Holmes Report 21 Jan 2019 // 10:24AM GMT
View Part Two of our 2018 Crisis Review here
View Part Three of our 2018 Crisis Review here
1. Facebook PR Fail
In November, the New York Times published an article that provided a comprehensive overview (based on interviews with more than 50 people) of Facebook’s response to the criticism the company faced after a plague of fake news that infected the site—and the political arena—during the presidential election of 2016.
As we explained in an analysis that month, the Times detailed the hiring of public affairs firm Definers, attempts to link Facebook critics to Jewish financier George Soros and suggestions that the criticism of Facebook was itself motivated by anti-Semitism. The newspaper’s reporting raised four particularly troublesome issues around Facebook’s public relations activities.
- First, a stark contrast between the company’s external promises of transparency and its pledge to do better, and its actions in the political realm: efforts to deceive lawmakers about the true extent of Russian interference and attempts to smear its critics;
- Second, Facebook’s senior executives were motivated by a desire to pander to the Trump administration and others on the right;
- Third, the Times story also revealed that Facebook had been paying Definers to pump out its own fake news and use alt-right media channels to spread misinformation;
- And finally—and most troublingly—the Times story highlighted a smear campaign undertaken against Jewish financier George Soros.
It was particularly disheartening to learn that Facebook public relations and public affairs execs, rather than warning company leadership about what would happen when the smear campaign inevitably came to light, were active participants in the campaign. Indeed, within days Facebook communications VP Elliott Schrage had taken the fall for the company’s actions, losing his job.
Richard Levick, CEO of crisis communications firm Levick, points out that the Definers incident was merely one example of a broader failure to address the “fake news” issue and others we raised in our crisis review last year. Says Levick, “Mark Zuckerberg promised to ‘fix Facebook’ and keeps telling us they are getting their house in order. But instead, with few exceptions, most of what we get from Facebook are small changes and lots of denials.
“It’s never easy, but as communications professionals our job is to help clients do the right thing, never more so than in a crisis. Facebook’s recent public posturing, on the other hand, is sadly reminiscent of the obstructionist tactics deployed a generation ago by the US tobacco industry – deny and delay. Every time Facebook feigns shock that its platform is being used for nefarious purposes, it strains its own credibility.
“If the testimony (or failure to testify) to the US Congress and the British Parliament and more is any indication, Facebook believes they are smarter than we are—a blunder begging for more regulation globally. Retaining an army of lobbyists and public relations specialists can only take Facebook so far. Consultants are not magicians. Instead of asking them to ‘put lipstick on a pig,’ Facebook should be arming them with solutions, and, dare I say it, visionary leadership for the information age.”
Our own analysis, meanwhile, focused on the limits of applying political techniques in the corporate realm. That often fails for two reasons.
First, politics is tribal in a way that the corporate world is not. Individuals who find their values aligned with specific political parties or individual candidates have a high tolerance for techniques that are ethically questionable (dishonesty, or personal attacks) if they are seen as a mutually agreed upon cause. Relatively few people have the same level of affinity for a corporation or its issues.
And second, politics is a zero-sum game. Candidates can attack each other in ways that turn off vast swathes of the electorate. As long as you are more successful persuading people not to vote for your opponent than he or she is at persuading them not to vote for you, you can win. If you engage in the same approach with a business rival, all you achieve is a smaller market where nobody trusts you or your competitors (which is why airlines don’t spend a lot of their marketing budget trying to suggest that their competitors are unsafe).
The Facebook campaign illustrates these differences perfectly.— PH
2. Nissan's Boss Gets Arrested
Even by Japan's storied standards of corporate malfeasance, the scandal at Nissan Motor deserves special mention — combining, as it does, financial wrongdoing, political intrigue and hubris to almost unparalleled effect. Now relegated to a tiny cell in Tokyo, former Nissan chairman Carlos Ghosn sits at the heart of the affair, arrested more than three months ago and charged this month with understating his compensation by more than $80m over eight years, and causing Nissan to make payments to the company of a Saudi Arabian friend.
Unlike recent crises in Japan, says H+K Strategies crisis comms practice leader Tim Luckett, "this was personal rather than corporate misconduct – political as well as financial." As Luckett notes, the scandal cames after the imperious Ghosn oversaw Nissan's turnaround and the creation of its high-profile alliance with Renault and, more recently, Mitsubishi.
