Risk to Reward Seminar Series: How to prepare for & recover from a corporate crisis
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8 September 2016 SCANDAL AND THE ROAD TO REDEMPTION: How to prepare for & recover from a corporate crisis TODD J. BURKE – Gowling WLG ANGELA CARMICHAEL – Fleishman Hillard
SCANDAL AND THE ROAD TO REDEMPTION:How to prepare for & recover from a corporate crisis
TODD J. BURKE – Gowling WLGANGELA CARMICHAEL – Fleishman Hillard
• Maintains the confidence and trust of existing stakeholders and clients;
• Attracts new business, investments and talent;
• Creates strong brand loyalty; and
• Mitigates the negative consequences when crisis strikes.
The Importance of Reputation Management
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Presentation Notes
Reputation is a critical asset – personally, professionally, and from a corporate or organizational perspective. Reputation is why people do business with an organization, why individuals choose to work there, and why consumers decide to buy a particular product or service.
• Loss of reputation impacts:• competitiveness;
• market positioning;
• the trust and loyalty of stakeholders;
• media relations; and
• and the legitimacy of operations.
CONSEQUENCES?
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Presentation Notes
In a 2014 study, Deloitte Touche Tohmatsu Limited (DTTL)/ Forbes Insights surveyed more than 300 executives across the globe – study found that the importance of managing reputational risk for a company’s long term success was paramount. Only 19% of all companies surveyed actually gave themselves an “A” grade for their ability to manage risk. Biggest concerns were threats beyond the companies’ control (includes risks from third party/ extended enterprise issues (47% of respondents) Other tops concerns were issues related to ethics and integrity, such as fraud, bribery and corruption, security risks (physical and cyber) and product and service risks. Name of study - 2014 Global Survey on Reputation Risk – Reputation@Risk
REPUTATION, WHAT’S THE BIG DEAL?
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Presentation Notes
Reputation is a valuable, but highly fragile corporate asset. We see examples every day – some where individuals have recovered and redeemed themselves, and others where reputations endured too much damage, or the steps taken were insufficient to put them back on the road to redemption. Although reputational harm can ostensibly come out of nowhere, there are ways that individuals and corporations can act pre-emptively to minimize the likelihood of a crisis, and soften the blow when one hits. The key message is preparation – whether as an individual or an organization, your ability to withstand a crisis is dependent upon what you do before that crisis hits. [See notes on Peewee Herman, and Friedman] In many examples, preparation focuses on your credibility, and the goodwill you have built with your stakeholders. To illustrate the importance of preparation, let’s take at a look at a recent example of stellar crisis management after a cringe worthy mistake: ---NEXT SLIDE – VIDEO
LOCHTE WINS GOLD!
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Announcer Elliotte Friedman was calling the highly anticipated race between Phelps and Lochte on Thursday when viewers noticed something a little off - Friedman mixed up the identities of the Ryan Lochte and Michael Phelps. Friedman acted decisively in dealing with the fallout.
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• Reputation as a protective mechanism.
• Communication with the public and controlling the message.
• Owning the mistake.
Presenter
Presentation Notes
After the worst mistake of his career, Elliotte Friedman showed the zero-tolerance world of Twitter what responsibility and grace mean. Friedman immediately owned up to his mistake Remarkably, his already developed reputation, combined with a sincere apology was accepted by the public. No harm, no foul. Although the potential repercussions of this mistake wouldn’t have sunk the reputation of CBC, it still highlights the importance of having an already strong reputation, the public’s confidence, and how crucial and effective an immediate public response can be.
• “I want to apologize for my behavior last weekend — for not being more careful and candid in how I described the events of that early morning,” –Lochte’s Instagram apology• Weak apology, on a weak platform
• No admission of lying
APOLOGIZING, LOCHTE STYLE
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Presentation Notes
- In his original account, Lochte said he and three other American swimmers had been pulled over by armed men calling themselves police officers, one of whom put a gun against his head before taking the cash from his wallet. But police investigators said Thursday that Lochte had fabricated elements of the encounter. The investigators said the swimmers had vandalized a gas station bathroom after leaving a party and were confronted over the damages by security guards. What could he have done differently? Consequences? Loss of sponsorships, credibility and support
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SIMPLY PUT…
Poor crisis performance is bad business.
PREPAREDNESSBOOSTS CRISIS PERFORMANCE…
A good crisis communications plan isn’t a PR “tool”, it’s a business necessity.
Presenter
Presentation Notes
You only get one shot to do it right. And if you get it right, in today’s business world, the media, your customers, your partners, your employees – they’ll remember you did the right thing. If you get it wrong – there is no going back and the road to recovery will be long and expensive.
