LEVICK Weekly - Nov 2 2012

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Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake

Amgen’s Widespread Repercussions with Paul Ferrillo

Initial Public Offerings with Alex Lynch

Monster Needs to Wake Up & Smell the Coffee

Communicating Difficult Decisions NACD Boardvision

Blogs Worth Following

LEVICK In the News


http://levick.com/insights

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LEVICK Weekly - Nov 2 2012

  1. 1. EDITION 15Weekly November 2, 2012 Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake
  2. 2. 03 Contents 04 Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake 09 Amgen’s Widespread Repercussions with Paul Ferrillo 10 Initial Public Offerings with Alex Lynch 14 Monster Needs to Wake Up & Smell the Coffee 18 Communicating Difficult Decisions NACD Boardvision 19 Blogs Worth Following 20 LEVICK In the NewsCOVER Image: In late October 2012 Hurricane Sandy affected at least 24 states in the United States, from Florida to NewEngland, with tropical storm force winds stretching far inland and mountain snows in West Virginia. The cyclone brought adestructive storm surge to New York City on the evening of October 29, flooding numerous streets, tunnels and subway linesin Lower Manhattan and other areas of the city and cutting off electricity in many parts of the city and its suburbs. Extensivedamage occurred in New Jersey, especially in the communities along the Jersey Shore.
  3. 3. WeeklyHurricane J ust before Hurricane Sandy struck This language went dramatically beyond clear New York and New Jersey with full simple communications. It was more than an force on October 29, there was a bit impassioned plea. Consider the use of the wordSandy: of mild disagreement among a few “remains” to instill a frightening visual impres- communications and media observers sion, conjuring up disturbing physical images as to the appropriateness of the public safety of what will happen if you don’t comply. warnings, New Jersey’s in particular. The advisory continued on with powerfully In retrospect, that “mild disagreement” raises supportive messages in equally pointed upper- issues of thunderous importance (pun in- case language. The storm was expected to tended) as it now seems that hundreds of lives, “slam” into the coast. Sandy is “potentially at least, hung in the balance. It also leads to historic,” injuries are “probably unavoidable,”A Shrill Lesson from the L’Aquila Earthquake an odd but, we’d argue, fairly credible conclu- and so forth. The NWS concluded with advice sion: that the approach to the looming disaster to “err on the side of caution.” by public officials, at least in New Jersey, wasRichard S. Levick, Esq. When we first read the warning, it seemed the directly conditioned by extraordinary eventsOriginally Published on Forbes.com NWS was doing just that itself: erring on the in Italy where, just a few days before Sandy, side of caution. As it turned out, there was no six scientists and one government official were erring about it at all, as the storm turned out to sent to jail for not adequately preparing the be at least as bad, probably worse, than ex- population ahead of the L’Aquila earthquake pected. As of this writing, there have been over that killed over 300 people. 50 deaths and the protracted power outage is On the Sunday afternoon preceding Sandy, back-breaking. (Rumors in New Jersey put full the National Weather Service (NWS) in Mount recovery at up to two weeks.) Holly, N.J. provided an advisory designed to Commentators who, just before the storm, spook and shock resistant evacuees. Shouting were wondering if “the tone of the service’s in caps, the warning included language that Sunday evening message was completely particularly caught the attention of communi- appropriate” might reflect on what it really cations professionals: If you are reluctant, think about your loved ones, think about the emergency responders who will be unable to reach you when you make the panicked phone call to be rescued, think about the rescue/recovery teams who will rescue you if you are injured or recover your remains if you do not survive.4 05 Anton Oparin / Shutterstock.com
  4. 4. Weekly lev radin / Shutterstock.com means to err on the side of caution in all because there was no power for either fridge professional communications. Sometimes or TV. Bloomberg’s lighter tone certainly did it means being very guarded in tone; some- no harm, as his comments in no way left any- times it means being extremely bold. In other one less prepared for the torrent to come. But words, caution is not necessarily synonymous you do have to hand it to New Jersey Gov. Chris with restraint. Christie. The same guy who predicted that the Denver Presidential debate would change the We were particularly struck by one article dynamics of the race seems to have had the praising Mayor Michael Bloomberg for being best gut sense for the kind of communications rather more congenial about the whole thing that would work most effectively here as well. than his counterparts in New Jersey. Bloom- Christie is now winning plaudits for his “trade- berg did discharge his duties strongly and mark bluntness and aplomb” in handling the responsibly, likewise warning citizens that fail- storm emergency. ure to evacuate threatens the lives of the first responders. At the same time, the article quotes It may be a “trademark” approach, but his him as suggesting that people “sit back, have a strategy could only have been encouraged by sandwich from the fridge, watch television.” the six-year sentences handed down in Italy because of “falsely reassuring” statements Well, you couldn’t actually have a sandwich before the 2009 L’Aquila earthquake. Close in or watch a ballgame in many areas of the city06 Anton Oparin / Shutterstock.com
