HEAD IN THE SAND APPROACH OF CEO’S: DEAL WITH PROBLEMS

Posted in analyze the problem, BBC, Business Crises We Create, Business Crisis Management, Corporate Crisis Management, Crisis Management, dealing head-on with a crisis, don't white wash the crisis, fix the problem, head in the sand approach, HSBC Compliance failures, not duck them, Poor crisis management, The DOJ and executives who try to avoid crises, the effect of ignoring a problem, Throw an employee under the bus on January 6th, 2013 by mnayor

The head in the sand approach to solving problems is not uncommon in everyday life. The concept of not getting involved has become more rapidly adopted by our citizenry. People readily subscribe to the maxim: The less involved you are the better off you are. It is also not uncommon in business situations, including at the very top positions. More and more CEO’s and other executives wish to insulate themselves and not sully their hands with messy issues, instead of solving them which is what they are paid to do.

 

When an organization’s leadership wishes to maintain clean  hands instead of confronting crises, the can is kicked down the road or left to those who do not have the authority, knowledge, or responsibility to handle. The result is often a rudderless ship, compounded problems for the organization, and a CEO who either throws other people under the bus or is made to resign leaving a bleeding hulk of a company.

 

Take the case of the British Broadcasting Corporation. For many years a popular, long-time host at BBC, Jimmy Savile, was suspected of sexually abusing young people, sometimes even at the premises of the BBC. The company recently came under blistering attack when it was learned that an investigation of Savile had been cancelled by the editor of BBC’s Newsnight program last year. Newsnight is an important current affairs program of the BBC. Mark Thompson, the BBC’s Director General until a few months ago claims to have had no knowledge of the accusations against Savile although there were many opportunities to delve into the matter if he chose to do so.

 

Another recent example is Stephen Green, now Lord Green. Lord Green became chief executive of HSBC in June 2003 and was appointed chairman in 2006. In December of 2012 HSBC entered into a Deferred Prosecution Agreement with the Department of Justice (DOJ), criminal money laundering activities and agreeing to pay fines and penalties totaling $1.9 billion. According to the Huffington Post, in 2005 Green was also made aware of the bank’s alleged ties with “rogue” regimes in theMiddle East. A US Senate investigation released internal emails showing how in the same year Lord Green was warned by an internal whistleblower in the bank’sMexicosubsidiary that compliance staff had “fabricated records”. He was also told in 2008, two years after being appointed executive chairman, that the Mexican authorities had uncovered evidence of money laundering that “may imply criminal responsibility of HSBC”.

 

Often, top management wishes to be insulated from bad decisions already made, and hard decisions that need to be made, even with the knowledge that, more often than not, the buck stops with them and severe harm can come to the company.

 

A CEO and his/her lieutenants are charged with monitoring the ship as a captain of a vessel or plane would. Rectifying what is wrong is a vital part of the job. Time does not absorb and dissolve bad decisions or situations. It only heightens the culpability of the parties who either made no attempt to rectify, or tried to white-wash them. Recently the DOJ and the SEC jointly released its 120 page Resource Guide to the Foreign Corrupt Practices Act (FCPA) which essentially prohibits and makes criminal the bribery of foreign officials. The Act was first passed in 1977, was amended a couple of times. The Guide explains what the DOJ and the SEC look for when it investigates, including the conduct of company when it learns of violations and the remedial steps which are taken to correct violations.

 

The FCPA states that it shall be unlawful for a company or its officers or directors to offer to pay, pay, promise to pay or authorize the payment of any money, gift or anything of value to foreign officials, or a foreign political party or official thereof, or foreign political candidate including to any person while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly to any foreign official, foreign political party or official thereof or foreign political candidate for the purpose of influencing any act or decision of such official, inducing any act in violation of the official’s duty or securing any improper advantage.

 

The Guide states that Congress meant not only “to impose liability on those with actual knowledge of wrongdoing, but also on those who purposefully avoid actual knowledge” and quotes H.R. Conf. Rep. No.100-576, at 920 (1988):

 

[T]he so-called head in the sand problem – variously described in the

pertinent authorities as “conscious disregard”, “willful blindness” or

deliberate ignorance” – should be covered so that management officials

could not take refuge from the Act’s prohibitions by their unwarranted    obliviousness to any action (or inaction), language

or other “signaling devise” that should reasonably alert them of the “high probability” of an

FCPA violation.