"The first problem was the vagueness in the initial response [from Nissan] — while this was clearly a corporate governance issue, Nissan only belatedly approved setting up an advisory committee of independent directors well after the scandal broke," explained Luckett. "But perhaps we don’t know the real back story."
That was compounded by several media scoops that put Nissan further onto the back foot, with the company also taking a cautious approach because of the legal dimension. All of which, says Luckett, created the impression that Nissan may have had "something to hide."
Among the lessons are this: corporates clearly need to be prepared for dealing with inappropriate or illegal behaviour even at the most senior leadership level: "It begs the (somewhat rhetorical) question — what questions were actually asked?"
Ultimately, concludes Luckett, "corporates who fail to adopt basic governance structures will endear little sympathy when alleged persistent wrongdoing is finally called out.
"There is no doubt that further questions will arise not just about Nissan's corporate culture, but about the country's corporate governance standards in general. However, as he awaits his fate behind bars, the ultimate judge in all of this, the share price, remains pretty much intact (as does Nissan’s global comms strategy) — so perhaps the real truth is that Nissan actually knows far more than they’ve bothered to communicate. I suspect this one will run and run." — AS
3. Is J&J's Credo Still Credible?
For more than three decades, when public relations people were asked to identify the gold standard of effective crisis management they would—almost unanimously—point to Johnson & Johnson’s handling of the Tylenol crisis of 1982, when the pharmaceutical giant turned to its credo (“We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services”) to guide its actions after it became apparent that its products had been tampered with.
But revelations over the past couple of years must have led even the staunchest admirers of the Tylenol case study to question whether J&J’s commitment to its credo is real—with evidence suggesting that even back in 1982, the company was acting like dozens of other large corporations that discovered a link between their products and serious side effects.
“In 1982, Dr Daniel Cramer found the first statistical link between the talc used in baby powder and ovarian cancer,” says the website Consumer Advocacy News. “Concerned by this discovery, executives from J&J met with Dr Cramer to discuss his findings and convince him that talc was perfectly safe. Throughout the next decade, mounting studies linking baby powder and ovarian cancer forced the company to mount its own investigation in the 1990s. An independent consultant advised the company not to continue to defend the safety of talc and either to place a warning on its products or to replace the talc in its products with cornstarch. The company ignored his advice.”
That story was published two years ago, and could be dismissed by company executives as the biased view of plaintiffs’ attorneys engaging in thousands of lawsuits against J&J. But in December of last year, Reuters published an investigative report that confirmed much of that narrative and added damaging detail—prompting a stock selloff that erased about $40 billion from J&J’s market value in a single day.
J&J has already been on the losing side of several jury verdicts on the issue—one for $4.69 billion—and faced thousands of additional lawsuits—but continues to deny any responsibility. Responding to the Reuters story, J&J said it was “one-sided, false, and inflammatory.” Confronted with a similar New York Times story days later, the company was similarly defiant: “The decades-long record overwhelmingly shows that our talc is safe, and J&J has engaged with great transparency in open discussions on the safety of its talc with scientists and regulators.”
The company further responded with ads and a website that provides a longer critique of the negative coverage, as well as noting that “of all the verdicts against Johnson & Johnson that we have already appealed, not one has been upheld.” And not surprisingly, J&J’s current chief executive Michael Gorsky has invoked the Tylenol history as evidence of the company’s good character (during an appearance on CNBC’s “Mad Money”).
The thoroughness and consistency of the company’s response has earned it some plaudits from crisis experts. Thom Weidlich at CrisisResponsePro says, “All in all, J&J’s quick and multifaceted response has been impressive.”
Erik Bernstein, of Bernstein Crisis Management, meanwhile notes: “Making statements about legal battles is always difficult because you’re limited in what you can say. This is the standard ‘we will appeal because we’re right’ message that typically follows a decision against any party, but it also included a healthy dose of compassion up front. This made it effective in communicating two points: first that J&J does care about the negative situation being experienced by its accusers, and second that it has what it believes to be proof that the claims against its brand are misplaced.”
The jury is (literally) still out on the facts of the case.—PH
4. Marriott Tops The Data Breach Charts
We have included data breaches in our crisis reviews for the past several years—last year Equifax made our top 15—and it seems that companies and consumers are almost as tired of these stories as we are. “This increasingly common scenario is itself proving to be a challenge for communicators,” says Tim Luckett, global crisis practice leader at Hill+Knowlton. “‘Breach fatigue’ is real—both for individuals affected, and the companies involved.”
