Rating the Top 10 Crises of 2003: Part III
Charting the future of public relations
Holmes Report

Rating the Top 10 Crises of 2003: Part III

Paul Holmes

8. Fox News vs. Al Franken

“When you roll in the mud with a pig, you both get dirty and the pig likes it,” says Al Tortorella, who adds, somewhat cynically, “In this case, it’s been difficult to even know who the pig is.”
It would be nice to make the case that Fox News will suffer irreparable damage to its reputation as a result of its frivolous and vitriolic lawsuit against satirist and author Al Franken, but it’s probably not true. The kind of people who take Fox News seriously won’t care, and the kind of people who care are already incapable of taking Fox News seriously.

Fox decided to sue Franken over his book, Lies and the Lying Liars Who Tell Them: A Fair and Balanced Look at the Right. The book reportedly took a few cheap shots at Fox, and at one of its employees, Bill O’Reilly, in particular. So Fox decided to get even by claiming that Franken’s use of the words “Fair and Balanced” in the book’s title infringe upon its trademark. It filed a suit that contained several paragraphs of personal attacks on the author—“Franken is… not a well-respected voice in American politics; rather, he appears to be shrill and unstable. His views lack any serious depth or insight”—before fretting about the confusion he might create in the marketplace and accusing him of trademark infringement.

The suit was probably doomed from the start. “PR by litigation rarely works,” says Michael Fineman, “especially when the defendant is high profile, savvy, more sympathetic than the accuser and has the resources to take the fight to the court of public opinion. Generally, lawyers have too many of the wrong instincts to provide sound public relations advice.”

Attempting to justify the suit in the New York Daily News, O’Reilly explained that “Fox News is striking back by putting the demonizers on notice that they will be held responsible when they violate trademarks or launch defamatory personal attacks on Fox personnel.” The suit doesn’t mention defamatory personal attacks, but O’Reilly’s self-pitying op-ed makes it clear what the real agenda is: striking back at someone who wants to fight on a level playing field, rather than simply subjecting himself to the demagogue’s on-air bullying.

The suit is rich in irony, from the fact that Fox News can trademark a phrase so unrelated to its true agenda (it’s as if Larry Flynt had trademarked the phrase “tasteful and modest”) to the fact that O’Reilly can accuse anyone of launching “gratuitous personal attacks” to the fact that right-wing Fox, which is opposed to frivolous lawsuits, would itself launch one of the most frivolous in living memory. (Even The Wall Street Journal editorial page found the suit ridiculous.)

Around the Internet, weblog authors organized a “fair and balanced” day, appropriating Fox’s trademark and essentially daring it to sue them too.

The case was laughed—literally—out of court, with the judge ruling that a person would have to be “completely dense” not to realize the cover was a joke. Not only that, but the company appears to have weakened its trademark, since the judge also offered the opinion that the phrase “fair and balanced” is in such common usage as to be untrademarkable. Oh yes, and the right-wing news network boosted sales of the book it was targeting, prompting the publisher to print an extra 50,000 copies as it shot to the number one spot on Amazon.

“The lawsuit, which was of dubious merit, hurt Fox in several ways,” says Ivan Alter. “First, it afforded Franken with a platform and his book a level of publicity it could never have otherwise enjoyed. Second, Fox appeared humorless and bitter. And third, there is something unseemly about a news network seeking to silence its critics. One would expect serious journalists to fight for the rights of dissenters to publish their opinions, not to seek to chill such speech with lawsuits.”

“As a communications professional, it’s your job to protect your company’s brand.,” says John Marzich, director of media and public relations at Benghiat Marketing & Communications. “However, Fox’s use of questionable legal tactics resulted in precisely the opposite, instead tarnishing and weakening the brand image. In fact, the litigation conducted in the name of brand protection did much more damage than Franken’s alleged appropriation of the company’s ‘Fair and Balanced’ phrase.

The ultimate lesson, according to Alter: “”Treat a joke with levity or risk becoming a punch line.”
At least the company might have gotten a new tagline out of the case, drawn from the judge’s ruling. Fox News: Wholly Without Merit. 

9. Abercrombie & Fitch

Abercrombie & Fitch is no stranger to crisis. In fact, the company seems to have been going out of its way to court controversy.

In April 2002, A&F came under fire for an issue of it’s A&F Quarterly magazine, which The Wall Street Journal said “looks more like a 300-page soft-core porn magazine than the mail-order catalog it purports to be.” The Illinois State Legislature last week passed a resolution condemning the retailer’s advertising campaign and calling on “the public, and parents especially, to boycott” the store, and urging stockholders “to demand a public stand against their marketing techniques promoting an obscene lifestyle, until advertising of this nature ceases.”

In the fourth quarter of 2003, the company faced similar charges after critics said its Christmas catalog, which featured young, scantily clad or nude models shown in sexually suggestive poses, amounted to “child pornography.”

First the company stopped selling its racy Christmas catalog, saying its stores needed the shelf space for a new fragrance line. Then it said it would replace the A&F Quarterly catalog with a new promotion, giving its critics a moment of triumph: “This was a company that promoted thong underwear to 10-year-olds,” Phil Burress, president of Citizens for Community Values, told reporters after the company announcement.

