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As people are increasingly using the new medium to disclose or blow the whistle on unfair treatment, SNS is changing the landscape of how businesses are influenced by public opinion.
Companies are not only aware but fearful of the power of SNS to rally public opinion to affect their sales as well as stock value, as witnessed in recent incidents involving Posco Energy and Namyang Dairy Products.
Last week, CEO Kim Woong of the nation’s leading dairy producer had to make a public apology after six million retail stores vowed to boycott his company’s products, while stock values plummeted. All because of an audio file on YouTube that caught a Namyang sales representative using threats and abusive language to strongarm a distributor.
Prior to the Namyang incident, the energy subsidiary of leading steelmaker Posco was the target of a huge public outcry after one of its executives reportedly hit a female flight attendant with a rolled up magazine on a flight to the United States.
In the past, public response to such incidents might have been limited, but with SNS the news traveled at an unprecedented speed and reach.
This is occurring amid the Park Geun-hye administration’s “economic democratization” initiative that aims to foster fair business practices.
SNS is now seen as a powerful tool for the economic democratization move as a platform where people can raise their voice to demand fair treatment.
However, some argue that the cutting-edge communication tools too often fuel antibusiness sentiment in an economy whose GDP growth is heavily dependent on the profits of a few conglomerates.
In the recent incidents involving the strong and weak of the business world, there is one thing in common. Small parties sought help from public opinion by disclosing incidents of unfair treatment on popular SNS tools.
In the case of the Posco Energy executive in April, SNS sites were faster than any media outlets as the flight attendant involved wrote what the executive did on KakaoTalk, a popular messaging app on smart devices.
Details about the incident spread among users on sites like Twitter, leading to public outrage and calls for punitive action and a public apology. The online community also distributed the alleged offender’s picture and title.
Experts estimate the brand value of Posco, a 2.7 trillion won ($2.4 billion) behemoth, has been seriously hurt.
“Since the issue is in the middle of being expanded and redistributed online, the impact on the company’s brand value is expected to plunge further,” said an employee at Interbrand Korea, a consulting firm.
The case of Namyang Dairy Products was more serious. An audio file of a phone conversation between a young Namyang salesman and an older distributor emerged on YouTube May 3.
In the recording, the sales representative hurls insults and threatens the distributor, who refuses to buy more product than he thinks he can sell. The company quickly became the target of a public scorn and a boycott campaign.
More than 150 associations of small business activists and self-employed store owners said Friday that about six million mom-and-pop stores would suspend sales of Namyang products if the company does not make restitution for material and mental damage it caused. A coalition of 15,000 convenience store owners also announced a boycott earlier last week. And the company’s stock price has plunged about 12 percent.
“With the economic democratization atmosphere, the weak have become brave enough to raise their voices to criticize unfair things,” said Shin Kwang-young, professor at Chung-Ang University. “Particularly, those in their 20s and 30s, who form the mainstream on SNS sites, are actively joining the band.”
SNS brings the voice of weak parties en masse is bringing about tangible change. Because of fierce criticism of Namyang online, the Fair Trade Commission last Wednesday embarked on an investigation into the dairy industry.
Namyang CEO Kim Woong publicly apologized at a press conference Thursday. During a one-minute speech, Kim deeply bowed three times.
After coming under criticism for poor working conditions, CJ Korea Express, the nation’s largest logistics company, pledged to increase wages of truck drivers by more than 40 percent by the end of the year.
Hyundai Department Store replaced “Party A” and “Party B”’ in contracts with “the department store” and “partner” starting last Friday.
The Ministry of Trade, Industry and Energy also said yesterday it will remove the words from contract documents with its institutions that work together with the government branch to develop technologies.
Companies are facing unexpected and increasing SNS risks that can damage public images and even profits.
“A serious risk for companies is that people regard the acts and words of an individual as those of their organizations,” said Song Dong-hyun, vice president of Strategy Salad, a crisis management consulting firm. “But the problem is not the SNS, but the fact that we mistakenly believe that such issues occurred due to the appearance of SNS sites, rather than finding fundamental causes.”
A Posco spokesman said the company acknowledges its primary responsibility is to prevent controversy by enhancing ethics among employees and executives.
“We can’t block or control SNS sites, so we better protect the company in advance from being mentioned negatively on those sites,” the spokesman said.
Song said companies should set long-term values and philosophies to reduce the SNS risk, pointing out that both Posco and Namyang made public apologies but the public didn’t take them seriously.
“Making an apology has become a trend among companies, which makes the act itself look less sincere,” Song said. “It may sound like a cliche, but companies need to find ways to prove their authenticity by clarifying their corporate philosophies.”
Conglomerates need to increase their awareness of the new SNS risk, since there are possibilities that copycat revelations could be made against major employers.
“Because most of the people consider themselves ‘subordinates,’ they get kind of a vicarious satisfaction when seeing other people accusing large businesses or men of power,” said a psychology professor at Seoul National University.
By Song Su-hyun [ssh@joongang.co.kr]