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BEFORE A CRISIS HITS
Five things that will help any company prepare and respond to crisis
Step 1: Conduct Risk Assessment
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Attacks /Terrorism
Fire
Natural disastersLabor issues
Compliance failure
Data security
IT systems failure
Financial irregularity
Litigation
Web cyber attack
Pandemic
Food borne illness
Senior management scandals
Kidnapping Owner/developer activities
Owner/developer defaults
Quality issues
Employee misconduct
Low
Pro
babi
lity
Hig
h Pr
obab
ility
Low Risk High Risk
Step 2: Identify & Rank Stakeholders
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INTEREST PRIORITY
HIGH INTEREST HIGH PRIORITY
INTEREST PRIORITY
MILD INTEREST LOW PRIORITY
NO INTEREST LOW PRIORITY
HIGH INTEREST HIGH PRIORITY
HIGH INTEREST PRIORITY
HIGH INTEREST HIGH PRIORITY
STAKEHOLDERS
EMPLOYEES
CUSTOMERS
SUPPLIERS
UNIONS/COUNCILS
POLITICIANS
NGO’S
MEDIA
RELATION
++
+
+
--
0
--
0
POWER
0
+++
+/-
+
++
+
++
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Presentation Notes
Do you have contact? What is the best way to reach each audience? Are you prepared? Who is contacting who?
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Step 3:
Identify Third-Party Experts & Analysts
Research and identify key influencers: Reporters Industry analysts/experts Advocates Online influencers Politicians NGO’s
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Identify and establish relationships with key experts and analysts that media, customers or other stakeholders may seek out during a crisis. Understand their willingness to speak on your behalf.
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Step 4:Build A Crisis Playbook
Determine key scenarios Define crisis team per scenario Draft potential responses (w legal)
Include resources, tools, templates Recommended processes Specific stakeholder matrix/map per
scenario
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Write a playbook for those issues with biggest risk to reputation and most likely to happen Outline what goes in a playbook Messaging per audience, holding statements Identify spokesperson for each scenario
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Step 5:
Train & Stress Test
Media train all spokespeople Simulate with entire crisis team Stress test the plan and team Record challenges Update plan
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Presentation Notes
Test various scenarios Pressure test the plan and the team Learn and make the plan better Conduct annually at the very least
LEGAL LIABILITY AND PUBLIC STATEMENTS
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As we’ve discussed, getting ahead of the public’s reaction and controlling the message with a well crafted statement is paramount. From a PR standpoint, issuing a public apology can maintain trust and credibility. From a legal standpoint, people fear issuing a public apology for fear of attracting liability for whatever scandal they’ve found themselves at the heart of. While exceptions exists, laws in Ontario permit individuals and corporations to apologize without fear of legal repercussions from the statement itself.
• Communicate, communicate, communicate.
• Every crisis is different, so should the public statement.
• Bottom line: act fast and be authentic.
PUBLIC STATEMENTS
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Presentation Notes
Deliver the appropriate content In the right channel Using the right spokesperson Demonstrate severity Provide content expertise To convey the right emotion along with necessary information Maple Leaf Example (for reference): “Going through the crisis there are two advisers I’ve paid no attention to. The first are the lawyers, and the second are the accountants. It’s not about money or legal liability; this is about our being accountable for providing consumers with safe food. This is a terrible tragedy. To those people who have become ill, and to the families who have lost loved ones, I want to express my deepest and most sincere sympathies. Words cannot begin to express our sadness for your pain.” McCain Foods CEO Michael McCain in his public apology following the 2008 listeria tainted meat incident In 2008 Maple Leaf Foods encountered one of the the biggest reputational challenges. Lunchmeat manufactured and packaged in Toronto under the Burns and Maple Leaf brands was infected, and there were nine confirmed and 11 suspected deaths attributed to eating the tainted meat. Others who ate the meat but recovered are still putting their lives back together, as are friends and families of all those affected Admitted fault and responsibility, Promised to fix the problem Apologized, at every turn No dodging the issues and couching their apology – upfront and to all possible media outlets Delivered by CEO Michael McCain Didn’t rely on celebrity endorsements Acted decisively and transparently Recalled more than 200 packed meat brands (tens of thousands of individual packages). One year later, Maple Leaf took out a full-page ads in the the Globe and Mail, Edmonton Journal, the Vancouver Sun, and others to make the one-year anniversary. It was framed as a letter to consumers. The ads said Maple Lead was committed to “becoming a global leader in food safety to prevent this kind of a tragedy from ever happening again. ... On behalf of our 24,000 employees, we promise to never forget.” 2008 – McCain was named business newsmaker based on his handling of the crisis.
• Apology Act, 2009, SO 2009, c. 3.
• Individual or Corporation.
• Not admissible in civil proceedings.
• Be wary of exceptions.
• Protection limited to Ontario under this Act.
