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You still have reputational risks as an investor

As an investor, you cannot assume that, because you are on the 'other side' and not in a management role at a company, you are safe from reputational risks. Your words and actions have as much influence on the credibility of the company as anyone else.

The US billionaire and minority investor, Chamath Palihapitiya, has received backlash on social media after he dismissed China’s Uyghur Muslims, claiming that he and other Americans “don’t care” about the abuse they face.

Power of personal opinion

Palihapitiya, who is part-owner of San Francisco basketball team Golden State Warriors, made the statement on the podcast ‘All-In’ which was released at the start of this week. It came in response to comments by host Jason Calacius on President Joe Biden’s strong stance on the matter.

The Warrior’s public relations team have been forced to distance the club from Palihapitiya over his comments, which included remarks that human rights were a “luxury belief.” This is also extended to a comment that he cared about issues of climate change and inflation, but would fall short of extending that to the Uyghurs – this is a comparison that truly set in stone his feelings on the matter, and was possibly a kick in the stomach for some.

Palihapitiya, who is also chairman at Virgin Galactic, has since admitted his comments lacked empathy. His stance came as surprising to many, especially considering the already delicate relationship basketball has with China — this is not the first time it has received backlash from the country. Houston Rockets general manager Daryl Morey’s support for Hong Kong’s protest movement provoked backlash in China, whilst LeBron James’ stance on China was also recently condemned.

No safety on the ‘other side’

The case highlights the reputational risks present on the ‘other side’ of business – don’t assume that because you are a shareholder or an investor, you are safe from the perils of exposure. There are many risks to your reputation as an investor, including financial loss, association with investment fund fraud, and even slight allegations of wrongdoing damaging people’s perception of your moral fiber and competence.

And now, with the new age of social media, your personal opinions – on what could be, to you, seemingly irrelevant topics to your investments – can tarnish your reputation. While it is commonly assumed that a company’s management board must understand and keep up with stakeholders’ expectations, this must also be assumed vice-versa.

Reputational capital is something that is built up over a long period of time and can be demolished over night. It is necessary to have a strong understanding that all actions, by all associated with a company, can affect the public perception of that company.

You cannot assume that all reputational risks fall solely on the top management – associations with a company from all sides will risk the credibility of a firm, hence why it is unsurprising the Warriors have chosen to distance themselves from Palihapitiya and his views.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.