View
220
Download
4
Category
Preview:
Citation preview
Crisis Management: from BP to NFL to ISIS to GMJohn M. Holcomb
Ethics Boot Camp
October 10, 2014
Sentencing GuidelinesMitigating Factors Lack of Involvement in the Offense by Any
Policy-Influencing Personnel Taking Appropriate Steps to Prevent the
Commission of Crimes Taking Appropriate Steps to Detect Crimes that
Have Been Committed Self-Reporting of Offenses to Authorities Cooperating Fully with the Government’s
Investigation
Mitigating Factors Cont. Accepting Responsibility Taking Swift, Voluntary Remedial Action Disciplining Individuals Responsible for the
Offense Responding to the Occurrence of an Offense
by Taking Steps to Prevent Further Offenses
Impact of Sentencing Guidelines Sentencing and Culpability Charging Guidelines of Government
Agencies Federal and State Tradeoffs Legal and Public Relations Strategies Converging Legal and Crisis Management
Trends
Steps in Crisis Management ModelSteps in Crisis Management Model Investigating the Facts Portraying the Problem Assessing Blame or Responsibility Responding to Critics Adopting New Policies Implementing New Practices/Procedures Political Tactics Cost in Money and Credibility
Crisis Management and Responses to Public ControversyFirm Finding
FactsProblem Portrayal
AssessBlame
Response to Critics
Policy Changes
New Procedures
Political Tactics
Costs in $ Credibility
J& J Tylenol
Internal Tests
Serious Problem
Blame Others
Collaborate Unilateral Change
None Ads and Self-reg
Low/Low
Abbot Labs Infant Formula
Internal and External Tests
Serious Problem
Accept Limited Blame
Collaborate Unilateral Change
Code and Decision Structure
Negotiate Self-regulate
Low/Low
Nestle Infant Formula
Inactive No Problem
Blame Others
Confront, then Collaborate
Industry-wide Change
Code and Decision Structure
Later Negotiate
Med/Med
Hooker ChemicalLove Canal
Inactive No Problem
Blame Others
Self-defense
No Change
Decision Structure
Ads and Litigation
High/High
Firestone 500 Recall
Suppress No Problem
Blame Others
Confront No Change
Product Testing
Lobbying High/High
A.H. Robbins IUD
Suppress No Problem
No Blame Confront No Change
None Litigation High/High
Crisis Management and Responses to Public ControversyFirm Finding
FactsProblem Portrayal
AssessBlame
Response to Critics
Policy Changes
New Procedures
Political Tactics
Costs in $ Credibility
Exxon Valdez
Delay Not Serious
Blame Captain
Self-defense
No change
None Litigation Med/High
Union Carbide in Bhopal
Delay Serious Problem
Blamed Indian Managers sabotage
Self-defense; try the case in India
Slow change
Slow change
Litigation and Avoid
Med/High
BP Diligent but spoke too soon
Under-Estimated Extent
Shared Blame with other firms
Self-defense and Collaborate
Clean up and Safety Measures
Change Leaders, Board Internal Report
Testify Pay VictimsAds on cleanup
High/High
News Corp
Inactive No gemeric Problem
Blame rogue reporters police
Self-defense
Investigate but weak board
Fired editors
Testify and Litigate
Med/Med
Tyco Suppress Minor problem
CEO blamed accountants
Self-defense
Massive Change in leaders board mgmt
Cultural change values governance
Strategic changes
High for old mgmt Low for new mgmt
Goldman Sachs
Inactive No Problem
Benefits for SHs
Self-defense
Changed Bonuses
None Testifu Settle Lawsuit
Med/Med
Crisis Management and Responses to Public Controversy
Firm Finding Facts
Problem Portrayal
AssessBlame
Response to Critics
Policy Changes
New Procedures
Political Tactics
Costs in $ Credibility
NFL Inactive Isolated Players Mea Culpa
6-game rule
Defend NFL
?
ISIS CIA ActiveW.H. Not
Jayvee Terrorists andAdvisers
Al Quaeda Is Gone; Fox News
Return to Iraq; No Derad Program
Air Support Coalition
Long-term Campaign
?
GM Inactive and Suppress
Limited Apology Limited Agree-ment
Internal Investiga-tion;Safety Culture; Aid Victims
Fire Culprits;Global Safety Director; Board Monitor
Litigate on property; Defend New GM; Victim Compen-sation Fund
High/High
Lessons from Crisis Management Cases Where you start is where you finish
Conscientious initial response predicts later positive steps and outcomes
Resistant initial response predicts later negative steps and outcomes
Mid-course corrections are rare indeed Require long lapse of time Require major changes in management Nestle is the only aberrant mixed case
Learning behavior is unusual From one’s own mistakes From mistakes of others
Pre-Crisis Stage John Browne era – eliminated rivals Beyond Petroleum Brand; Caspian Sea CSR Growth over quality control Hayward era to emphasize safety, but questionable
culture Texas City refinery explosion Pipeline corrosion Thunder Horse platform problems Safety problems at Magnus platform, North Sea
Ascertaining the Facts Underestimated flow rate
Government also or chiefly responsible Effect on aggressiveness of response?
