saving abilities. The programme generated more than 19,000 positive engagements, comprising 21.6% of the bank’s total engagement between January and March 2024.

It’s evident that these kinds of initiatives build consumer trust and loyalty, both of which are key components for any successful corporate governance strategy. By analysing this type of unsolicited consumer feedback on companies’ practices, we move towards a more holistic understanding of what it takes for companies to be transparent, ethical and effective.

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