Crisis Class 2 Jan 19 2012

Corporate Crisis
Communications
Spring 2012
Class #2
January 19, 2012
Judith Muhlberg & Bruce Harrison

1 Georgetown University Crisis Communications Jan. 19, 2012

What is a corporate
crisis?
(Created by 2012 Spring Class, Crisis Communication,
Georgetown University)

A disruptive event that
threatens the organization’s
reputation, relationships with
stakeholders and long-term
sustainability.

What are some characteristics
of company crises? From Dezenhall’s ‘Damage
Control’

A crisis means CONFLICT between company and
opposing forces; otherwise it’s a problem
We easily cast VILLAINS and VICTIMS, helped by
VINDICATORS—media, social, legal and political activists
Companies can SURVIVE the “torpedo” if they CONTROL
the immediate damage, take charge of the
communications, and the OUTCOME of the crisis
CONTEXT—time, place, external and internal conditions–
shapes the nature of, and response to, crises.


‘Classic’ Crisis Case Studies,
With Consideration of ‘Pre-Digital’ and ‘Digital’ Contexts
 Audi crisis, 1986: a public drama CRISIS with sympathetic
VICTIMS, compelling STORY, scary THREAT, public
OUTRAGE, feeding frenzy MEDIA, ready LITIGANTS and
PLAINTIFFS’ LAWYERS
 J&J crisis, 1982: a popular product is center of a CRISIS that
becomes classic COMMUNICATION case
 HP crisis, 2006: a quiet, internal failure to deal with a PROBLEM,
becomes CRISIS, with a sequel in 2011.
 Exxon crisis, 1989: biggest oil spill in US history – with a low mark
in CRISIS COMMUNICATION
 BP crisis, 2010: the new ‘biggest oil spill’ – with new lessons in taking
charge of CRISIS COMMUNICATION


Tonight: we analyze case studies
using questions drawn from
Dezenhall
1. Was the company seen as a victim or villain? Has that status
changed since the crisis reached the post-climax stage?
2. Did they take the initiative (get off defense, go on offense,
do aggressive damage control)? If so, how…and how soon?
3. What was the company’s main message? To its stakeholders, to
government?
4. Did the company wrap messages with principle? Security,
Safety, Privacy, Choice, Justice, Economy…?
5. Did the company apologize? If so, how, and did it help?
6. What will be the outcome? Will there be life after the crisis? Will
the torpedoed ship survive?


Audi 1986 (pre-digital context)
J&J/Tylenol 1982 (pre-digital)
HP 2006 & 2011 (digital)
Three Companies/Four Case Studies


Case Analysis: Audi, 1986
 Victims:
 Reverend (Rev. Bradosky)
 Reverend’s wife (Kristi Bradosky)
 6-year-old son (Joshua Bradosky)
 Audi 5000
 Event:
Kristi alleged that her Audi 5000 lurched forward in her garage,
unprompted, killing Joshua.
 Disruption from the Event:
 CBS’s 60 Minutes broadcast a segment (11/23/86) called “Out of
Control”
 Rev. and Mrs. Bradosky were interviewed – very emotional


 CBS showed their own “field demonstrations” of a runaway car –
with no one in the driver’s seat.
 Audi executive tried to explain the physical impossibility
 CBS and Ed Bradley created a new mechanical syndrome
“sudden acceleration” (no matter how hard a driver pressed on the
brake, the car would keep zooming ahead)
 Threats to the organization’s reputation,
relationships with stakeholders and long-term
sustainability:
 Audi could not prove to the public that “sudden acceleration =
driver error (facts were “not heard”)
 Government investigations ensued
 Plaintiffs’ lawyers created a support group “Audi Victims Network”
– leading to more lawsuits

 CBS repeated the broadcast (9/87) with 1,200 reports of
“sudden acceleration” – 5 deaths/400 injuries
 Audi’s reputation (motto: The Art of Engineering) took a huge
nose-dive in North America (not in Europe)
 Audi sales plummeted (from 74,000 to 14,000 and a market
share loss of 80%). They lost billions of revenue, and did not
recover in the North American market for a decade
 Truth:
 In 1989, NHTSA concluded there was no mechanical basis
for “sudden acceleration” and the accidents were caused
by driver error. The drivers had most likely placed their
foot on the accelerator (instead of the brake).


