Opinion 4 minute read
The guilty verdict against Elizabeth Holmes, founder and CEO of failed biotechnology firm Theranos, is important news for communicators and company leaders.
Holmes was found guilty on four counts of misleading investors. Prosecution evidence included a CNBC interview in which she made inaccurate statements, and a company presentation falsely suggesting endorsement from big pharmaceutical firms.
The verdict has caused a stir in tech circles, where hubris and hype are often considered par for the course, and where some see the ability to massage reality as a crucial component in making the impossible possible.
Although privately-owned companies attract less regulatory scrutiny than their publicly traded counterparts, record amounts of venture capital are now being pumped into early-stage companies on both sides of the Atlantic.
With big money at stake, and Theranos creating a precedent for future fraud cases, more executives will likely face prosecution for misleading stakeholders in years to come.
And this wake-up call for founders and CEOs is also a warning for PRs who advise them on matters of reputation and communication.
Before we go further, I must stress that the overwhelming majority of people we've encountered in the tech sector are honest. Very few seek to be deliberately deceptive.
A more common area of risk for companies and their communicators is the potential for misinformation created by mistakes. PRs have a role in helping clients avoid inadvertent exaggerations or falsehoods that could land them in hot water.
There is plenty that early-stage companies can take from the playbooks of the PLCs, where there are severe penalties for those found to mislead investors.
1: Accountability for the truth
First, there needs to be clear accountability about who is responsible for the accuracy of publicly shared information. Ultimately, that will be the company CEO (or equivalent).
There should be defined approval processes for all communications activities. The CEO should have final approval on any material that might influence public perception of company value or financial performance.
Company documents should state whether they are cleared for public consumption or not, and nothing should be shared outside the company without formal written approval from the appropriate parties.
2: Don't confuse vision with reality
Every company needs a vision for the future they're aspiring to achieve, and this is often a core component of an early-stage organisation's PR activities.
But whilst you can act like the company you aspire to be and communicate a vision with enthusiasm, Theranos shows you can't misrepresent your current situation. Clearly differentiate what has been achieved from what you are working towards.
As companies grow, it becomes more challenging to control this narrative. Rumours often seem more interesting than reality, so clearly communicate progress internally and ensure colleagues know what is appropriate when talking to external stakeholders.
3: Check your facts
There is a big difference between facts that are known or proven to be true, and conjecture, speculation or opinion. Don't confuse them.
A good PR must be prepared to play devil's advocate and scrutinise the message and content thoroughly before it reaches the public domain.
It's possible to misinterpret what you are told, so double-check details. Question colleagues or clients to make sure that your understanding, and theirs, is as complete as it can be. Ensure they have an opportunity to review what you commit to paper.
Check your facts and claims with reputable sources before sharing them publicly. Keep a record of those sources and evidence to back up your assertions.
Media interviews are a great way of promoting a company. However, they also create very public opportunities for mistakes. Remind spokespeople to stick to the facts, avoid speculation and focus on what they know to be true.
One of the beautiful things about early-stage companies is their ability to move at pace and take risks. These firms need evangelists to communicate their potential and achievements in the best light possible. Standing out from the crowd frequently requires boldness and creativity.
However, as Theranos now shows, they also need to stay on the right side of truth (not to mention the court of public opinion, which can be incredibly savage to firms found to have misled the public). Being creative with the truth and misleading investors are not risks worth taking.
PR professionals must take the lead here and help put in place good communications governance early with clients. This will benefit those firms for years to come.
Written by James Taylor, founder and managing director of Roaring Mouse Public Relations
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