Covering up a problem always makes it worse. It's axiomatic in crisis management. And yet even the strong and the brave succomb to the pressure to keep the ugly hidden.
Such a sad reminder of this today in not-so Happy Valley, Pennsylvania, where Penn State continues to feel the repercussions of the Jerry Sandusky sexual abuse scandal and the cover-up that allowed his preditory behavior to continue for so long.
Yesterday, the university did the previously unthinkable in removing the seven-foot bronze statue to beloved coach Joe Paterno and the surrounding memorial, calling it "an obstacle to healing." Gone too are the plaques detailing his many winning seasons. And now we can't even describe Paterno as the winningest coach in college football history, as the NCAA today vacated all PSU football victories from 1998 to 2011. According to US News and World Report, the NCAA found that Paterno and other university officials "had concealed allegations of Sandusky's actions, and concluded their motive was to protect the football program and the school from negative publicity."
The NCAA sanctions will all but shut down Penn State's football program, which has been so much a part of the university's identity. So now a new leadership team at PSU will begin the long, hard process to restore trust and build a new identity stressing excellence apart from football. Meanwhile, litigation from the abuse victims will drag on, a continuing reminder of the ignomy of scandal and cover-up. One can only imagine how many victims of abuse might have been spared if Paterno and the others had acted swiftly against Sandusky--if they had stood up and said "No more," and let the sun shine on the ugly problem no matter the immediate consequences. It would have taken courage and leadership, qualities Paterno seemed to have in abundance.
All of which underscores how hard it is to do the right thing when confronted with credible evidence of wrong-doing in the organizations we represent and believe in. We must redouble our commitment to get after the truth quickly and push back against the inevitable pressures to just keep it all quiet.
Facebook launched perhaps the most anticipated IPO ever and instead of the moonshot many expected, it fizzled like a rocket from North Korea--and has since completely imploded. First, Facebook executives made a decision shortly before the IPO launched to increase the number of shares floated, greatly increasing the odds that demand wouldn't keep up and the share price would fall. Then, the big day came. The stock price initially went up by about 10 percent, as individual investors finally got their chance to buy a piece of the dream, but within hours the share price was plummeting. As Facebook stock continued to sink on its second and third day, allegations arose that Facebook insiders (and execs at Morgan Stanley, the underwriter of the IPO) had revised revenues projections downward but didn't inform the market at large. Now the SEC is investigating and the inevitable investor lawsuits have been filed. The prospect of a protracted legal battle has become a thick cloud hanging over Facebook the Stock, a discouraging prospects that will continue to dampen enthusiasm in the investment for some time to come.
Meanwhile, J.P. Morgan has become the poster child for a new chant from the Occupy Wall Street crowd: "We told you so." Just when you thought the Big Banks had been chastened by the near collapse of the world financial markets followed by massive bailouts of those deemed "too big to fail," JPM announces a multi-billion-dollar loss from speculative trades in risky derivatives, the same stupidity that led to the financial meltdown in the first place. The so called "London Whale" trades undermined JPM CEO Jamie Dimon's case that banks should be freed from Dodd-Frank regulations enacted following the bank bailouts. Dimon went from the financial industry's most persuasive advocate to being perceived as the very embodiment of the "Bankster" the Occupy crowds would like to burn at the stake.
So what can Facebook and Morgan do to win back your trust? That's the subject for my next few posts. Your ideas welcome!
What do companies need to do and say to win back pubic trust?
Jordan Kimmel of Trust Across America posed that question to me this week on his radio program on Voice America. Here's the link to listen to the interview.
Jordan asked me about winning back trust after a crisis and about my experience in the Ford-Firestone mess that is the basis for my book, FEEDING FRENZY. And we talked about the turmoil inside Goldman Sachs after former executive Greg Smith took quite a public parting shot in the form of an op-ed in the New York Times. (Smith's piece has since led to a global torrent of negative press and opinion against Goldman and its brand of "pirate capitalism.")
Goldman CEO Lloyd Blankfein
I pointed out that the heart of Smith's accusations against Goldman's corporate culture is the violation of customer trust, of putting profit ahead of customer interest. But even worse, I noted, is a bigger cloud hanging over Goldman, the violation of public trust. It's now clear that Goldman played a key role in the financial crisis that precipitated the global Great Recession, especially in regard to the clever packaging of derivatives built around shaky subprime mortgage disguised as AAA-rated investments.
The American public is incredibly forgiving when the leaders of an organization express remorse and a sincere commitment to change behavior for the better. But contriteness is not the message coming out of Goldman.
Furthermore, in today's world, transparency is an essential element of corporate social responsibility. Goldman's corporate culture is built on impenetrable secrecy. And there's little reason to expect the curtain to be lifted any time soon.
It's only March, but put Goldman Sachs down as an early contender for Force for Good's 2012 PR Disaster of the Year.
The real tragedy of the scandal at Penn State is that so many of Jerry Sandusky's alleged acts of predatory sexual abuse over the years could have been prevented if university officials had not tried to keep it quiet. Hoping to avoid an ugly incident, their silence led to arguably the worst scandal in American sports history ... and made for an easy choice for the Force for Good's 2011 PR Disaster of the Year.
