Lessons from that radio prank

Company may have been able to manage the event better

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published December 11, 2012 12:30 pm AEDT

By now, almost everyone in Australia will be aware of the two radio hosts (DJs) who rang the UK hospital and pretended to be members of the royal family.

They were able to find out how the pregnant Duchess of Cambridge was doing, and the nurse who took the call has apparently committed suicide.

A mainstream – social media backlash against the station – 2Day FM, the DJs and the company that owns the station, Southern Cross Media (ASX: SXL), as well as its advertisers, has raged on over the weekend and into Monday. Telstra Corporation (ASX: TLS) and Coles – owned by Wesfarmers Limited (ASX: WES) have withdrawn their advertising from the station because they fear being targeted by association, and more are reported to be considering similar action.

Southern Cross have followed the move of Macquarie Radio Network Limited (ASX: MRN) back in October following the Alan Jones scandal, and suspended all advertising to try and protect its advertisers from any public backlash. It has also publicly apologised, implemented a company-wide suspension of "prank" calls, and is reviewing its policies and processes.

Additionally, the DJs have also decided that they won't return to the program until further notice. In television interviews, both radio hosts appeared deeply shocked by the event, and may be in no fit state to resume work for some time.

While Southern Cross has announced that the segment was reviewed by its legal team and authorisation was granted to broadcast it, the company believes that no-one could have foreseen the tragic consequences that occurred.

That may be the case, but companies in future need to be more prepared to manage a social media backlash. Already, Southern Cross is losing thousands of dollars a day in lost advertising and the UK hospital is disputing some of Southern Cross' statements – not a good look. The company could also face legal issues, with some commentators suggesting that you cannot record someone's voice and use it without their permission.

The Foolish bottom line

Despite the company's belief that it has not breached any media laws, Southern Cross probably should have gone 'above and beyond' its calling, to help minimise the fallout. While it's unlikely that the event will bring this company to its knees, the next company caught up in such a scandal may not survive.

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Motley Fool writer/analyst Mike King doesn't own shares in any company mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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