2011: The Year CEOs (and Presidents) Need to Take a Social Media Crisis Seriously

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2010 was a major turning point for social media – with Facebook reaching 500 million active users and 97 percent of China's 457 million netizens having used social media, according to TNS data.

Now, just barely one month into 2011, events in Tunisia and Egypt demonstrate both social media's impact on people's lives and the sheer velocity with which news can travel via social networks. As the saying goes, it's hard to build up a brand, but easy to bring it down. That works for regimes too. And it's never been easier.

Closer to home, the Chinese blogosphere has been dominated in recent weeks by the profanity-laced rant of online bookseller Dangdang CEO Li Guoqing against Morgan Stanley, the lead investment bank for his company's IPO. Li claimed – at length and via Sina Weibo (Chinese Twitter equivalent) – that Morgan Stanley intentionally short-changed Dangdang by around $1 billion in the IPO, given that it 'popped' by 86.9 percent on the first day of trading. Li was spurred on by Weibo user Lost Elegance, posing as a Morgan Stanley employee, who later became known as 'Big Morgan Lady'.

"Big Morgan Lady"

Dangdang CEO Li Guoqing

Opinion seems to be that the extended online rant did not reflect well on Dangdang. In response, Li's wife Peggy Yu, who is also founder and chairwoman of Dangdang, has been doing damage control on behalf of her husband.

Yet the episode also cast a poor light on Morgan Stanley and the entire U.S.-style IPO process. To add insult to injury, earlier this month Brand Finance released its annual Top 500 banking brands report, showing Morgan Stanley to be the biggest loser, losing a whopping $1.05 billion from its brand value in 2010. Touché to Dangdang's Li Guoqing.

In both cases, the CEOs have apologised profusely. But the damage was already done.

So what should a good CEO (or president) do to embrace netizens and yet maintain their dignity? Here are some social media basics for companies, politicians, and personalities facing a crisis:

1. Monitor the social media conversation. If your reputation is being damaged, it's best to know what is happening and respond appropriately in the appropriate forum.

2. Have an authentic presence on the major social networks in your country or region. Get familiar with the media and how they are used. Morgan Stanley could have instantly used a social media presence to disown and discredit 'Big Morgan Lady' as a fraud, reiterate the fairness of the IPO process, and give Li Guoqing respect as a valued client.

3. Have a crisis preparedness plan that includes the proactive use of social media.

4. Ensure media training for all spokespeople also applies to social media, particularly in the context of a crisis.

5. Implement a social media policy, both as a guideline for communications departments and official spokespeople, as well as for employees and staff.