To Return or not to Return
Has handing back furlough money become a complex reputational issue?
Since Covid-19’s arrival in the UK, businesses have benefitted from billions of pounds - and counting - in government financial support.
A small but growing number of businesses have since decided to voluntarily return payments, or waive reliefs, despite their being no question of their legal right to such support.
Both the amounts, and the professed reasons for their return, have varied. Tesco CEO Ken Murphy, whose firm announced a £585 million return of business rates relief in early December, said:
We were really focused on what was the right thing for the Tesco brand, […] Tesco customers and Tesco communities.
Morrisons, Sainsbury’s, Asda, B&M and Aldi followed suit soon after, with the retail sextet’s rates waivers worth a collective £1.8 billion to the public purse.
In February, PR firm Lansons announced the return of “all the money we had claimed under the furlough scheme”. Having remained profitable, returning the unspecified amount “seemed the right thing to do and our duty as part of the broader national effort”, CEO Tony Langham said.
Other companies have issued far shorter, less specific statements - marcoms group Next Fifteen said its furlough repayment of £1.4 million this March was “in recognition of the Group’s continued strong trading performance and balance sheet”. Guardian Media Group’s £1.6 million refund the following month was “in light of a substantially improved financial position”, according to a story in The Guardian itself - no public announcement can be found on the group’s website. Telegraph Media Group’s undisclosed repayment in early June 2020 was one of the first in any industry - but rather than take the opportunity to celebrate, its announcement was brief and workmanlike, with no hint of self-congratulation, or ‘we’re all in it together’ sentiment.
Our analysis consistently shows that there is a real first-mover advantage with this kind of thing - if you are first off the mark with a particular initiative, you’re likely to get a wider and more positive reaction. If competitors follow... the reputational uplift [for them] will be far less pronounced.
Such donations can be seen as part of the increased pressures for businesses to take positions on social and ethical issues. And with that now expected to be the norm rather than the exception, Tesco was canny to get in ahead of its competitors says Siera Torontow, a director at reputation intelligence firm alva.
“Our analysis consistently shows that there is a real first-mover advantage with this kind of thing - if you are first off the mark with a particular initiative, you’re likely to get a wider and more positive reaction. If competitors follow - the reputational uplift [for them] will be far less pronounced,” Torontow says. Those competitors will also find increased pressure to fall in line, meaning they now have a “risk to be mitigated” rather than a “gain to be realised”, she adds.
Given the public perception that the big grocers had done well out of the pandemic, it is unsurprising that there was public and media pressure on them to make such gestures - despite the fact that Covid-19 produced significant extra costs for the firms. As early as April 2020, Adam Leyland, editor of The Grocer, wrote that these firms “must be careful not to undermine the goodwill they’ve earned” by overcapitalising on government support.
Jon McLeod, a partner at comms consultancy DRD, says that the sector is very mindful of long-term, large-scale reputational issues. “For some time, the major grocers have been thinking hard about how they position themselves in a number of areas such as supply chain, property and planning, employment practices and so on,” McLeod notes.
He goes on to say that their waiving of rates relief was “completely rational, and makes a lot of sense”. But he raises an eyebrow at the trend’s broader spread, commenting: “For this to become the subject of attention-seeking among businesses where they hadn’t been part of an established commentary about the fortunes of their industry, that’s a bit odd - you don’t really need to take such action.”
It’s like how some clients will appreciate you having a swish office, but some will think; ‘wait, am I paying for this?
“The net profit of all sorts of businesses are in part a function of tax reliefs, government support and other schemes,” McLeod continues. “It seems a little odd for a business to highlight whether or not you have taken advantage of one specific form of support when you’re undoubtedly using others.” Nonetheless, he acknowledges that some - not all - clients might be impressed by a company making such a move, saying: “It’s like how some clients will appreciate you having a swish office, but some will think; ‘wait, am I paying for this?’.”
Lansons’ Langham tells Influence that he has “only heard positive things from people” about its furlough repayment announcement. Asked whether he thought more businesses should be doing so, he said: “I don’t judge anyone else, everyone has to make their own decisions. I want the best thing for our country, so I’d prefer those that can afford to, to pay furlough money back, if they’ve been very profitable.”
Alongside consumers, and current and potential clients, another key audience to consider is the internal one - especially given the risk of making a repayment, only to find yourself making redundancies or unable to afford pay rises a few months later.
“That is a difficult conversation,” acknowledges CIPR fellow and internal specialist Advita Patel, of Comms Rebel. “But I’m strongly on the side that if you’re open, honest and transparent from day one with your colleagues that they will understand that businesses will go up and down, and that we never know what the economy might be like in a year’s time.” Ironically, this may have been difficult for some companies, where internal comms talent was itself furloughed - “that’s mind-blowing for me that you’re furloughing people and then not having internal comms capacity,” she comments.
A clear sense of values is also important, says alva’s Torontow. “The key is for a business to have, and to properly articulate, an authentic, consistent, relationship with profit,” she says, arguing that during Covid “all businesses would be well advised to move at least marginally away from shareholder primacy, in the direction of stakeholder capitalism”, while also warning that moves in that direction might meet a frosty reception if too drastic.
A pharma company is a classic example - at the basic level, they make money out of sick people, so there are incentives for these companies not to report too much profit
This question of values and company narrative is not the sole preserve of comms pros, with Warwick Business School accounting professor Joanne Horton explaining that accountants and finance leaders have long been attuned to the impact a company’s accounts have.
“A pharma company is a classic example - at the basic level, they make money out of sick people, so there are incentives for these companies not to report too much profit,” Horton explains. “Most pharma companies can’t call R&D an asset on their balance sheet, but they wouldn’t want to because then they couldn’t write it off in order to reduce their profits.” Silicon Valley meanwhile “lobbies very hard to change accounting rules to ensure their accounts look better and they can show more revenue, because that’s a good look in that industry,” she says.
Covid-related support makes this picture even more complex. “If you are taking such support, it does rather restrict what you can do later; you will be constrained. If you take that money and then show huge profits, that doesn’t look good, people will ask ‘why did you need the help?’,” Horton says. The same goes for paying large dividends to shareholders, increasing executive salaries, and other measures which might grab headlines and irk critics even in non-pandemic circumstances. “With the pandemic, that will go on for a while - maybe another year, maybe five. It depends on how long it remains at the front of the public’s mind,” Horton continues.
The bottom line is that all businesses must be aware that any form of support comes, in Horton’s words, “with some rather implicit strings attached”. As the shape of the post-pandemic economy becomes clear, and support packages evolve, those strings become ever more explicit, and PR professionals will be left with some complex reputational sums.