The following is the fifth in a series of columns highlighting the importance of putting the public at the heart of communications strategies. This column focuses on the opportunity for publicly traded companies to better harness the power of the public.

Elon Musk’s recent musings about possibly taking Tesla private have spawned a discussion about the unique challenges faced by publicly traded companies. While a lawyer or accountant could better explain the regulatory and financial obstacles public companies are forced to contend with, it’s important to understand how they are challenged by public perceptions.

Public companies are accountable to their shareholders, which include both individual and institutional investors. Yet, by their ownership model, they have a heightened exposure to the non-shareholding public writ large. In fact, public companies can be held to account by members of the public who are neither shareholders nor customers.

The stock market is akin to a giant social experiment, where public opinion can push share prices up or down based on factors, which are disconnected from business fundamentals or balance sheets. People can decide to invest in public companies, or not, based on the reputation of a company among those in the investor’s immediate or extended social circles.

Let’s say that an otherwise profitable manufacturer, Widget Co., producing a high-quality product, acquires a less than stellar reputation in environmental sustainability, gender equality or ethical conduct. Whether it is undeserved or not, the public sentiment toward the company could falter, which could drive troubled shareholders to divest themselves of their stake.

We are increasingly seeing that the public wants corporate visions to reflect community values.  Individual and institutional investors are not immune to these trends and are putting their portfolios where their principles are. Beyond their own views, though, investors can be heavily influenced by how the company is perceived by much broader public audiences.

All of this speaks to the importance of public companies engaging with the public and not merely with a narrow group of existing shareholders. Public companies should cultivate a reputation for being the type of business that everyone wants to invest in, even if the vast majority of the people they connect with will never buy a single share in their company.

Public companies have a vested interest in harnessing the power of the non-shareholding public as part of their investor relations efforts. It is an audience as important and influential as the business press and investment advisers. As individuals become more concerned about how a company behaves, public perceptions will increasingly sway the flow of investments.

Rob Mariani is a senior vice-president with Hill+Knowlton Strategies, and serves as General Manager of their Ottawa Offices. 

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