Desenhall Analysis
1. Was the company seen as a victim or villain? Has
that status changed since the crisis reached the post-climax stage?
2. Did they take the initiative (get off defense, go on
offense)? If so, how…and how soon?
3. What was the company’s main message? To its
stakeholders, to government?
4. Did the company wrap messages with principle?
Security, Safety, Privacy, Choice, Justice, Economy…?
6. What will be the outcome? Will there be life after the
crisis? Will the torpedoed ship survive?


Case Analysis: J&J Tylenol
1982


1982
Disruption from the Event:
 JNJ recalled all Tylenol in the Chicago area immediately and
began working with the police and FBI
 Reaction spread nationwide as companies (Safeway, Revco,
CVS) pulled Tylenol from their shelves
 JNJ found 2 additional cyanide pills in recalled bottles
 On Oct. 5, JNJ recalled all Tylenol products nationwide.

Threats to the organization’s reputation,
relationships with stakeholders and long-term
sustainability:
CCO Larry Foster had a reputation for openness and honesty
with the media, and many reporters trusted/respected him
Relying on the J&J Credo as a guide, the CEO and crisis team
acted quickly to warn the public and destroyed 31 million Tylenol
capsules.

J&J Credo


1982
 The FBI and FDA did not find evidence of tampering at the 2
JNJ plants where Tylenol was produced and shifted the focus
to an external source – “a malicious psychopath” who bought
Tylenol, laced it with cyanide and put it back on store shelves
 While Tylenol’s future hung in the balance, it did not affect the
sustainability of JNJ. JNJ was (is) a very diversified company,
and other products were not affected. There was no boycott
vs. JNJ
 On Nov. 11, JNJ announced a triple-seal safety package for
Tylenol. News conference was satellite-fed to 29 sites where
media were gathered. Toll-free number for consumers
received 200,000 calls
 Other pharmaceuticals followed JNJ’s lead with their
packaging


1982
 New Tylenol packaging was back on the shelves 10 weeks
after the start of the crisis
 The crisis cost JNJ $100M
 Tylenol regained 100% of its market share post-crisis
 JNJ was viewed as a responsible company that saved lives by
their rapid response, openness and honesty

“What began as J&J’s darkest hour turned out to be its brightest in
terms of corporate reputation.”
Larry Foster, CCO


Desenhall Analysis


J&J Sequel: Motrin Moms
Timed for International Baby Wearing week, J&J ran the
following commercial


J&J Sequel: Motrin Moms
 Within hours, it was on YouTube and became the most tweeted
topic on Twitter – and mommy bloggers went into full gear…
 J&J pulled the ad from its site, the VP of marketing emailed the
most active bloggers to apologize


Desenhall Analysis
1. Was the company seen as a victim or
villain? Has that status changed since the
crisis reached the post-climax stage?
2. Did they take the initiative (get off
defense, go on offense)? If so, how…
and how soon?
3. What was the company’s main
message? To its stakeholders, to government?
4. Did the company wrap messages
with principle? Security, Safety, Privacy,
Choice, Justice, Economy…?
5. Did the company apologize? If so,
19 how, and did it help?
Georgetown University Crisis Communications Jan. 19, 2012

Case Analysis: HP, 2006
 Victims:
 9 journalists (WSJ, NYT, CNET, etc.,)
 2 HP employees from “pretexting”/3 from involvement
 7 HP Board Members
 Villan:
 Patricia Dunn, interim HP Chair and Lead Director, HP
 Event:
In late 2005, concerned about boardroom leaks, interim HP
chairman, Patricia Dunn, set in motion a private investigation,
including the collection of private phone records through
pretexting. “Pretexting” is gathering info through
misrepresentation – pretending to be the person to whom the
private phone records belonged.