“This company moves at a snail’s pace to correct damage,” says Tellem’s Karpf. “This year’s holiday debacle followed Asian T-shirts that drew ire: internal A&F PR said that they were supposed to be funny rather than offering sincere apologies and here is a huge donation to some Asian charity to make up for their stupidity. That was followed several months later by “the underwear for teenyboppers” scandal that had parents boycotting the stores.

“Company spokespeople claim innocence and regret, but they keep doing dumb things. Don’t make any more moves until you button down strategy and figure out your unique selling proposition.”

Just when the company thought it was clear, it was hit with a lawsuit alleging that the sales force in its 600-plus stores is “overwhelmingly white.” The lead plaintiff claimed an interviewer told her that she would be recommended for a job at an A&F store, but that she was later told that she was passed over because she did not have the “image” that A&F wanted to present.

The big problem is that A&F didn’t seem to know what image it wanted to present. Benetton has shown that companies can court controversy as long as they respond with consistency and courage when the controversy generates heated criticism. One problem at Abercrombie & Fitch is that the company didn’t seem to know whether it wanted to be controversial or not.

Says Fineman, “To effectively reach its mostly adolescent, rebelliously-inclined audience and to separate itself from more traditional retailers, A&F has purposefully marketed itself with plenty of devil-may-care attitude and arrogance. But the challenges of this kind of reverse marketing are not insignificant.  The company must continually find a way to outdo or one-up itself each year with increasingly outrageous stunts, and it must hope that the attitude it is promoting doesn’t come back to haunt them should a real crisis emerge.

“The company may eventually need the goodwill of the market at large.”

10. Phil Condit Forced Out at Boeing

Of all the companies embroiled in corporate scandal over the past few years, none had fallen so far so fast as Boeing. Boeing is one of the biggest names in American business, its 747 brand almost as familiar around the globe as Coca-Cola. A decade ago, Boeing was one of the 10 most admired corporations in America, according to Fortune’s annual rankings.

But in 2003 the aircraft manufacturer made headlines for a different reason. In this case, the problem is not financial wrongdoing but what Business Week referred to as “chicanery… a long series of mistakes, manipulations, and controversies in manufacturing, accounting, acquisitions and strategy that went unchallenged and unchecked by Boeing’s board of directors.”

The accusations include the theft of documents from a competitor, the offer of a job to a Pentagon official while she was reviewing a major contract with the company, and suspicious dealings with an investment fund owned by Pentagon advisor Richard Pearle. And the crisis that had been simmering for a month came to a boil last week with the resignation of chairman and chief executive Phil Condit, who conceded “the controversies and distractions of the past year were obscuring the great accomplishments of this great company.”

“Boeing as a defense contractor is subject to even greater public and private scrutiny than most,” says Keith Burton, worldwide director of corporate and employee communications at Golin/Harris, which helped with the effort to attract Boeing to Chicago. “Its corporate history and legacy are steeped in the need for propriety, ethics and integrity. ”

But since Condit took the helm of the company in April of 1996, the company has been a magnet for controversy.

In 1997, Boeing lost control of its commercial airplane plants, trying to produce a record number of planes. It recently paid $92.5 million to settle shareholder lawsuits claiming it had misled investors over the mess. Another lawsuit, alleging that the company knowingly underpaid female employees and denied them promotion, is scheduled to come to trial in April of next year. But it’s the company’s shady dealings in Washington that are most troubling.

Says Alter, “Although the public should be furious with the lawmakers who approved the wasteful $20 billion commitment to buy and lease planes, Boeing will take the bigger PR hit. While the government is charged with protecting public funds, it was Boeing that sought to enrich itself on the taxpayers’ dime. The elected officials can point fingers at the lobbyists and hide behind the alleged creation of jobs while the corporation is left holding the bag.

“Boeing is defenseless. It cannot even seek to share the blame with the government. The company will need government contracts to rebuild its business and it certainly cannot afford to alienate its biggest customer.”

Boeing was slow to respond to the initial charges, some critics say. According to one senior public relations exec: “When the reported conflicts of interest came to light and the firings followed, Boeing should immediately have moved to full disclosure to show that its management team acted quickly, decisively and in the interest of protecting its close relationships and integrity.” Instead, “the company has labored with its communication. The public communication has appeared labored and deliberative.”

John Ashford, a prominent Washington public affairs counselor and chairman of The Hawthorn Group, agrees. “Once the violations were apparent they could have mounted a more aggressive investigation; promoted, internally and externally, both the investigation and a ‘zero tolerance’ culture; and brought the customers actively into solving the problem.”

Instead, he says, the company “failed to—immediately—find all the truth, tell all the truth, accept responsibility and apologize, visibly take punitive and corrective action, and mount a pro-active campaign.  They let this become an excuse for getting rid of a lackluster CEO.” In other words, the company violated most of the rules of effective crisis management.

