Woolworths provides perfect example of why you cannot ignore stakeholders

Every undergraduate PR student knows from their first semester that understanding stakeholders is essential, yet some big corporations appear to have forgotten that basic principle.

An independent report in June castigated Woolworths for failing to properly consider the Aboriginal people of Darwin over a plan to build a widely-opposed giant Dan Murphy’s liquor store within walking distance of three “dry” communities.

The review, led by commercial lawyer Danny Gilbert, said Woolworths, and its liquor subsidiary Endeavour, failed in engagement with the Aboriginal and Torres Strait Islander communities “on the significance of alcohol in the community and the complexities surrounding alcohol abuse”. The 144-page report came out a month after Woolworths had announced it would abandon its plan for the mega-store.

This saga of failure to engage with indigenous stakeholders raised inevitable comparison with what happened in mid-2020 when Rio Tinto used high-explosive to destroy 46,000-year-old Aboriginal caves in Western Australia’s Juukan Gorge.

The Sydney Morning Herald headlined its report: “Woolworths has just experienced its own Juukan Gorge moment”, though the cases were fundamentally different. Moreover, the Rio Tinto chief executives and two other senior executives lost their jobs, and the chair announced he would resign, while Woolworths advised no-one would lose their performance bonus.

Yet the two cases do warrant comparison. 

Responding to the damning review of the Dan Murphy proposal, Woolworths’ chief executive Brad Banducci, suggested management hadn’t been properly advised and said they needed to “empower our First Nations team members and our advisory board to have a lot more carriage in terms of their mandate to give us advice.”

However, it was reported that Woolworths did not consult its own external Indigenous Advisory Panel. Furthermore, the company did not rule out applying again once the NT Government freeze on liquor licences expires in 2023.

Contrast this with the statement from Rio Tinto chair Simon Thomson announcing his decision to stand down. “The tragic events at Juukan Gorge are a source of personal sadness and deep regret, as well as being a clear breach of our values as a company. As chairman, I am ultimately accountable for the failings that led to this tragic event.” The company pledged that such a thing would never happen again.

Both companies used a legal stratagem to overcome stakeholder concerns. Rio Tinto claimed it had legal authority to proceed with the destruction of the caves, though later accepted it should not have done so.

For Woolworths, the legal route was a four-year fight to build the liquor mega-store. When the Northern Territory’s Liquor Licensing commission blocked the proposal, Woolworths lobbied the NT government to fast-track the application, which was approved in December 2020. 

The independent Gilbert review said this process distorted fairness and “did not meet the standards expected of a leading corporate citizen.” Banducci said Woolworths was “humbled by the report” and conceded they “should have taken a broader definition of our stakeholders and the community that we needed to consult with”.

Of course, Woolworths and Rio Tinto are by no means alone when it comes to failure to recognise and involve key stakeholders.

Consider how, in April, Australia Post announced a ban on delivering perishable food, supposedly because of inconsistent regulations between states. But they had failed to properly engage with small business and their own government owners and within days the plan was scrapped.

In the same week, some millionaire football club owners announced the establishment of a new European Super League with 12 top soccer teams. They too failed to consult key stakeholders — including football governing bodies — and the plan collapsed in just three days. 

There is no question that stakeholder engagement is essential to effective management. So why do some executive managers continue to get it so wrong?

Tony Jaques is an expert on issue and crisis management and risk communication. He is CEO of Melbourne-based consultancy Issue Outcomes and his latest book is Crisis Counsel: Navigating Legal and Communication Conflict.