Disruption from the Event:
The investigation to plug leaks did more damage than the leaks
Congressional hearings were called on the “pretexting” issue


 HP’s general counsel, chief ethics officer and security
manager were forced to resign
 Patricia Dunn resigned
 Felony charges against her were dropped.
 Unfortunately, she died in December 2010.
 Threats to organization’s reputation, relationships
with stakeholders and long-term sustainability:
 Media outrage over the actions. At Hurd’s first news
conference on the issue, he took no questions “legal issues at
stake.”
 New CEO, Mark Hurd, apologized to those who were “spied
upon”/ hired a former US prosecutor to review the actions
 HP shares did not take a hit. Analysts remained bullish on the
stock, and Hurd’s takeover as CEO positively impacted HP
business fundamentals.

Desenhall Analysis (’06 &
‘11)


Case Analysis: HP Sequel
 Mark Hurd became CEO of HP (following Carly Fiorina’s firing by
the Board) in March 2005 and succeeded Patricia Dunn as
Chairman (following her firing by the Board) in September 2006
 Hurd was fired on August 6, 2010, after an internal investigation
uncovered “expense-account irregularities” and inappropriate
conduct in an investigation into a claim of sexual harassment
made by former reality TV actress
 The probe concluded that the company's sexual-harassment
policy was not violated, but that its standards of business
conduct were.
 HP lost $9 billion in market cap the week after he “resigned.”
 A letter, containing details of the sexual harassment claim, was
published by the NYT on December 29, 2011
 He is now Co-President at Oracle
 Meg Whitman is now CEO of HP

Desenhall Analysis (’06 &
‘11)


Exxon Valdez 1989 (Pre-digital)
BP 2010 (Digital Contexts)

Two Case Studies
(Contexts of Time, Impact on Communication)


Case Analysis:
Exxon ‘Valdez’: 1989
What, when? just after midnight on a calm sea, March 24,
1989
Huge crude-oil tanker hits reef in Alaska
Worst oil spill ever in American waters (11 million
gallons into Prince William Sound)
Victims?
 Wildlife: 1 million migratory fowl; 2,500 sea otters; seals, sea
lions, clams, fish
 Workers: lost work, fishing income, tourists…
Villain?
Company culture, CEO, ship’s captain…?

Case Analysis: Exxon ‘Valdez’: 1989

 Disruptions…and threats:
 Heavy media, local and three major TV networks
 Mobilized foes: fishermen, environmentalists, others
 Angry customers: protest, cancel their Exxon credit cards
 Exxon accused of lacking plan to deal with incident..and of causing harm, income
loss, basis for LAWSUITS
 Communication/response:
 Unanswered negatives on ‘feeble containment effort’
 Understaffed Exxon center in Valdez overwhelmed by media
 Incorrect, hostile information, with Exxon in Houston scrambling to correct—
while protecting CEO Rawl who refused to go to scene


Post-climax impact (in digital
era)
Attorneys for plaintiffs continue to argue that Exxon was
responsible because they “put a drunk in charge of a tanker”
Exxon argues that punitive damages greater than $25 million
not justified because the spill resulted from an accident and
because Exxon spent $2 billion cleaning up the spill and
another $1 billion to settle civil and criminal charges.
ANCHORAGE JURY AWARDED $287 MILLION
DAMAGES AND $5 BILLION PUNITIVE
A separate settlement of damages with seafood producers,
cost the company $63.75 million


Post-climax impact (in digital
era)
AND THE CASE GOES ON:
2002 – CIRCUIT COURT CUTS PUNITIVE TO $4.5
BILLION
2006 – CIRCUIT COURT CUTS TO $2.5 BILLION
2007 – COURT DENIES REQUEST FOR THIRD
HEARING, COMPANY APPEALS TO SUPREME COURT
2008 – SUPREME COURT CASE IS REMANDED TO
LOWER COURT…


Desenhall Analysis

Case Analysis: BP Oil Crisis: 2010
• Cause
– April 20, 2010: Gulf of Mexico: drill rig explodes, 11
workers are killed
– Leaks in the pipeline/formation…25,000 barrels/day of
oil, pour into water, reach shore
• Public awareness/concern
– Immediate, virtually nonstop intensive traditional media
and social media coverage
– Starting April 26: leak is seen by public 24/7 via BP’s
undersea camera…Internet, TV, SM
• Climax
• August 8: Leaking well is plugged; bubbles are clear.