Says Karpf, “Phil Condit was quiet… too quiet. He lacked the charisma and self-marketing skills of a Jack Welsh. When the crises piled up, he had no reservoir of good will to tap. A CEO has a duty to cultivate a positive PR image, not for his/her own aggrandizement but to give a company focus and credibility. Today Boeing lacks both, but with a new PR offensive, the future will be bright for one of America’s most distinguished brands.”

The company’s new leadership team, led by former McDonnell Douglas chief Harry Stonecipher, has made all the right noises. But Boeing still has a long way to go before it enjoys the same lustrous image it possessed a decade ago.

Grade: B

In Conclusion

Overall, the list provides several clues about what makes a crisis-prone organization.

“Large enterprises need a sustaining vision to bind people together in a common purpose—a vision that is about much more than profit,” says Burt Wolder, former vice president of public relations at AT&T and now president of the New York chapter of PRSA. “The PR counselor’s role as the chief steward of this vision, and director of its animating dialogue among constituencies, is critical during a crisis and its aftermath.”

In many cases, the organizations that made this list exhibited considerable hubris before the crises struck.

“In analyzing the list, it appears 10 of the 12 exhibited unadulterated arrogance in thinking they didn’t have to live up to the highest standards of ethics, the law and respect for community/investor trust and shareholder/employee interests,” says Tom Gable. “Five or six seemed driven by a combination of both arrogance and avarice. The greed factor may be driven by perquisite envy among CEOs in the biggest companies.”

Even after the crisis struck, many seemed incapable of acknowledging their sins or recognizing they could be held accountable for them.

Martha Stewart described the charges against her as “ridiculous” while she chopped cabbage during a morning show interview; Dennis Kozlowski discussed the $2 million birthday party and the $6,000 shower curtains as his just reward for building Tyco into one of the world’s largest companies; Dick Grasso defended his extraordinary compensation by pointing out that the exchange’s board had approved every nickel and told critics, “I’m blessed.”

Says Tom Reno, president of GCI New York, “It’s not an accident that each of these individuals found themselves in nearly every rogue’s gallery and on every scoundrel list for 2003. America is quick to forgive those who are remorseful and apologetic, and equally quick to punish arrogance. Aggressive, defiant tactics don’t work. Martha’s quickly launched website did not earn her any sympathy points. Only after her tearful Barbara Walters interview did Martha gain some support.”

“Many of these crises reaffirm Lord Acton’s aphorism, ‘Power corrupts,’ and perhaps add a modern variation: ‘Celebrity corrupts,’” says Al Geduldig, principal at New York crisis counseling firm Geduldig & Ferguson. “Meld that with Gordon Gecko’s ‘Greed is good,’ and you have created an evil amalgam that elevates people’s tendency to cheat on their taxes and lie to insurance companies to monumental levels.”

Geduldig suggests a number of fallacies that fuel crisis-prone behavior of senior business leaders:
· Arrogance: “Those laws don’t apply to me; what I do is my (our) own damn business.”
· Invincibility: “I’m too powerful to be hurt.”
· Invisibility: “I can hide it from you; I can even hide it in plain sight.”
· Smarter than thou: “We can make it come out the way we want.”
· Strengh in numbers: “If everybody in the inside circle is doing it, it must be okay.”
· Self-righteousness: “I deserve it.”

Not surprisingly, given those attitudes, few of the companies in question appear to have afforded PR a seat at the policy-making table. (A PR guy with his ear to the ground could have prevented the American Airlines mess, and probably two or three other top 10 nominees).

“Communications advisors play no more important a role than when they provide clients with a grounding in an external reality, or a corporate ‘smell test,’” says Patrick Riley, managing director at Burson-Marsteller. “None of these crises would have passed such a test: a self-regulatory body whose board is stacked with the friends of the CEO approving extreme pay packages in what amounts to secretive ways; a CEO looking to cut jobs and salaries and benefits of line workers, but not being up front about the fact that he or she and top management are not going to be sharing the pain; a CEO feathering a luxurious corporate apartment with millions of shareholder dollars; top management of a government contractor arranging for future employment of a government employee who is involved with the company’s work.

“That the situations involving Messrs. Grasso, Carty, Kozlowski, and Condit got as far as they did is a testimony to lack of perspective: a perspective that communications counselors provide.”

Veteran Hill & Knowlton crisis counselor Dick Hyde agrees.

“The public relations professionals appear to have been left out until way too late in the process so that preventative measures they might have recommended, and even intelligent damage control, were absent in these situations,” he says. “Message development either was overlooked or, if used, message delivery was inconsistent because what came from the statements and spokespersons of the organizations involved in these crises was all over the lot and failed in terms of clarity or believability.

“And one of every organization’s best allies—the employees—were overlooked so they were out of the loop when it came time to offer perspective or be supportive as the situation got tough; what a difference it could have made in virtually every one of these crisis situations if internal communication had been observed from the outset.”

One thing is sure: all of the lessons of these crises will go unlearned by many senior executives at companies around America, guaranteeing us plenty of candidates for next year’s list.

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