Time and again, the lasting impact of a crisis is made worse by those first on the scene hoping to sweep it under the rug. How many times have you you heard, "The coverup was worse than the crime?"
Bold prediction: this won't be the last time a scandal is made far worse by embarrassed officials trying to make it all go away. Don't let it happen at your company. Work with senior leadership to develop a rigorous crisis management plan built around smart, proactive crisis communications to all stakeholders.
Click here for five years of truly memorable recipients of FFG's PR Disaster of the Year.
Herman Cain—no matter what you believe at this point, it is clear that the Cain campaign has been clueless in handling a crisis they should have seen coming. With 10 day's notice before the publication by Politico October 31 of the first allegations, how could Cain be caught flat-footed and ill-prepared? The steady drip, drip, drip of new accusations (we've seen this movie before, twice: It's Tiger Woods and Anthony Weiner, all over again) makes it clear this story isn't going away and Cain's various responses—angrily lashing out at reporters, trying desperately to change the subject, defiantly attacking one of his accusers as a "troubled woman," are all wrong, wrong, wrong.
Penn State—the sad, sordid tale of sexual abuse allegedly perpetrated by longtime assistant football coach Jerry Sandusky should have ended in 1996 when Sandusky was first caught showering with a boy; police were notified but no charges filed. Or in 2002 when a graduate assistant coach walked in on Sandusky in the shower with a boy, he told head coach Joe Paterno who reported the charges up to the Administration but didn’t notify police, confront Sandusky or otherwise follow through on his obligations to the community to stop a predator. Yesterday, university officials abruptly cancelled Paterno’s weekly press conference, only adding to the uproar. Today, the 84-year-old Paterno announced he will retire at the end of the year, surprising no one. The real tragedy is that so many at the university remained silent while Sandusky continued to molest at least eight boys.
Greek Prime Minister George Papandreou, who in a quieter year might be running away with the award. With rioters in the streets of Athens a daily event protesting austerity measures that will end the gravy train for a coddled public in an IOU economy, Papandreou surprised his fellow leaders in the Eurozone by saying he would put Greek's last-chance bailout up for referendum. Hmmmm, seems like all those riots would give one pause before putting further-but-necessary austerity moves up for public referendum. Then, when Germany, France and the rest of the Eurozone made it obvious that their generous deal would be rescinded, Papandreou did an about-face and cancelled the referendum--nothing like promising a vote to a riotous public and the reneging, throwing gasoline on the fire. Papandreou was forced to resign to be replaced by ... no one yet. This being Greece, a new coalition government has yet to be formed amid more squabbling.
These newbies to PR disaster join entrenched candidates Wiener (who exposed himself as a liar), Lindsey Lohan (can’t seem to stay out of trouble), Dominiquec Strauss-Kahn and his accuser (he is at best a lech accused of much worse, but her story fell apart and he returned to France where he will apparently not be President), and the Boston Red Sox / Atlanta Braves (historic chokes by both teams--okay not so much a communications issue, but disasters nontheless).
A furious social media backlash helped convince Bank of America to reverse its unpopular decision to charge customers a monthly fee for using their debit cards.
The anti-Big Bank sentiment that is driving the Occupy Wall Street protests accentuated the consumer hue and cry, and BoA CEO's tone-deaf comments provided plenty of opportunity for derision.
"We have a right to make a profit," CEO Brian Moynihan, said infamously. While a perfectly reasonable statement in normal times, these are hardly normal times and the comment struck a discordant note with those hurt by the Great Recession. BoA received a taxpayer bailout to the tune of $45 billion, plus a "loan-loss back-stop" of $97 billion, according to CNN. Home-owners with upside-down mortgages and unemployed/underemployed workers haven't been as fortunate and quite predictably were put off by Moynihan's line.
"The 'right to make a profit' comment triggered a great deal of negative sentiment," wrote James Purchase of Attensity (a company selling social media analytic software). On-line comments mimicked Moynihan, "'I have the right to bank elsewhere,' and 'Yes, but no more than I have the right to a job.' The most negative sentiment was around 'excessive profits,' 'high fees' and 'bailout.'"
BoA's experience is a cautionary tale for business failing to keep abreast of consumer sentiment being expressed in social media. You can learn a lot by listening. And if what you're hearing sounds severely at odds with a climate conducive to a business decision you're about to make, it's time to revisit the decision.
BTW - BoA's stock dropped when it announced the new debit card fees (investors apparently being more in tune with public sentiment than Moynihan and company), it fell again when Moynihan dug in his heals, and it further sank yesterday when the company rescinded the decision (losing more than the overall market on a very down day). The BoA incident is in line to receive serious consideration for Force for Good's 2011 PR Disaster of the Year.
Came across as clueless, defensive and not at all transparent in Congressional hearings. Tony, that was just the warm-up act. Now that they see that you make good theater, you're sure to be "invited" back for follow up hearings (and don't expect any more apologies from friendly Congressman).
With the well still spewing tons of oil into the Gulf, Congress feeling unsatisfied with his testimony and Gulf state citizens in a rage, Hayward took time off to jet back to participate in a yacht race in the U.K. Bad form, Tony.
