Liam McMonagle: Reputation, reputation, reputation

Liam McMonagle, partner at law firm Thorntons

A business can be ridiculed and have its misdemeanours or service failings widely circulated in minutes through social media. And yet, just as it comes, it goes, too. Just over a week ago, everyone was talking about David Cameron’s undergraduate dining club and recreational activities which would permanently diminish his standing. Really?

As lawyers, we help our clients manage reputations all the time. We draft contracts which can be terminated if a party “brings the other into disrepute” or trigger claims for damages over “loss of reputation”. We use take down procedures on websites to have unfair or unlawful criticism of clients removed. In serious cases, we may try to prevent publication or broadcast of damaging material or bring proceedings for defamation if it is too late for that. We know reputational considerations will influence, even if they don’t always dictate, our clients’ decisions.

The Volkswagen emissions testing scandal is an example of how this works on the largest scale. There is no doubt that the financial impact of the scandal will run into billions – the collapse in VW’s share price reflects that. Yet the assumption that the company’s reputation is also on life support, widely stated in much of the discussion on the issue, seems rash.

Volkswagen has a wide portfolio of marques and brands acquired over many years including Lamborghini, Bentley, Porsche, Audi, VW, SEAT and Skoda, associated to varying degrees with the scandal. The chief executive has left, which allows demonstrable “moving on”.

Already, people are asking other questions. Is Volkswagen a one-off, or is this normal industry behaviour? If emissions are so important, why do we use test conditions so far removed from regular operation that an unthinking machine can tell the difference? How accurate are other claimed statistics we rely on when choosing products – like a smartphone’s battery life or the calorie count in a ready meal?

Volkswagen has been in business since the 1930s (a period which has given many German companies reputational challenges) and in the mid-2000s was sufficiently important that the German government passed laws regulating its ownership which were subsequently found to be protectionist and unlawful by the European Court of Justice. It has some very challenging days ahead but any obituary surely premature.

One of the most regular, but least conspicuous, ways lawyers help their clients to manage reputation is helping them carry on business within the law and in ways that withstand scrutiny. On 1 October, the new Consumer Rights Act takes effect which significantly extends and updates the “statutory rights” we all have as buyers of goods, services and digital content. Are you ready for that?

Liam McMonagle is a partner in the intellectual property, technology and media team at Thorntons and is qualified in Scots and English law