My lawyer said I can apologize
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Presenter
Presentation Notes
The Apology Act provides a statutory privilege to expressions of regret, including admissions of liability, when made outside the context of a civil proceeding. On April 23, 2009, the Apology Act, came into force in Ontario. The chief effect of the Act on liability insurance is that apologies by an insured, which previously could have been used as evidence of fault or liability, are no longer admissible for this purpose. Secondly, insurers are prevented from denying coverage in the face of an apology by an insured person. Apology means: "an expression of sympathy or regret, a statement that a person is sorry or any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or actions relate." The effect of this definition is that apologies that admit liability, whether expressly or impliedly, may be made without leading inevitably to a finding of liability. This protection is provided in Section 2 of the Act. British Columbia’s Apology Act was the first to be enacted in Canada. It goes beyond medical lawsuits, and applies to “any matter.” Like other statutes in Canada that were enacted after B.C., it allows persons and companies to apologize, and that apology may contain an admission of responsibility, without the apology being admissible as evidence in civil court to prove liability. The Exceptions (http://www.nelligan.ca/e/ontariosnewapologyact.cfm) The first exception applies where a person apologizes "while testifying at a civil proceeding". Apologies made at an examination for discovery, a cross-examination on an affidavit, or at any step after a proceeding has begun, are not protected. The second exception is found in Section 2(2), which allows apologies to be used as admissions for the purposes of the Provincial Offences Act. Insurers should be alert to this exception where their insured party is facing any charge that may be prosecuted under the Provincial Offences Act. A similar exception maintains the common-law rule that an admission voluntarily given can be used against an accused in a criminal proceeding. In other words, statements made by your insured to the police will continue to be assessed for voluntariness and under the Charter to determine their admissibility in criminal proceedings Apologies legislation available in the following jurisdictions: B.C. Alberta (evidence act) Saskatchewan (evidence act) Manitoba Nova Scotia P.E.I. NFLD Nunavut.
LEGAL MECHANISMS TO PROTECT REPUTATION
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1. Document management and preserving privilege;
2. Coordinating and implementing investigations;
3. External remedies.• Passivity vs. Proactivity – what do you need?
• Eg. Injunctive relief.
ROLE OF COUNSEL
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Presentation Notes
The role of counsel is diverse and largely dependent on the remedy needed before, during, and after the crisis. Document management and preserving privilege; Documentation of Investigation: Document Preservation and Collection – Maintain detailed log/timeline of all steps taken to preserve and collect documents. Interviews – Maintain all interview outlines, notes taken during interviews, and a copy of any documents provided by interviewees during interviews. Investigation Report – Prepare a report describing the investigation process, setting forth factual findings with reference to relevant documents, analyzing the facts in light of applicable law or company policy, and make conclusions/recommendations. Include language and headers to protect privilege Document Preservation: Issue a broadly worded preservation notice to all individuals who may have relevant documents as soon as an issue arises that may result in litigation or a government investigation. Take steps to ensure that electronic documents are preserved (e.g., suspend periodic auto-delete/overwrite mechanisms). Consider imaging hard drives of involved personnel. Document Collection: Develop an interview template/questionnaire to help employees identify responsive hard copy documents. Ensure that electronic documents are collected in a forensically sound manner that preserves metadata. Use in-house IT resources or third-party vendor, as necessary. Review relevant documents (preserving privilege over documents reviewed). Preservation of Evidence: Legal Obligations under Canadian law: Duty to issue a litigation hold in Canadian law: As soon as litigation reasonably anticipated must consider obligation to take reasonable and good faith steps to preserve evidence Canadian statutes have record keeping requirements, or may “block” transmittal of documents in another jurisdiction Courts can draw adverse inference from failure to produce a document Duty to oversee compliance with litigation holds Sanctions possible, but none, yet Obligation to produce relevant records Discovery governed by principles of proportionality Objectives to keep in mind when responding to an external investigations (from Tory’s presentation): Preventing prejudice to potential future enforcement proceedings Considering implications for associated civil litigation Preserving privilege and confidentiality Avoid allegations of failing to cooperate Managing costs Maintaining relationships 2. Coordinating and implementing investigations; Internal Investigations: Who Should be Involved? Board of Directors and/or management – Oversee investigation and receive periodic status reports. In-house counsel – Conduct investigation or interface with external counsel conducting investigation. External counsel – Conduct investigation, if necessary. Significant issues, extensive scope. Issues implicating specialized areas of law. Voluntary disclosure/regulator interaction likely. Independent external counsel – Conduct investigation if circumstances warrant. Senior management potentially implicated/interested. High reputational or economic risk. Possible voluntary disclosure or parallel government investigation. Main benefit: No doubts/questions about impartiality and credibility of investigation.