 

It is very likely that in the future the DOJ will adopt various theories expounded in the Guide to other criminal prosecutions besides those arising from the FCPA. For example, in December, 2012, in the highly publicized HSBC money laundering case, the DOJ imposed its FCPA risk based guidelines to the bank’s flawed country risk-rating methodology. It is only a matter of time before we see the “head in the sand” approach to management come under significant direct attack.

 

Thus, it is time for boards of directors to insist that top management take full responsibility to right the wrongs of their organizations.  It is incumbent on top management, and lower levels in turn, to clarify lines of responsibility and authority, to define the values of their organizations, to impose clear lines of accountability and to review regularly issues that arise. Confronting and solving problems is a big part of the job. Basking in increased sales, profitability and market share at the expense of ignoring core issues is a dangerous path that has often set back businesses several years and cost, or should have cost some CEO’s their jobs.

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HURRICANE SANDY AND THE MARATHON

Posted in Crisis Communication Failures, Crisis Management Strategy, Crisis Management Success Stories, dealing with a natural disaster, DECISIONS IN A VACUUM, Doing the right thing, Hurricane Sandy, negative publicity, New York City Marathon, Poor crisis management on November 12th, 2012 by mnayor

One of the most evident communications failures in the aftermath of Hurricane Sandy involved the ING New York City Marathon. Unquestionably the success of the Marathon paled in comparison to the misery heaped on New York (and New Jersey and Connecticut) residents who should of course have received and should continue to receive immediate and effective relief.

 

However, I cannot understand why the Marathon could not have been transformed into a major vehicle for focusing attention on and creating relief efforts for the residents of Staten Island, and The Rockaways, the areas ofNew Yorkthe most severely damaged.  I believe that the event could have been salvaged and made into something extraordinarily constructive instead of seemingly distractive and frivolous.

 

During the week of the storm Mayor Bloomberg kept announcing that theMarathonwould go on. He justified the decision by saying it would be good for New Yorkers. It  would bring the City together and lift everyone’s spirits. He also stated that no resources would be diverted from the relief effort. This comment, although true, was weak in light of the dozens of generators seen being transported toCentral Park  for the traditional pasta dinner, and the numerous port-a-potties being installed near the starting line. Granted these resources were private but it all seemed so selfish. This was crisis management and crisis communication at its worst.

 

What might have happened if the following had occurred? Mayor Bloomberg and Mary Wittenberg, president and CEO of the New York Road Runners (NYRR) jointly announced that theMarathonwas being renamed the Sandy Relief Marathon. The prize money was being donated immediately to the relief effort. The pasta dinner was cancelled and all generators and other private resources were being transferred to stricken areas. All port-a-potties were available immediately to the public. A telethon was being established for call-in donations during the race. All runners were being encouraged to donate their time in the coming days to support efforts. And so on.

 

The perception and the reality of theMarathonwould have been transformed into a humanitarian effort. That’s the way it should have been, instead of being billed as a cheer-leading, feel-good effort. Good crisis management in the Mayor’s Office and the NYRR was lacking. They had the time to make it happen but not the imagination or creativity. The resulting cancellation on the Friday before the event was a fiasco. An embarrassment for both the Mayor and the NYRR. The financial loss to the City is in the untold millions. The damage to the reputation to the event and the Road Runners organization remains to be seen. Certainly the thousands who travelled from abroad to participate now have a bitter taste in their mouths. The most common reaction was – We understand cancelling the event but why wait until Friday. If you had cancelled earlier in the week we could have saved the trip and our airfare.

 

We can only hope that nothing befalls the tri-state area again likeSandy, but if it does more intelligent and creative minds should grapple with a situation like theMarathonand utilize the notoriety of such an event to good and productive use. Obviously it is easier in hindsight to come up with ideas, but doing what’s right, sacrificing certain elements of an event and willingly taking two steps back in order to take one step forward would have burnished the image of the Marathon instead of tarnishing it. Trying to salvage an event in its entirety was and is perceived as putting yourself first. Placing the needs of those devastated bySandyfirst, and sacrificing some of theMarathon’s bells and whistles might have just garnered a lot more respect and kept a version of the race intact. Now NYRR has to renegotiate with product sponsors, ESPN and local affiliate WABC, and the participants themselves. It difficult to envision it coming out a true winner.

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