This year’s biggest story involved Marriott (in the wake of its merger with Starwood), which recorded the second largest breach in cyber security history, exposing some 380 million records, although we could have included data breaches at Facebook (50 million), Quora (100 million) and Ticketmaster, all of which saw sensitive information accessed by attackers.
(NordVPN says more than one billion people’s data was compromised in 2018, with British Airways, Google and Uber making the virtual personal network provider’s list.)
“Strict reporting guidelines (including GDPR in the EU, and comprehensive Federal and State laws in the US), mean that businesses are frequently reporting breaches—potential, actual, large or small,” says Luckett “‘The boy who cried wolf’ has become ‘the brand that cried woe.’ So it’s a challenge for the likes of Marriott when serious breaches involving potentially sensitive data (passport and credit card details, amongst other information) occur, to encourage affected individuals to actually take notice, and more importantly, take action.
“Breach fatigue can also be a significant challenge for brands that are so used to the standard playbook approach of ‘announce, reiterate the commitment to cyber security and offer credit monitoring.’ Communicators need to remember that ‘affected individuals’ are people: the elderly person who may not understand web monitoring, the millennial who has a highly sensitive junk mail filter, or the online shopper who discards the 10th identical ‘cyber incident notification’ email.”
Having said all that, Luckett believes Marriott’s response was strong, including a comprehensive website, media campaign (as required by law), credit monitoring and call center. “In other words, they ticked the necessary boxes. But with an increasing number of breaches, and more of us disclosing private information online, organisations have a greater responsibility to protect that data, and if the worst does happen, actively help customers to navigate what they’re meant to do.”
And even with these events becoming commonplace, it’s important for companies to remember that they are being judged. “More Americans expect breaches than ever before and see them as a test of a company’s ability to be responsive and transparent,” says Brent Shelton, of technology PR firm Bospar.—PH
5. Huawei's CFO Gets Arrested
That two of our top five crises including corporate leaders being arrested might point to a trend, but the situation concerning Huawei CFO Meng Wanzhou is sufficiently removed from Carlos' Ghosn's fate at Nissan as to constitute a totally separate crisis scenario. One that is, furthermore, considerably complicated by the geopolitical opposition and security concerns that have bedevilled Huawei's rapid rise over the past decade.
US authorities allege that Meng and Huawei violated Iran sanctions and may have made illegal transactions with HSBC. It is, says Signal Leadership Communication principal Bob Pickard, just the latest step in a "continuing saga" that has seen Huawei attempt to reassure the world that it is not a proxy for the Chinese government.
At the same time, notes Pickard, Huawei has built a "world-class communications platform" in a short space of time, including a new corporate PR roster that includes BCW and Edelman. "The profile of the company's brand has been growing fast, fuelled by cybersecurity fears concomitant with a massive marketing spend powering increasingly popular products which are driving the company’s unrelenting commercial success."
Meng's arrest, though, takes Huawei into "unchartered territory," says Pickard, where it simply finds itself unable to shape the narrative to its advantage. "Regardless of its world-class issues management and crisis communications capability, it’s not calling the comms shots in the news as the Chinese and North American governments on the other side duke it out through the state-supported media and information platforms at their disposal.
"As China’s national champion multinational, Huawei is now a red flag of warning in most of the Anglosphere countries of China’s rise as a technologically advanced superpower that many are afraid could surpass and dominate a divided and declining West, where governments may be reaching the conclusion that if they don’t stop Huawei now — stop Chinese encroachment into the Western telecoms infrastructure — they never will."
Huawei's response to the arrest has been fairly tepid, punctuated by a rare appearance from CEO Ren Zhengfei. "Probably the best public relations and marketing communications can’t overcome the realpolitik situation Huawei finds itself in," says Pickard. "Even rolling out their biggest PR gun — the reclusive Huawei founder Ren Zhengfei who almost never speaks to the media — smacked of desperation as he heaped praise on Donald Trump and thanked Canada's justice system for the kind treatment of his daughter who remains under house arrest."
6. Oxfam's Sexual Misconduct Scandal
There’s something particularly sad about a charity hitting the headlines for the wrong reasons, but even organisations that overwhelmingly have their organisational and volunteer hearts in the right place can get it catastrophically wrong.
So it was with Oxfam, the highly-respected, 77-year-old international aid organisation, when it emerged last February that it was facing multiple allegations of sexual misconduct over many years by its workers – including paying sex workers, some of whom may have been underage, in Haiti and Chad. The crisis escalated quickly, severely damaging Oxfam’s reputation and its relationship with one of its biggest donors, the UK government.