  5. 5. Weekly tone to Bloomberg’s attempted insouciance, Bernardo De Bernardinis, then deputy chief kind of dire warnings that Sandy prompted in New Jersey but something more was obviously Amgen’s Widespread of Italy’s Civil Protection Department, had advised residents to go home and have some wine. “Absolutely a Montepulciano,” he added. needed in Italy, if only a reminder that it’s not really worth risking your life just because the probability of disaster is very low. Repercussions with Paul Ferrillo It was, in hindsight, a gratuitous comment that enraged many Italians and helped convict De Bernardinis. Were the court sentences fair? I hardly think so. Did Christie face similar penal- ties had he been anything less than blunt and even scarifying? Of course not, but the gover- nor reads the news. Just a day or two before Sandy, the Italian debacle had to be, at the very least, a reminder not to pull a single punch; again, to err on the side of caution by being as Disaster planning is all about risk management blustery as possible. and risk management is often about com- munications. To be sure, there are significant From a communications standpoint, the events lessons for business here, underscored by our in Italy are all the more pertinent because current public preoccupation with transpar- those convicted were not convicted for failing ency and accountability. When you prepare for to predict the earthquake. Earthquake predic- problems, you must calibrate the communica- tion is a difficult science to ever get right, as an tions. Sometimes you need to shout like Chris international commission on forecasting set up Christie. Sometimes a prominent disclaimer after L’Aquila reminded us. An earthquake is a In this LEVICK Daily video interview, we discuss the class certification issues raised by the Amgen will suffice. potential “hazard…all the time,” said one com- litigation with Paul Ferrillo, Senior Securities Litigator with Weil Gotshal & Manges, LLP. With mission member. The one thing businesses can be sure of is cases such as Amgen and Walmart bringing more clarity to class certification issues, companies that, when there’s any possibility of a disaster —and especially those in the public sphere—need to carefully consider how they share news On the other hand, there were tremors before (e.g., product recall, insider trading arrest, you affecting the company and what to say when events don’t transpire as planned. the L’Aquila quake. In similar past instances, name it), more than a bottle of Montepulciano residents would typically sleep in their cars, will be needed. L just to be sure. Here, according to the allega- tion, the assurances by the scientists directly Richard S. Levick, Esq., President and CEO of LEVICK, repre- sents countries and companies in the highest-stakes global led to people deciding it was all right to stay communications matters—from the Wall Street crisis and the indoors. The defendants are thus going to jail Gulf oil spill to Guantanamo Bay and the Catholic Church. for failing to communicate. It’s not reasonable to have expected those tremors to incite the08 9
  6. 6. What is to be learned from the less than stellar IPOs issued by Groupon and Initial Public Facebook in recent months? What are the lessons for companies outside the Offerings technology sector? Alexander Lynch: The primary lessons from with Alex Lynch the Groupon and Facebook IPOs are not only applicable to technology companies but are applicable to all companies looking to com- Richard S. Levick, Esq. Originally Published on LEVICK Daily plete an IPO. First, listen to your advisors. IPO companies should retain advisors who are experienced in Over the next several weeks, LEVICK Daily the IPO process and can help it avoid the many will share selected interviews from our pitfalls. One of the most common pitfalls is recent NACD Directorship article entitled gun-jumping or marketing the IPO outside of “What’s Next? The Top Issues of 2013 and the typical registration process. Gun-jumping Beyond.” Today, we feature a discussion can delay your offering, result in liability, and on initial public offerings (IPOs) with Alex produce bad press during the roadshow. Many Lynch, a partner in Weil Gotshal’s Capital of the gun-jumping issues in the Groupon IPO Markets Practice. could have been avoided if the standard advice regarding publicity had been followed. Mr. Lynch focuses on the representation of companies, particularly technology, health- Second, when setting the valuation of the IPO, care, financial services, and other growth en- leave some room for the stock to appreciate terprises, as well as leading investment banks and be mindful of who is being allocated stock. and private equity firms. He has extensive Facebook priced its IPO at a rich valuation experience in equity capital markets transac- and increased the number of shares sold in tions, with a particular focus on initial public the offering. IPO companies need to balance offerings. He also advises boards on securities between trying to maximize the price and the and corporate governance matters. size of the offering and selecting the right type of IPO investors and letting those new inves- At the conclusion of the interview, you can tors enjoy some success. A rich valuation and find LEVICK’s own communications best large deal size can reduce the demand for the practices appended. stock in the market after an IPO. In addition,lev radin / Shutterstock.com 11