BP Crisis: Stakeholders
Fishing industry…46,000 sq. mile ban on commercial
fishing…boats, operators, oyster/fish harvesters,
processors…
Tourism…hotels, resorts, air travel, ground
transportation…
Local businesses…restaurants, supplies, fishing,
tourism, Gulf sports…
Others…environmentalists, fish/wildlife/ habitat
stakeholders…


BP-government interactions
• President Obama goes to Gulf, holds news
events, puts ban on offshore drilling and on
Gulf fishing.
• Obama joined by AL, GA, MS, FL governors in
expressing interest, concern, reassurance, etc.
• Former FL Senator Graham & EPA Chief Reilly head
commission to look into causes/impact
• Congressional hearings: (5/11/10) execs from BP,
Transocean, Halliburton; (6/17/10) CEO Hayward


BP Corporate Accountability
Voluntarily sets up compensation fund
Hires out-of-work boat-owners, fishermen
Agrees with White House, to finance $20 billion fund
to pay claims of people whose jobs and lives have been
damaged
Mid-2010: BP says spill (now capped) cost the company
$6.1 billion so far


BP Crisis: Communication (2010-Now]
• BP communications team on site within hours
• Crisis US media base, websites, social media, interactive
Twitter activated; BP’s undersea camera shows the leak 24/7
on Internet
• CEO Hayward (U.K.) arrives, acts as spokesperson
– Downside: CEO does poorly at Congressional hearings , has
media gaffe (“want my life back”) (Chmn: ‘small people”)
– Correction: spokesperson role goes to Dudley (U.S.)
– Coast Guard spokesperson expands credibility
• Print and TV ad campaign in major US outlets (still running)
– Themes: accountability, environment, economy; local people
– BP employees, local officials, boosters – as
spokespersons


BP continue paying victims’ claims at high rates –
9,000 of 23,000 so far – and the company gets some
halo recognition in the media.
BP says failed safety systems and irresponsible
behavior of contractors led to the explosion.] The
firms deny the allegations.
BP files $40 billion in lawsuits against rig owner
Transocean, cementer Halliburton and blowout
preventer manufacturer Cameron. Not yet resolved.


BP internal report admits some blame, holds others
responsible for decisions that caused explosion
Incoming CEO Bob Dudley tells analysts that the
claims filed may add up to less than $20 billion put in
escrow
Dudley speeches in London and in New York: We get
it. We’re sorry. We’ll fix it.
Favorable media includes New York Times op-ed by
respected business columnist Joe Nocera


Desenhall Analysis
1. Is the company seen as a victim or villain? Has that status
changed since the crisis reached the post-climax stage?
3. What was the company’s main message? To its stakeholders, to
government?
4. Did the company wrap messages with principle? Security,
Safety, Privacy, Choice, Justice, Economy…?
5. Did the company apologize? If so, how, and did that help?
6. What will be the outcome? Will there be life after the crisis? Will
the torpedoed ship survive?


Pre-Crisis Intelligence Project


What company or companies
are you tracking?
1: Pharmaceutical industry
2: Technology
3: Automotive
4: Financial
5: Food/Beverage


Searches you can use…not necessary
to build a ‘listening station’
• Google
• Yahoo
• LEXIS-NEXIS
• Twitter Search
• Filtrbox
• NYTimes, Wall Street
Journal, Financial Times,
Fortune, etc.
• Technorati.com
• And look at the
Guide handout
you received
1/12/12


Next Week
Work on your PIP and be prepared to comment on your
progress “listening to stakeholder perception”
What you know about your company
What you’ve picked up by accessing stakeholder information,
news and commentary.
Guest Lecture
Eric Dezenhall
 In addition to heading Dezenhall Resources, Ltd., Eric is a published
author of fiction and non-fiction books, a frequent media commentator,
and a sought-after speaker.


Crisis Class 2 Jan 19 2012

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