ETHICS AND CRISIS MANAGEMENT

Posted in Crisis Management, Ethics and Crisis Management, ETHICS FROM THE TOP DOWN, guidelines for ethical standards, including ethics as part of your corporate culture, problem employees, Setting ethical standards on September 12th, 2012 by mnayor

 On September 8, 2012 The New York Times ran a front page story about Marcone, a company that may well be the largest authorized dealer of appliance parts in theU.S.  it’s been around since 1932.The reason for its front page notoriety is due to one of its senior vice presidents, Carlos Garcia, buying, essentially smuggling, and reselling large quantities of a banned refrigerant for appliances such as refrigerators and air conditioners. Garcia imported the gas, HCF-22 which damages the ozone layer, without the necessary approvals, thereby violating international treaties andU.S.law. The substance has been prohibited in new appliances since 2010. In June, Garcia was sentenced to 13 months in jail.

 

Faced with a tempting or risky issue, a powerful person, a powerful company, a powerful country is most likely still to believe that there is a good chance of getting away with something. Lie low and time will make the issue recede into history. Put a band aid on and no one will dare to pierce your impenetrable shell. This is what happened to Wal-Mart in April of this year when its Mexican subsidiary was exposed as having engaged in  pervasive bribery as a normal course of business. What would have happened if Wal-Mart had entertained a genuine independent internal investigation when it had the opportunity, and made those findings known to the Justice Department and to the State ofMexico? There would have been a much smaller story. Wal-Mart would at least have been accused of being honorable. Its reputation for integrity would have been burnished. It would have paid a price but perhaps not as steep a price as it will now pay.

Why don’t people get it? Because there is a gambler in all of us, even when the odds are poor. Is there a chance we can get away with something? Let’s give it a try. What do we have to lose? Ask Richard Nixon. Ask Bill Clinton. Ask all those who have tried to wheedle their way out of messes only to get caught. Ah but then again there is always that other guy, the guy who got away with it. We should follow him. He’s a smart guy. He knew the angles. If he could do it, we can too. Right now things are calm. Let’s not rock the boat. But in the long run the straight-shooter almost always wins.

What’s the lesson for CEO’s of organizations? It’s simple really. Every organization has  a “culture”. An integral part of that culture should be a requirement for high ethical standards, communicated from the top down. Transmitting the idea of winning at any cost will most likely ensure that some manager or employee down the chain will misconstrue the message and take ridiculous liberties in order to be noticed. Turning a blind eye to actions that are suspect bears the same message, even if it takes a little longer to filter down. Excessive emphasis on the bottom line can put extraordinary pressure on executives and managers to wring blood out of a stone and look for routes that will pay huge rewards, oftentimes the risk be damned. Johnson & Johnson has certainly paid a huge price to its reputation under the leadership of William Weldon, who retired as CEO just a few months ago. Under his guidance J&J’s wonderful standing in the eyes of the public has plummeted. The number of recalls, dirty facilities and end-runs around regulations over the last several years have contributed to the erosion of its sterling reputation of putting the consumer first as it did in the Tylenol scare of 1982.

 

What can a CEO do? First establish a no tolerance rule for non-ethical behavior. Anyone whose conduct exceeds the bounds of propriety is gone. Second, very careful employment screening is a must. Thirdly, establish ethical standards. Easier said than done? Perhaps but the effort should be made. Obviously if certain conduct is illegal, then it clearly has no place in the organization. beyond that if conduct is egregious enough to create the valid claim of negligence or breach of contract it should not be tolerated. Finally, if conduct would offend any one class or more of your stakeholders then it should be carefully considered. No organization should take an action that has the potential for angering its customers or clients, its investors, suppliers, employees, government officials, the public at large or the media. Of course, angering your competition is a different story, unless it angers the public at large and boomerangs.

 

No organization can protect itself against the errant employee who may jeopardize its reputation, legal standing or success. Nevertheless, it is imperative that the CEO and the board of any entity establish the rules of conduct by which it wishes to be known and respected.

 

 

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JOHNSON & JOHNSON: CRISIS MANAGEMENT IN FREE-FALL

Posted in Business Crisis Management, Crisis Communication Failures, Crisis Communication Response, Liability Communications on October 5th, 2010 by mnayor

 The Today show on September 21st dusted off a fairly old story. Ortho Evra, a birth control patch introduced in 2002 and produced by J&J subsidiary Ortho McNeil was in the news again. Since the time of its introduction the patch has been the subject of thousands of court complaints. The product allegedly has the effect of causing deep vein thrombosis, pulmonary embolisms, heart attacks, strokes and death, all stemming from the fact that it can deliver twice as much estrogen to the body as regular birth control pills. J&J has received years of bad press about this subject. No claim has ever gone to trial and J&J continues settlements that total many tens of millions of dollars.

 The Today show reported that it had recently uncovered a 2005 resignation letter from a former J&J vice president saying that he could not remain in his position knowing the high levels of estrogen delivered by the product. The show also reported that another former vice president was suing the Company for wrongful termination based on his whistle-blowing efforts even before the product was introduced to the public.

 Now switch gears to J&J’s non-prescription products. Over the last year, the Company has gone through a slew of product recalls, including infants’ and children’s Tylenol, for reasons including contamination and the presence of foreign matter. The Company also conducted what is termed a “phantom” recall of Motrin by hiring a third party to buy up the product on store shelves in order to avoid adverse publicity. J&J maintains that it did so under an agreement with the Food and Drug Administration. The House of Representatives investigated the recalls, and questioned the alleged agreement with FDA when it heard CEO William Weldon at the end of September. Weldon acknowledged at the hearing that J&J had let the public down by not maintaining its high standards. An F.D.A. official testified that the Company had an inadequate quality system at a number of its facilities. One lawmaker declared that J&J’s failures would mar its reputation for years.

 J&J’s 1982 handling of the Tylenol scare is often cited as the quintessential example of crisis management in modern corporate history. Back then cyanide had been found in bottles of Tylenol in the Chicago area. J&J immediately issued public warnings, called a product recall, created tamper-proof packaging, and before long was fully back in business. The Company was up-front and willing to bite the bullet in the best interests of the public. Unfortunately that does not appear to be the philosophy today.

J&J’s website states that “The values that guide our decision making are spelled out in Our Credo. Put simply, Our Credo challenges us to put the needs and well-being of the people we serve first.” Maybe so, but it appears as if a new breed of management has taken the reins at J&J – new cutting -edge types whose sole concentration is on the bottom line. Yet it might be this competence and cool business efficiency that will have the effect of undermining the extraordinary 120 year old reputation of this venerable institution. The abilities of current management must be tempered with sensitivity and responsibility to the public in order to salvage and maintain the invaluable good will of one of America’s great corporations. Hopefully the lessons learned will again set management on the right course.

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APOLOGIES, APOLOGIES , APOLOGIES

Posted in Crisis Communication Response, Crisis Management Response on July 27th, 2010 by admin

Has our country gotten apology slap-happy?

It seems that no matter what, we always want to see more twisting in the wind, whether it’s Tiger Woods, BP or anything or anyone in between. An apology is either not sincere enough, not-heart-felt, not good enough, doesn’t admit enough, doesn’t say what we want to hear. Are we spending more time on form over substance? The bottom line in most cases: we want the problem fixed or we want the situation remedied. Read more »

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