  7. 7. Weekly How can boards of directors best pre- lenges faced by the IPO company and ensure pare themselves for the transition from that they are manageable. Make any necessary private to public ownership? changes to the business, management or advi- sors before the IPO process to avoid having Alexander Lynch: Remember, IPOs are the to make these changes during the IPO when beginning; not the end. An IPO will not be the public scrutiny is most intense. last time the IPO company accesses the mar- ket. Preparation for life as a public company In connection with considering an IPO, I is critical for success. Also, a well-executed advise boards and management teams to IPO provides a substantial amount of goodwill act like they run a public company before and positive publicity, while a poorly executed being public. L IPO can damage an IPO company’s reputation Richard S. Levick, Esq., President and CEO of LEVICK, repre- for a long time. Accordingly, preparation by sents countries and companies in the highest-stakes global the board is critical. communications matters—from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church. Be honest in your assessment of the IPO allocating IPO shares to hedge funds and indi- and alert the IPO company’s advisors of any This post is excerpted from Richard Levick’s recent NACD company’s readiness to be a public company. Directorship feature “What’s Next? The Top Issues of 2013 and vidual investors rather than long-only mutual disclosure issues. Make sure you have the right management Beyond.” To read the full article and learn more about the most funds can result in increased selling pressure Second, focus on accounting issues. Is the IPO team in place. Confirm that you have the right significant issues impacting boardrooms today, click here. if things don’t go well. Remember, an IPO is not company ready to report on a quarterly basis? accountants and attorneys. Assess the chal- the last time to the market. Can it produce financial statements on a timely What are the responsibilities of boards of basis? Are there any accounting policies that BEST COMMUNICATIONS PRACTICES: directors in the IPO process? need to be reconsidered? Do you have any ma- terial weaknesses or significant deficiencies? Alexander Lynch: Directors have a number of If so, how are they being remediated and will The price at which you set your IPO communicates a lot about your value proposition. unique responsibilities in the IPO process. First they be remediated in advance of the IPO? 1. What happens to that price after the offering communicates even more. Boards need and foremost, directors have personal liabil- to maintain investor confidence by allowing room for the share price to grow. ity for material misstatements and omissions And third, make sure the IPO company is The IPO is the beginning, not the end. It is not only a financial event, but a in the registration statement and prospectus. ready to be public by asking the tough ques- 2. corporate branding opportunity. Boards need to ensure that newly-public Directors also personally sign the registration tions. Do you have the right management team companies communicate their value just as aggressively post-IPO as they do statement. As a result, it is critical for directors in place? Why is the IPO company going pub- in the critical months leading up to it. to give themselves the time necessary to read lic? Is the business model mature enough to Boards need to be ready for circumstances in which high IPO trading volume and review the registration statement carefully withstand investor scrutiny? If you don’t have 3. creates glitches in the system that cost investors’ money and has a negative in advance of the initial filing and throughout the right answers to these questions, the IPO impact on trust in the system. Companies need to be ready with statements the process. They should then compare the dis- company is likely not ready to be public. that can forestall chaos and confusion under all anticipated contingencies. closure to what they know about the business12 13
  8. 8. Monster needs toWake Up & Smellthe Coffee Gene Grabowski Originally Published on LEVICK Daily
  9. 9. Weekly T “ he U.S. Food and Drug Administra- other stimulants could have horrible conse- tion (FDA) is now investigating five quences—especially for children. All the while, If Monster tries to ride out a storm this deaths and one non-lethal heart the market for these drinks has seemed to attack that have been linked to Monster energy expand exponentially. size without protecting itself better, it drinks. The FDA inquiry came after Monster Now, however, it seems the safety questions will likely pay a very painful price in Beverage Corp. was sued in California Superior have reached critical mass. On the day the brand damage and litigation costs.” Court by the parents of a 14-year-old Maryland Maryland parents announced their lawsuit, girl who claim the company’s marquee product Monster’s share price dropped 16 percent. That caused their daughter’s cardiac arrest. alone is evidence that the radio-silence strategy The actions are just the latest salvo against simply isn’t going to work anymore. Monster As a start, the company needs to engage its crit- Both the third party experts and the most Monster and other energy drink makers whose and others need to stop letting media critics, ics in the digital venues that dominate prod- supportive facts need to be front and center in products have caused increasing concern concerned