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Published 05 October 2012 14:18, Updated 09 October 2012 06:02
Candid camera ... Blaming someone else for your company’s mistakes on video can amplify the negative consequences of the problem.
New research has shown that companies using video, such as YouTube, to apologise for corporate stumbles risk doubling the negative effect of their statement on investors if they don’t handle the announcement properly.
According to the study, which was led by the University of Washington’s Frank Hodge and published by the American Accounting Association, video – especially when announcing bad news – remains in the minds of investors for longer than a written announcement.
“Video announcements of this kind require special care,” Hodge says. “Managing the response of investors ... is a formidable undertaking. Doing so via video over the internet makes it all the more formidable.”
Chief executives that take responsibility for a blunder and apologise in video announcements are looked upon more favourably than those that apologise, but blame others for the mistake. The study found that when an investor learned of a company problem in a written announcement the amount they intended to invest dropped by 13 per cent on average. However, if the CEO blamed another party in a video message, investors reduced their investment level by 26 per cent.
“What this study points to is the need to be alert to the powerful effect video has when people’s feelings come into play. If outsiders are to blame for your company’s restatement, by all means say so, but you’d better make sure you document it and make a strong case for it. Plus, for good measure, you still probably need to apologise for letting it happen.”
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