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Economic downturn on the horizon?

When corporate leaders as different as Jamie Dimon and Elon Musk both say they expect an economic downturn, companies tend to listen. Ahead of what many fear could be a prolonged economic contraction, management teams are likely to focus their efforts on supply chain management, shoring up cash and identifying efficiencies to settle in for a time of uncertainty. All of this is vital, but they should also refine their communications programmes.

Maintaining stakeholder support becomes more difficult during times of greater uncertainty, and communicating with those stakeholders is never more important than in those moments. Below, I outline some things to keep in mind when engaging with the key constituencies of investors, employees, and customers, as well as considerations for engaging with the media and communicating around M&A.


When resources become more scarce, we naturally pay more attention to how those resources are used. Investors will apply an even higher level of scrutiny to capital allocation decisions, so companies should provide more colour on the thought process that goes into those decisions.

One example would be if your company chooses to pursue inorganic growth. Investors may see risk in acquisitions in an uncertain economic environment. However, what if the acquisition led to diversifying the business that could make it more immune to cyclicality? Providing more insight into the thought process that went into arriving at the decision to prioritise growth through acquisition can drive shareholder understanding and buy-in.

Or, investors may ask: Why did the company pay down debt instead of buying back stock when its stock is undervalued? Returning cash to shareholders in a down market may be attractive, but the maths may favour paying down debt in a rising-rate environment to maintain optimal balance sheet flexibility. Bring investors along on this thought process − including walking them through the math – and help them understand the company’s priorities. Share with investors how various factors play into the company’s critical capital decisions and what assumptions and priorities you considered.

economic downturn

In assessing capital allocation opportunities, boards and management teams will always benefit from having a clear understanding of shareholder priorities. Companies that don’t have a strong sense of shareholder interests, or who suspect that the loudest voice they hear may not reflect the majority view, should consider conducting an independent investor perception study to yield insights into what shareholders think about corporate strategy and other important topics. In fact, asking shareholders their views in advance of an announcement (while taking care not to inadvertently tip off what is being considered) can provide valuable insights, that can shape how the company communicates its decisions.

When visibility is limited and the assumptions underlying expectations for the company are in flux, companies should also provide additional colour on what factors underpin the company’s projections – and how those could continue to shift. Inflation, foreign exchange risk and interest rates could have a greater impact on results in a turbulent market, making apples-to- apples comparisons tougher on a quarter-over-quarter or year-over-year basis. The more insight you can provide about your assumptions, the more likely investors and analysts are to come out with similar models and endorse your projections.

Finally, for companies with diverse business lines or that operate in different markets, shifts in the market may mean that factors which previously favoured one business line now favour others. When that happens, themes such as resiliency and diversity (of revenues, end markets or supply chains) will become more important. Take a step back to talk about how the pieces of the business fit together, and drill deeper into business lines that may have previously been less in favour, so investors better understand all parts of the business. A mini-investor day could be a great way to drill down into segments that haven’t recently been in the limelight, or to demonstrate how the pieces fit together for a greater sum-of-the-parts.


In a market downturn, companies will likely face tough decisions that impact employees – from compensation freezes and furloughs to reductions in force to internal reorganisations, and all of this in the wake of two years of pandemic-related changes and dislocation. If equity is a component of compensation and equity values drop, employees will also be directly affected. These factors all make it harder to attract and retain top talent.

As the company makes difficult decisions, employees will want to know that their views are represented and that they have a two-way dialogue and a voice. While not everyone can have a seat at the proverbial table, and while tough business decisions will ultimately be made by the executive teams after weighing the interests of multiple stakeholders including employees, management, and the board, the board should seek to understand employee interests and allow employees to feel heard. For example, management can onduct informal or formal listening tours, solicit feedback from employee leaders, or host more frequent town hall meetings.

Employees also want to be part of an organisation that is purpose-led, mission-driven and that reflects their own values. In a challenging economy companies and leaders will need to share a credible long-term vision about the operational and financial opportunities and risks for the business. But they can’t stop there: the long-term vision should also account for what the future company can accomplish with regards to ESG, DE&I, sustainability, corporate culture, and broad social issues relevant to employees.

When companies are undergoing financial restructurings, we often hear them say things such as, ‘when we right-size our leverage, we’ll be able to expand geographically or invest in a new product line, which will drive our future growth.’ Often, however, they can and should go further, saying things like, “with the right resources in place we’ll make a greater difference in our communities by reaching more customers with our products that enhance safety and protect the environment.’ With management’s attention focused on the financial strength of the business, don’t lose sight of the non-financial factors that are actually driving employee retention and productivity.

Uncertainty always fuels rumours and speculation, which in turn can cause anxiety and fear. When employees start to question the future of the company and their role within it, leaders need to assuage that anxiety by reaching people with messages about the long-term strategy and the near-term efforts to get there. Having good messages and good intentions isn’t enough: you need consistency and uniformity of the message delivery to avoid a game of telephone that inevitably leads to dilution, if not distortion, of the original message. A cascade communications approach can be effective, and internal ambassadors can carry messages, but logistical planning can also go a long way to drive consistency and thus quell the rumour mill. Provide talking points, Q&A and guidelines to guide internal conversations. Offer an email box or intranet site updated regularly to address questions. Schedule announcements so that people across multiple shifts and time zones hear first from the company directly.