Brendan May, chairman of sustainability consultancy Robertsbridge, who has worked with many NGOs around the world, said the charity’s inexperience in handling negative media coverage was evident from the moment the crisis broke: “It was clear that Oxfam was caught like a rabbit in the headlines, completely clueless on how to handle the growing seriousness of the accusations being levelled against it.”
He says there was a period during the crisis where Oxfam seemed to be turning to the right tactics: “The highlight was using its global executive director, the hugely impressive Ugandan politician Winnie Byanyima. Her obviously sincere apologies, an exclusive TV interview and a compelling piece to camera gave believers in the sector's work some much needed confidence at a pivotal moment. Byanyima’s authentic voice was also vital in reassuring donors that the charity was taking the magnitude of events seriously, particularly essential in shoring up fragile political support in the UK and beyond.”
Unfortunately, much of that good work was undone when Oxfam's UK chief executive gave an interview to the Guardian saying the attacks were out of proportion and defending the claims on the basis it was not as if Oxfam had "murdered babies in their cots". “It quickly became clear he couldn't survive this astonishing blooper,” says May. “It greatly undermined the progress Oxfam had begun to make with a concrete plan of action to root out abuse and have all allegations properly investigated.”
May says the episode did huge damage to the development movement, and gave unnecessary fuel to those on the political spectrum who would rather the UK did not help developing countries at all. “As reputational crises go, it therefore doesn't get much worse. And a stark reminder that if your chief executive is going to give media interviews, especially on a topic as sensitive as this, never ever allow them near a journalist without the right training,” he says.
“Oxfam is full of excellent dedicated programme staff. Its communications functions were found wanting at a critical time, and it’s a reminder that charities need to invest properly in communications excellence, just like any other brand.” — MPS
7. Sir Martin Sorrell Uncouples From WPP
When a figurehead as high-profile (and divisive) as Sir Martin Sorrell left the holding company he founded 33 years previously, and not entirely on his own terms, it was never going to be anything but seismic.
The announcement that the most powerful man in the agency world was suddenly exiting WPP may have been made at 10pm on a Saturday night when much of the London industry was enjoying a warm April evening, but it was anything but buried news: the shockwaves and analysis (including in this publication) rolled on for weeks.
The news that WPP was conducting an internal investigation into Sorrell’s conduct and behaviour was followed by a “sex, cash and bullying” Financial Times story that included Sorrell’s former chauffeur as a source. That piece, which ultimately precipitated his departure, is still the subject of dispute: Sorrell continues to miss no opportunity to bombastically rubbish its content.
And opinion is still divided on whether Sorrell’s departure was the only possible outcome as things came to a head, or whether it’s a decision WPP’s board will live to regret.
At Lansons, CEO Tony Langham doesn’t think either the corporation or its founder handled themselves with grace: “Martin Sorrell's sordid exit from WPP is surely the saddest crisis of 2018. Genius entrepreneur Sir Martin should not have left the business he made, under a cloud. WPP should not have created an enemy of Sir Martin, as he knows where many of the bodies are buried. Yet that's what happened. Both sides seem to have put pride above dignity. And in seeking to protect their reputations, both sides damaged their own reputations more than was necessary.”
Langham says that from the sidelines, it appeared that WPP fought the dirtiest. “Leaks about the chauffeur, the investigation and visits to brothels could hardly have come from Sir Martin. WPP seemed to think that just because they owned information that they could leak with impunity. They were wrong.
“In fact, it's Sir Martin that has emerged the least damaged. He has his shiny new business, S4 – and a business starting in 2018 is going to be much better placed than a business put together over the last 30 years. And of course, the people he's made money for in the past, aren't worried by his supposed misdemeanours.”
In contrast, says Langham, the new WPP team led by Mark Read has the mountainous challenge of turning the WPP oil tanker around. “And Sir Martin is free to undermine them from the sidelines. It's entirely possible that WPP will also appear in the crisis list of 2019 or 2020.”
At Hanover Communications, deputy MD of corporate Gary Cleland, agrees that the real crisis for WPP, regardless of how Sorrell’s exit panned out at the time, is still to come: “The actual departure of Sir Martin was handled, in the circumstances, as well as could be expected. The challenge for WPP will come in the years ahead.
“Amid speculation over the efficacy of large holding groups, Sir Martin personified WPP and gave it a coherent identity. In his absence, the challenge for the business will be in creating a binding identity for itself that is coherent to its employees as well as its clients.” — MPS