REPUTATION MANAGEMENT - DEALING WITH EMERGENCIES

Author Richard Solomon is a conflicts and crisis management lawyer with 50 years of experience in business development, antitrust and franchise law, management counseling and dispute resolution including trials and crisis management.

Over the last 45 plus years I have encountered numerous situations in which my client was accused of things that, if true, would damage the reputation to the point of capital value impairment of the company. In these instances, the repute injury and impairment promised to be more enduring than what was then the normal 24 hour news cycle – that doesn’t exist anymore anyway. Currently we are witnessing in the BP – Gulf of Mexico situation a perfect storm example of this phenomenon that is being mismanaged to text book proportions. Since it is so immediately current and pervasive, I will refer to it from time to time as this article progresses.

In the BP situation we are dealing with the inevitable consequences of cutting financial corners to such extremes that safety failures abound over a period of some years in various of the company’s installations, with resulting explosions, fires, deaths, multi victim injuries, environmental damage, all followed by public statements that do not tend to repair its repute in any community. The name BP is now synonymous with Scofflaw.

There are really only two probable reasons for such unfortunate mismanagement of public information. Either the company is advised by people who have no clue about what is happening and how to deal with it – following cut and paste manual like procedures intended to fit everything from a hangnail to thermonuclear holocaust – or the arrogance of management is such that any statement that might help achieve mutual understanding between the company and its adversaries would not be permitted for the sole reason that it fails to praise and support the managers whose names and positions are associated with the circumstances.

Aristocratic management attitudes are understandable where anything but cheer leading support of policy is career ending in its impact. In privately held companies the attitude is present, but how one manages adjusting that attitude is somewhat different. In publicly held companies there seems to be a palpable paranoia about the potential impact on one’s prospects from anything but absolute praise.

Overcoming either circumstance is a process of accounting for what the company is willing to do; when it is willing to do it; in what steps it is willing to proceed; whether flexibility in adjusting to exigent circumstances as they may arise is available; and control over statements to be made, including by whom they are to be made.

Being told that suggested changes in position will produce your being fired is something one must work around. Changes will be inevitable. Suggestions have to be made. You have to be able to move on if your suggestions don’t fit the pistol when they are made. You can’t allow yourself to be scared off what you are there to accomplish by threats that you can be discharged. That just comes with the territory.

Illustrative of the impact of changing circumstances, an important event in the BP saga has just occurred. BP was sparing no effort trying to consolidate all Gulf of Mexico litigation in Federal Court in Houston, its home town in the USA, where it would be expected to get an industry friendly judge and many industry employees in any jury, and where there would not be any local oil spill impact to color any result. However, the Judicial Panel on Multi District Litigation just consolidated all Gulf of Mexico BP litigation in the Federal Court in New Orleans, where none of the supposed advantages would be available. They would be in the court and before a jury located at the epicenter of the disaster.

There is a profound impact upon BP’s plans about how it would handle anything from this point on, having to be more considerate in its settlement of claims policies and procedures as well as potentially more generous that originally planned with regard to disbursements. How that program is handled can be expected to impact judicial and juror thinking as well as how relief will be fashioned by the court if there is also to be mandatory injunctive relief. What you do in the beginning, if insufficiently flexible and sensitive, will turn on you down the road.

In the same week as the story about the BP litigation being venued in New Orleans, CNN broke a story about BP stiffing the suppliers from whom BP ordered emergency supplies, such as surface booms to prevent oil from coming ashore. BP came out with an obvious false excuse for nonpayment, saying that they only refused non conforming products even though in many instances BP’s on site inspectors approved the product for shipment. Similar stories about BP promising to pay and then not paying abound all over Louisiana. These will be some of the lawsuits that will be brought in New Orleans. Perhaps it is an intentional ploy to delay payments for the purpose of trying to negotiate smaller payments to settle the disputes. Insurance companies are known to use this claims management technique forever. That is not a great comparison for BP, as there is a huge amount of insurance bad faith coverage and claims management litigation pending all over the gulf coast region right now, and the potential jury pools have already been poisoned by the failure to pay claims arising from hurricanes Katrina and Rita.

As somewhat more than an interesting aside, there has been an epidemic of applications in Louisiana for fishing licenses, coupled with locals offering bribes to commercial fishermen to attest falsely that they had been on the payroll so that they could apply for payments from BP for lost work. It appears that this has been rather substantial and that millions in lost pay benefits were probably paid out to people who were not and who never had been in the fishing industry. This story will represent material usable to try to exonerate improper withholding of payments in other situations. Le plus ca change, le plus c’est la meme chose.

What if anything is different in the BP situation from what is faced by people and companies generally in crisis mode? Think of BP – and any other giant petro company for that matter – as in a group with insurance companies and General Motors as far as attitude is concerned. They live only by laws of large numbers in which everything is – or should be – hedged. Community reputation issues are not real to them. They pay lip service to community reputation, but the world is the community, not some small region or city. In that scale what may happen anywhere is not thought to endanger the whole enterprise. That failed ultimately to work for General Motors where being out of touch everywhere became the driving company modus operandi. And even then, along came a government to bail them out. Is it any wonder that such firms really don’t give a tinker’s damn about reputation? They pretend to, but they don’t.

Normal enterprises cannot make it on that program. Normal companies are vulnerable. Normal companies must, therefore, find a more humane and rational way to manage crises. Normal companies must have well conditioned antennae out there telling them to what and when they must react, and then finding the reactions that, even if challenged, reveal a conscious goal to deal with “it” in a competent mode.