WHEN CRISIS STRIKES
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Presenter
Presentation Notes
When we look at overall themes or “must haves” when it comes to a successful crisis response there are key elements that we see time and again from the company’s who do it well… they are… I’d argue that to fulfil all those requirements you have to have a plan in place in advance. You just can’t deliver on all these things in the heat of a moment. And crisis are just that… moments in time that can change future direction for a business in a matter of seconds, minutes and sometimes, as in the case of VW, something that took place over the course of several years.
COMMUNICATING WHEN CRISIS ERUPTS
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WHEN CRISIS STRIKES
1. Speed
2. Transparency
3. Control the narrative
4. Great Leadership
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RECENT CASE STUDIES
• 275 on board• Media tweet within 4 minutes
Crisis comms plan activates immediately:Leveraged all platforms
Twitter, Facebook, Website updated within an hourShared up-to-date, known factsNo spin, no “safety record” statementsEstablished simple way for media to contact
Emirates
Utilized CEO as key spokespersonReleased shareable video statement in multiple
languages, press conference, written statements
Emirates Airlines crash – Aug3/2016
Presenter
Presentation Notes
When Emirates Airlines flight EK521, with 275 passengers and crew on board, caught fire after crash landing at Dubai International Airport on August 3, 2016, the airline demonstrated how the four tenets of crisis communications – Speed, Transparency, Controlling the Narrative and Demonstrating Great Leadership – take place simultaneously. The airline began sharing updates within an hour of the incident and leveraged all of its communications platforms to share factual information relevant to the specific incident. They did not try to add additional layers of messaging about the organization’s history or safety record, but stuck to what people most wanted to know – whether or not the people on board were injured, and what action was being taken to rectify the situation. This immediacy and accuracy allowed the airline to take control of the narrative right away. Their CEO and Chairman, the organization’s ultimate Decider, also played the critical role of spokesperson, which demonstrated the seriousness of the situation and the priority the airline placed on it. They released shareable video statements and made him available to answer media questions in a timely fashion.
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RECENT CASE STUDIES
Speed, Transparency, Narrative, Leadership:
• Within an hour established itself as an information authority on all platforms
• Maintained consumer trust • Conveyed empathy, authority and
willingness to “do right” in a high-stakes environment
Preparedness, Training, Activation:• Statements, tweets and posts were pre-
prepared for exactly this kind of incident • Freed Emirates to focus key resources on
access to up-to-date information • Their corporate values and brand promise
led the response
Why it Worked?
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Presentation Notes
By acting quickly and sharing information transparently, Emirates Airlines was able to control the narrative. Its CEO demonstrated leadership by becoming the face of the issue and focusing on the facts and the airline’s priority on the safety and well-being of its passengers. What this case study demonstrates clearly is how effectively an organization can accomplish these four tenets of crisis comms when they have prepared ahead of time. This response was so quick and effective because they had prepared for it in such a strategic and tactical way. Since much of their communication would have been prepared ahead of time, the organization was able to free up valuable resources to focus on the timely information around the passenger manifest and flight details.
• Home Depot faced at least 44 lawsuits in the United States and Canada over a massive data breach that affected 56 million debit and credit cards in 2014.
• Class action in Canada – Ontario Court approved the settlement.
• No cover up - responded as a “good corporate citizen”.
• Doing the right thing – PR vs. Legal perspective.
RECENT CASE STUDIES
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Presenter
Presentation Notes
In Ontario, Justice Perell approved the settlement, valuing it at about $400,000 to the settlement class members He also approved counsel fee of $120,000 less than a third of what plaintiffs’ lawyers asked for and about one third of what Home Depot agreed to. “Between April 11, 2014 and September 13, 2014, there was a data breach at Home Depot,” Justice Perell wrote. “Its payment card system was hacked by criminal intruders using custom-built malware to clandestinely breach Home Depot’s computer system.” Home Depot has a $100 million insurance policy for breach-related expenses. That comes with a $7.5 million deductible. Home Depot has since said that hackers also stole 53 million email addresses. No evidence that a Class Member absorbed a fraudulent charge. As part of the settlement agreement in Canada, Home Depot agreed, among other things, to create a non-reversionary fund of $250,000 “for the documented claims of Canadians whose payment card information and/or email address was compromised as a result of the data breach during the data breach period.” Justice Perell added: “The case for Home Depot being culpable was speculative at the outset and ultimately the case was proven to be very weak. The real villains in the piece were the computer hackers, who stole the data. After the data breach was discovered, there was no cover up, and Home Depot responded as a good corporate citizen to remedy the data breach. There is no reason to think that it needed or was deserving of behaviour modification. Home Depot’s voluntarily-offered package of benefits to its customers is superior to the package of benefits achieved in the class actions.”
QUESTIONS?
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