I don't see how any chief executive can ride out such a devastating string of incredibly stupid moves. Oh, and BTW, BP stock has lost half its value since the crisis began, costing pensioners and other investors tens of billions of dollars.
Do us all a favour, Tony; it's high time to resign.
Time again for Force for Good's annual PR Disaster of the Year.
For 2009, this infamous award is shared by several hoaxers, poseurs and liars who helped make 2009 "the year of brazen fraud."
First and foremost, was the "Balloon Boy Family," the adorable (not!) Heenes of Colorado who launched a flimsy, silver-colored, helium-inflated flying saucer and managed to con the nation's news networks into several hours of breathless coverage (while Army jets were scrambled and havoc wreaked with Denver air traffic) predicated on the belief that six-year-old Falcon Heene was on-board. Richard Heene and his wife concocted the hoax in an effort to sell a concept for a new reality TV show. How fitting that Falcon spilled the beans on CNN with the candid line that provided a fitting tag-line for 2009: "We did it for the show."
In the category of "aren't their 15 minutes over" are White House party crashers Michaele and Tareq Salahi. They pretended to have scored an invitation to the Obama Administration's first state dinner. They successfully snuck in. Secret Service took the bullet for the security lapse. Congress held a hearing that was skipped by the Salahis (as well as the White House social secretary who clearly deserved part of the blame for letting the Salahis get through to the President). But we didn't need the crashers to testify -- they already were making the rounds on television talk shows. Once again, motivation for boorish behavior stemmed from a breathless desire for a spot on a reality show, in this case "Real Housewives of Washington." Are you bored yet?
Brazenness was taken to a whole new level when environmental activists posed as Chamber of Commerce leaders and held a well-attended press conference at the national Press Club in Washington to "announce" that the influential business organization had reversed itself and would support legislation to to address climate change concerns. The stunt angered just about everyone involved, including the duped news organizations, the Chamber of Commerce and even many environmental groups which rightly felt the stunt was beneath any organization wanting to be taken seriously in a complex policy debate.
Lame cover stories (aka lies) used to explain inexplicable behavior: hard to top disappearing South Carolina Governor Mark Sanford, who was not hiking the Appalachian trail but in fact meeting up with his Argentinian mistress. Then his maudlin public apology made him seem even more ridiculous.
Standing alone atop the list of the serially unfaithful, Tiger Woods seized global attention with a bizarre' car accident, in which his attending wife turned out to have had a dozen or more good reasons to break the glass in the rear windows of Tigers' SUV, none of which involved dragging Tiger to safety, as first reported. Tiger pleaded for privacy, somehow hoping to avoid the subsequent avalanche of forth-coming mistresses.
Dishonorable mention -- the White House functionary who authorized in the deepest throes of the Great Recession a hugely expensive photo-op that never produced a usable image but did manage to frighten hundreds of thousands of New Yorkers. How could it ever have seemed a good idea to okay a mission involving Air Force One and a trailing fighter jet in a low-altitude fly-over circling lower Manhattan. Didn't any of that imagery ring a bell?
I was planning to write an optimistic post today, finding some measure of hopeful anticipation in the recent mini-rally on Wall Street and a number of positive economic numbers that came out the last two weeks. Hope and optimism, when based on a prudent business case, are contagious. And the irrepressible spirit of American innovation will win out sooner than later.
Things are indeed tough out there, but, really, the world is not coming to an end.
That post will have to wait until next week, assuming there are still some hopeful signs of a coming economic thaw after some lamentable actions by our political leaders. Call this post "What were they thinking: March 2009 edition."
In a rare display of bi-partisanship, the U.S. Congress rushes to pass the "seize the AIG scoundrels' bonus" act yesterday, slapping a 90% tax retro-actively on bonuses to employees of any companies that received more than $5 billion in "bail-out" money. That includes capable people at such places as Wells Fargo and Goldman Sachs that didn't want the TARP money but were forced to take it by the Treasury Dept. so investors wouldn't be able to distinguish failing banks from the strong ones. Granted, no one in the Financial Products division of AIG should have received any bonus. But Congress' rash action doesn't bode well for business (aka, the engine that is going to get us out this economic rut). .
Of course, all politics are local and it is not just the Federal government that has taken a stupid pill. Illinois Governor Pat Quinn, by all accounts an upstanding and high-integrity breath-of-fresh-air to former Governor Blagojevich, confirms that, in addition to some spending cuts, he wants to raise the state personal and business income tax by 50% !!! (personal income tax would jump from 3% to 4.5% and the state business tax from 4.8% to 7.2%) to balance Illinois' bloated budget. That's on top of a sales tax rate that exceeds 10% in the city of Chicago. Update: The Weekend WSJ brings a national spotlight to "The Taxin Illini" in this op-ed.
No one needs to remind us, again, that we are in the midst of the WRSGD ("Worst Recession since the Great Depression"). Can you think of two worse actions you could take at a time when we need to inspire confidence in our business leaders, investors, consumers and employees? Wait, don't answer that question. You might give our "leaders" some ideas.