This is so obvious an effective event response management plan that it is a wonder that it is not universally adopted. There are no hard and fast rules in these situations. This plan always works unless it becomes corrupted by lost reliability. When the pronouncements do not match the realities, any plan falls apart. Each step of its implementation is multidimensional, as there are often several interests impacted by the event that should receive consideration. Their interests are usually divergent because those having the interests are not a homogeneous population. There are also layers of concerns within each interested group. When these are competently accounted for and responded to, the restoration of company reputation is achieved with the least amount of expense in the shortest time period. Where there is culpability on the part of the company, deliberate, negligent or in any event attached responsibility, there is no magic pixie dust exoneration possibility.

Your PR people are not ready for prime time in this kind of situation. This is the stuff of specialists who can think and work outside any box and with any kind of management except the delusional dictator to whom reason is immaterial. Additionally, the law protects the accusing bloggers and their hosting website owners against lawsuits brought by accused companies for besmirching the company reputation. In the back and forth between preventing people from using your name (as in references in adverse postings about you) through trademark infringement litigation, on the one hand, and freedom of speech on the other, freedom of speech is trumping the trademark protection interests. Statutory constructs aimed at protecting the Internet favor the website owners in most instances, limiting your real options to posting responses to the accusations made against you. Scaring disgruntled complainers with your big budget lawsuits is becoming more difficult. Judicial willingness to award attorney fees and expenses to your enemies because you should have known you had no right against your target defendant is making the little accuser’s task of finding representation less difficult. You can expect to be discovered and successfully sued if you or others acting for you hack into your adversary’s website to sabotage the site or remove adverse commentary. I have dealt with three such situations in the last six months, so I consider myself to be fairly up to date in this appraisal of it.

In the beginning…… just like it says in the Bible…..there are initial circumstances. Most of the time they are not completely known or comprehended in their potential. Therefore, what is said at that first moment is being said for reasons of panic and evasion. That shouldn’t be so, but it almost always is. What should be said is simple, direct and obviously truthful – free of denial – free of agenda – free of signs of panic and paranoia. What should be said is that you are trying to learn all the facts and that when you believe you know enough to be able to make responsible statements, you will have something to say. Now how difficult is that, and why is it almost never done? Think of what BP said that was of course shown to be incorrect and that set the tone for so many of its subsequent compounding falsehoods and half truths - to the point that nothing said by BP would be credited by anyone.

That initial statement must be followed by a real investigation, honestly marshalling information calculated to show the truth of the matter. In a real crisis event that information will probably come out anyway. If it comes out after you have misrepresented what it is and what it will be, what have you accomplished?

Bring in resources that are known to have some credibility. Before doing that, confer with the candidate resource so that there is a clear understanding what will be done and how it will be done, as well as how information resulting from the investigation will be handled and by whom.

Illustratively, there is one person with enormous credibility and respect in Louisiana based upon his work during the Hurricane Katrina disaster. He has his ways, and that requires that before his retention it must be sorted out what will and won’t be done and who is the boss and just how he can live with the arrangements. The trouble with honest effective people is that they often have a hard time when it comes to being the spokesperson for apparent misrepresentation. I am of course referring to retired General Honore. He knows the area and its people and they trust him. Having an arrangement that accommodates access to that kind of resource absolutely has to be explored as soon as possible. This was not done by BP, and in retrospect it is doubtful General Honore would have been willing to participate in what BP had in mind. To do so would have been reputation destructive for him, and his future value ruined.

General Honore type people are not always available. Unfortunately, what is sought out is usually someone good at theatrical appearances – Marlboro Men who can get you to start smoking their brand of weed. They say anything if you pay them. They are at most only momentarily convincing about anything. While you don’t always have access to the instantly believable resource, you absolutely have to do better than Tony Hayward. Most importantly, however, is the person behind the spokesperson. That resource has to be focused upon managing the potential for situational changes, and has also to be focused upon achieving something more than simply momentary sound bite impact.

The resource you are going to use must be available throughout the crisis. He cannot be handling so many other things that availability on immediate notice is unworkable. As it nears its end, immediacy of need may wane, but up to that point, he has to have his Blackberry in his pocket when he sleeps and when he makes love. He must also be able to show up quickly if today’s virtual meeting technology simply won’t suffice.

It is rather easy to sit back and point out things that someone else did that turned out to be less than appropriate. You can take just about any adverse situation today and see the cut and paste standard PR ploys being used – denials – misrepresentations about things not even investigated yet – assigning blame to others – trying to use some government or industry standard as exoneration for obviously blameworthy conduct – false promises of remediation so general as to allow later denial when you don’t do whatever it was that you promised but never intended to do – and so on and so forth.

In the end, between authorities conducting investigations; investigative reporting; adverse statements made by disgruntled employees and former employees; other involved parties defensively trying to lay responsibility on you through their own denials; most of the correct information is going to come out. The ability to control the news and the publicity of information is no longer an option. Moreover, in the process of ineffective exculpation other matters in which you are involved are investigated, and, just like BP today, issues are found in which you engaged in similar conduct there.

If in reality you perceive yourself to be immune to reputational damage, and you really don’t give a tinker’s damn about it – although you won’t say that in public – falsehoods and false promises may in the end save you some money. But if you are not possessed of royal status in the world, you need to consider the approaches suggested above. You should pay less in remediation costs and attorney expenses in the long run, and your reputation will recover more quickly than if you follow what passes today for crisis information management.