Paul Holmes 03 Sep 1990 // 11:00PM GMT
Most corporate crises have a limited life span. While many observers argue that the companies involved live with the consequences of crisis for years, even decades (finding it more difficult to recruit, to get permission to open new plants, to persuade customers that they can be trusted) the crisis quickly ceases to be the most important subject of conversation for the company's executives and their public relations people. A semblance of normality is restored after a few months, perhaps even weeks.
But the crisis that forced Manville Corporation into bankruptcy, a still unknown number of product liability law suits brought by asbestos victims, continues to dominate that company's operational and communications agenda, thanks to the court-imposed formation of a trust fund to which Manville must continue to contribute.
As The Wall Street Journal reported earlier this year: "Speaking recently to analysts in New York, Thomas Stephens, the chief executive of Manville Corp., tried to interest them in its `quality businesses and strong competitive positions.' But when it came time for questions, the analysts seemed mainly interested in `the Trust."'
Donald L. Ferguson, vice president of corporate relations for the Colorado company, has been looking for a term to describe the new discipline he has been forced to practice. It goes beyond crisis communications, he says. So far the best suggestion seems to be "siege management," which conveys the endless persis tence of the asbestos issue's domination of company news, but which has some unhealthy undertones, suggesting a defensive mentality that Ferguson has striven to overcome.
Manville went into bankruptcy as a company with good reason to be defensive. Asbestos disease was reported for the first time in the UX in 1908, and by the '50s the asbestos companies themselves were well aware of the health risks, Manville having conducted a study of employees in 1949 that showed 534 of 780 with lung changes.
The company's medical director, Kenneth W Smith, explained the decision not to put warning labels on asbestos products while giving testimony in 1976. "The corporation is in business... to provide jobs for people and make money for stockholders and they had to take that into consideration in everything they did, and if the applications of a caution label identifying a product as hazardous would cut sales, there would be serious financial implications."
Ultimately, of course, failure to apply warning labels had even more "serious financial implications." By 1984 the company was facing more than 25,000 personal injury lawsuits, with no way of telling how many might follow. By then it had already sought bankruptcy protection that was to culminate in the creation of the Manville Trust and a unique business situation in which the company's victims became its major shareholders, owning up to 80% of Manville stock.
Manville had gone from being a company that was known for deceit and disregard for the public well-being to one where the formal business mission was to serve the public good.
What communications triumphs Manville has achieved since that time have been owed to two things. The first is the attitude of the new management team, led by Tom Stephens. A strong code of ethics, a commitment to doing the right thing not only for customers and employees but also for the asbestos victims who "own" the Trust, permeates the company today. The second is the unique public relations structure Ferguson has put in place.
While the larger PR agencies are aggressively selling the idea of "one-stop shopping," Ferguson has taken what some might see as a contrarian approach.. Rather than hiring a PR agency, Manville uses its own custom-made agency, a team of seven senior counselors Ferguson has pulled together with the assistance of communications consultant Alfred Geduldig.
Team members include Ferguson; Geduldig; New York investor relations specialist Ted Berk, Manning Selvage & Lee's Lou Capozzi; environmental specialist Mike Gaughan, who runs a Colorado PR firm; L.A.-based crisis expert Michael Sitrick; Washington media relations and public affairs specialist Arnold Smith; and Bob Swadosh, president of New York agency The Swadosh Group. The team meets regularly, in what participants describe as an atmosphere of "creative confrontation."
Says Capozzi, "Ted Berk will always ask; `What are we going to tell The Wall Street Journal ?' I tend to be the `warm and fuzzy' guy. You can predict how various people will react to various suggestions. But at the same time, there's a free flow of ideas you don't often see in client meetings. People will challenge each other's ideas, they'll argue, in a way that doesn't happen when everyone is sticking to the agency line."
Ferguson says the traditional agency-of-record approach "may be appropriate for other companies," but that what Manville needed as it emerged from Chapter 11 and began to rebuild itself was a team of extremely high quality counselors—the kind of team that could not be found in one convenient location. "Companies don't think twice about hiring a dozen law firms to work on a dozen different aspects of their business," Ferguson points out. "Why should public relations be any different?"
The first priority for Ferguson has been restoring the confidence of the financial community. Manville was not only a company that took shelter in Chapter 11, it was not only a company that had seen 98% of its value vanish overnight, it was a company where 80% of the stock was held by creditors, and only 20% of the stock was traded.
"The crux of the matter," says Al Geduldig, "is that the majority shareholder, the Trust, needs to put pressure on Manville to pay it more money so it can settle more claims. But the more pressure
the Trust puts on the company the less valuable the company is to its minority shareholders. And if the company loses value in that regard, its, contributions to the Trust go down. There's a very delicate balance to be struck."
Although Tom Stephens' grilling by reporters earlier this year indicates that some are skeptical, the fact is that institutional ownership of Manville stock has risen from two per cent to 38%, due in part to Ferguson and his team working closely one-onone with members of the financial community emphasizing that Manville is a new company under new management, committed to serving all its stakeholders.
Ferguson talks now of a time when the company put out three or four newswire releases a day updating the financial community on legal decisions affecting its performance, the sheer bulk of information emphasizing that this was a company committed to total openness and honesty. He admits too that this responsibility to react to every item of news made it difficult to sit down and discuss proactive strategies.
Nevertheless, a strategy has begun to emerge, emphasizing Manville’s commitment to the environment. An independent health and environmental committee monitors all activities, and the company now goes so far as to place warnings on wood products in response to scientific evidence that wood dust can harm lungs.
Mike Gaughan describes Manville as "a company that has learned its lessons."
"You have a management in place there that really recognizes the benefit of behaving in the public interest, because they have seen what can happen to a company when the consequences of its actions are harmful to the community. Everyone there is committed to communication. It's not a token thing, its ingrained in the whole company." .
Three years out of Chapter 11, the rehabilitation of Manville Corporation is remarkable. Analysts describe the company as "basically sound," the financial community remains wary but supportive, customers are coming back, and the company has won praise for its environmental initiatives.
The major problem is the Trust, which keeps running out of cash. Some say Manville is not paying fast enough; others say the Trust is being managed improperly. Manville has promised more money at the end of next year, but Stephens has stressed that the company needs to function as a profitable business if the Trust is to continue to receive money long term.
The formation of the Trust was supposed to allow the company to put the trauma of litigation behind it, since it involved an injunction preventing anyone from suing Manville itself (victims may only sue the Trust.) It hasn't quite worked that way. Many members of the public don't understand the "wall" that divides Manville from the Trust. Even the New York Times uses the two interchangeably.
"It's frustrating," says Ferguson. "But it's rarely dull."