parents, lawmakers, regulators, and uct perceptions today. Right now, Monster’s company blog posts and during every effort among food and beverage safety advocates. plaintiffs’ attorneys tell their story for them. website (screenshot left) is extremely dark, to engage the digital and traditional media As the inquiries have grown, we’ve heard little Even if Monster wins costly court cases, more mysterious, foreboding and in many places, influencers who are now controlling Monster’s in response to allegations that consuming con- are sure to follow unless the company takes sexually themed. That’s perfect for attracting story online and in the mainstream media. centrated amounts of caffeine, sugar, and steps to head them off now. the disaffected, rebellious teenagers to whom If Monster tries to ride out a storm this the company markets. Unfortunately, about a size without protecting itself better, it will third of the visitors to its site now are parents, likely pay a very painful price in brand lawyers, regulators and aides to crusading damage and litigation costs. Until now, only lawmakers. Their prejudices and suspicions teens and 20-somethings were paying atten- are being reinforced by what they see. As such, tion to Monster. Now it’s under the scrutiny of the site needs to consider showing some less- frightened moms and dads, their lawyers, and threatening images and highlighting some posi- the FDA. That should be enough to energize tive information to meet the concerns of these any company. L critical audiences. Gene Grabowski is an Executive Vice President at LEVICK At the same time, Monster needs to enlist some and a contributing author to LEVICK Daily. expert support—whether they be food scien- tists, nutritionists, researchers, or even success- ful athletes and entertainers—that can attest to the safety and efficacy of its product. Above all, the company must repeatedly hammer home the best fact on its side now: that a can of Mon- ster contains less caffeine than a Starbucks’ Image public domain. monsterenergy.com House Venti.16 17
  10. 10. NACD BoardVision Communicating Difficult Decisions BLOGS worth following Thought leaders Industry blogs Amber Naslund Holmes Report brasstackthinking.com holmesreport.com Amber Naslund is a coauthor of The Now Revolution. A source of news, knowledge, and career The book discusses the impact of the social web information for public relations professionals. and how businesses need to “adapt to the new era of instantaneous business. NACD Blog blog.nacdonline.org Brian Halligan The National Association of Corporate Directors hubspot.com/company/management/brian-halligan (NACD) blog provides insight on corporate HubSpot CEO and Founder. governanceand leading board practices. Chris Brogan PR Week Chrisbrogan.com prweekus.com Chris Brogan is an American author, journalist, PRWeek is a vital part of the PR and communications marketing consultant, and frequent speaker about industries in the US, providing timely news, reviews, social media marketing. profiles, techniques, and ground-breaking research. David Meerman Scott PR Daily News davidmeermanscott.com prdaily.com David Meerman Scott is an American online PR Daily provides public relations professionals, marketing strategist, and author of several books social media specialists and marketing on marketing, most notably The New Rules of communicators with a daily news feed. Marketing and PR with over 250,000 copies in print in more than 25 languages. In this edition of NACD BoardVision, we explore the communications options available to corporate leaders in this challenging economic environment with Mary Ann Cloyd, a Leader in Guy Kawasaki BUSINESS Related guykawasaki.com FastCompany the PwC Center for Board Governance, and Peter Gleason, the Managing Director and CFO for Guy Kawasaki is a Silicon Valley venture capitalist, fastcompany.com the National Association of Corporate Directors. In an era of belt-tightening across the business bestselling author, and Apple Fellow. He was one Fast Company is the world’s leading progressive of the Apple employees originally responsible for business media brand, with a unique editorial landscape, honesty and transparency are essential to ensuring that difficult decisions are not only marketing the Macintosh in 1984. focus on business, design, and technology. understood, but accepted and eventually embraced by employees, customers, and the full gamut Jay Baer Forbes of corporate stakeholders. jaybaer.com Forbes.com Jay Baer is coauthor of, “The Now Revolution: 7 Forbes is a leading source for reliable business Shifts to Make Your Business Faster, Smarter and news and financial information for the Worlds More Social. business leaders.Financial Communications Rachel Botsman rachelbotsman.com Mashable mashable.comLitigation Rachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration Social Media news blog covering cool new websites and social networks.Corporate & Reputation and sharing through network technologies.Public Affairs Seth Godin sethgodin.typepad.comCrisis Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing. Sign Up Today
  11. 11. IN THE NEWS ArticlesUSA TODAY | November 1, 2012Trees One of Storm’s Biggest KillersProductivity@Work | October 29, 2012Joining—and Capturing—the Online CommunityPR Week | October 29, 2012Federal Agencies Use Social to Preach PreparednessReputation Rhino | October 29, 2012Interview with Crisis Communications Expert Richard LEVICK—Part 1Star Tribune | October 26, 2012Best Buy Stock Hits a 10-year Low THE URGENCY OF NOW.

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