Remember that employees are also the face of the company with other key stakeholders, especially customers. Ensure that they are aligned on message and are prepared to answer tough questions when there is concern or skepticism about the future financial strength of the business. For example, if you have a big trade show coming up, make sure the customer-facing employees are armed with talking points and guidance for how to address tough questions. Similarly, if an employee is speaking on an industry panel or an executive is speaking at an investor conference, anticipate and rehearse the tough Q&A in advance.


With customers facing higher prices in an inflationary environment, brand connection carries extra importance and weight for maintaining strong customer relationships. Like employees, customers increasingly want the companies they support to reflect their values. Over the past several years, customers and employees have put pressure on companies to take positions on social issues ranging from race, immigration, voting rights, LGBTQ rights, and even abortion.

This is understandably uncomfortable for many companies. To avoid ‘blowing with the wind’ on such critical issues, corporate leaders and boards should develop objective frameworks for considering when and how to chime in on social issues. Companies should plan ahead for the topics they anticipate will get attention based on current and upcoming events – for example, in the US, the Supreme Court ruling on Roe v. Wade and the midterm elections this Fall.

Customers also value engagement, so providing additional outlets for dialogue and an ability to make their thoughts heard can strengthen a relationship between the company and its customers. Depending on the industry, companies should build digital strategies to drive true engagement rather than one-way communication. Digital engagement also provides critical data that other forms of communication can’t often provide, so leverage lessons from digital platforms to drive messaging and strategy across other channels.

Media Engagement

When times are tough, media may wade into speculation about a company’s path.  What starts as mere speculation often leads to rumours that can spook customers, employees, vendors, shareholders and others. Knowing how to handle inquiries and manage rumors can avoid a downward cycle, wherein the speculation leads to deterioration of the business and thus confirms the prophecy.

Companies can, and should, build relationships with relevant reporters, even when the goal is to educate them on key issues and open a line of communication rather than pitch a specific story. Reporters want ‘scoops’, but they also value insight that companies can offer on background. Keeping key industry reporters close can help ensure that stories are well-informed, and ensure that reporters come to the company for comments. This is always good practice, but especially so when times are tough.

In fact, speaking with reporters on background can shape their understanding of an issue or add extra context without drawing attention to a rumour or lending it credibility by providing an on-the-record comment. For these reasons, on-background conversations are often useful in addressing speculation.

Companies should also have the tools in place to monitor the traction of speculation – are you getting a lot of questions from employees or customers? Is the media report getting a lot of views online or on social media? Be prepared with a standby communication to bring down the temperature and reassure stakeholders of your strategy, if reports begin to speculate about the viability of the company’s path forward. Then reinforce those words through actions to demonstrate that it’s business as usual by sharing regular business updates – new hires, contract wins, and product launches, etc.

M&A Communications

Economic swings can present buying and selling opportunities for companies looking to take advantage of valuation differentials or find needed resiliency through scale. But nothing tests a company’s relationships with its key stakeholders like a transaction. For companies that choose to pursue transactions, an uncertain economy presents risks outside of the difficulty of arriving at an appropriate valuation.

At the beginning of the COVID-19 pandemic, we saw some deals quickly fall apart due to ‘material adverse change’ (MAC) or ‘material adverse event’ (MAE) challenges. Significant, unexpected changes in the economy (and stock prices) could lead more buyers to seek to unwind deals made in a rosier economy. In fact, we are already starting to see that happen. Similarly, shareholders may be more likely to oppose transactions when they have more limited visibility for the future and see more execution risk or less certainty of fit. Therefore, boards and management teams should develop contingency communications plans so they are armed with the messages, strategies, and tactics needed to defend (or back out of) a transaction. These plans map out the range of scenarios the company could face and draft messages to rebut criticisms, promote benefits or question the analysis, credibility or motive of critics. Some of the planning is highly tactical (who will do what) whereas other parts employ game theory to strategise based on the potential moves of the opposing stakeholder(s).

M&A in a down market is particularly tough for the seller, which must make the case about why now is the right time to sell, despite low valuations. Understand the cost basis and priorities of shareholders. If the deal includes a stock consideration, tout the benefits of “riding the upside” in a recovery. If the deal includes a cash consideration, emphasise the immediate and certain value shareholders will receive without additional execution or valuation risk in a volatile market.


When companies find themselves in challenging situations, including a volatile or depressed market environment, shifting how they communicate can help preserve the value of the business and maintain the support of key stakeholders.

A challenging economy is not the time to hide, or pare back communications when communications are more critical than ever. By sharing more about their priorities, thought processes and guiding principles, companies can provide stakeholders with helpful context that addresses questions and demonstrates control, which will go far in preserving important relationships and trust over the long term.


Ethical Boardroom is a premier website dedicated to providing the latest news, insights, and analyses on corporate governance, sustainability, and boardroom practices.

Ethical Boardroom is a premier website dedicated to providing the latest news, insights, and analyses on corporate governance, sustainability, and boardroom practices.


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