Internal investigation launched by BP Multiple efforts to probe the causes
Portraying the Problem Acknowledged “worst ever” oil disaster “Just want my life back” comment showed hubris
and inability to empathize with those who were suffering
Less impact on coast and wildlife than Exxon Valdez, especially on the fish stock
Major impact areas: oyster beds, marshlands, coral reefs, seabed and possibly plankton
Oil has dissipated – 75%; was Hayward right?
Allocating Responsibility Took responsibility for cleanup of Gulf and “all legitimate
claims”; not liable for gross negligence Internal investigation set up legal case but does not address
legal issues; no mea culpa but PR document Halliburton responsible for cement problems, not acting on
warning about gas flow problems Transocean and rig maintenance problems
Discusses eight factors and BP takes responsibility for half of one; reaction after bottom kill indicated no well design problem; two executives in trouble
Causation is still murky and yet to be determined
Investigative Reports and Allocating Responsibility Presidential 0il Spill Commission Report: criticized all three
companies, claiming shared responsibility, with special focus on Halliburton for unstable cement mixture; BP accepted report, while Transocean criticized it and awarded bonuses for “best year in safety performance in company’s history”
Coast Guard Report: highly critical of Transocean for safety management system failure and poor safety culture
National Academy of Engineering: failures by all parties, focus on lack of discipline and training, compared to nuclear and chemical industries
Did BP cut corners and sacrifice safety? Markey says “yes,” while presidential commission found no evidence
Transocean Internal Investigation Put primary responsibility on BP
Faulty well design Failed to check cement Chose process to close well that created
unnecessary risk, unapproved by Interior Department
BP Response: Advocacy document and cherry-picked facts to support its litigation strategy
Responding to Critics More collaborative than confrontational Three BP and two Transocean officials refused to testify Pushed by Congress and tension with Administration
Nationalistic impulses BP rarely if ever pushed back
Hayward was inept, unknowledgeable, and weary before Congress; understood the anger; blamed media and rivals for hysteria; board fired him
No battle with NGOs, despite tepid boycott No engagement with investor groups and their proposals but no
avoidance of their complaints US media harshly critical of BP; British media of Obama
Responding to Critics Did not join refiners in opposing climate change law in CA by
supporting Prop 23 Hypocrisy in posing as green company invited more criticism
and scrutiny External programs in CSR (Pipeline to Caspian Sea) conflicted
with internal problems, so overall CR profile is weak Debate over value of disclosure and apology Criticism from Gulf state politicians Potential conflict between legal and PR advice mitigated by
changes in sentencing and charging guidelines
Adopting New Policies Selling $30 million in assets Forging closer ties with Russia; Fiasco over Rosneft deal and
conflict between Russian government and oligarchs More emphasis on deepwater drilling, less on refining Moving more into emerging markets Remediation and cleanup efforts praised Voluntary aid to Gulf states for tourism; relocation of sea turtles $500 million scientific research fund facing state politics Committed to changing culture; “heard it before” Danger of Spanish company drilling off of Cuba may benefit
American companies – extending knowhow and equipment
Instituting New Procedures Ousted head of exploration and production Established global safety division Centralizing control under Dudley Review of employee assessments and rewards Review of supervision of outside contractors Splitting exploration and production division into 3 units:
exploration, development, production Shut down operations in Alaska and North Sea Scrutinizing board committees on safety/environment and
audit – membership and charter
Political Tactics Restoration payments contingent on continuing ability to drill
in the Gulf – political bargaining Tripled amount spent on advertising – criticized but
insignificant amount compares to $9 billion paid out thus far; best ads have been of employees cleaning up the Gulf area
Use of Brunswick crisis communications firm; retained political consultants on both sides of the aisle; increased PAC donations
Reilly lauded BP for defining the problem as systemic industry failure, while Transocean sees it as a BP problem
Litigation and Penalties $20 billion fund for property and human damages Possible $18 billion fine, if there is gross negligence ($4,300 per
barrel vs. $1,000) Settlements with contractor Weatherford and partner Moex
Offshore; first wave and indicates lack of gross negligence 300 civil lawsuits pending – wrongful death and economic damages Center for Biological Diversity has lawsuit of $19 billion for
damages under Clean Water Act Civil lawsuit by DOJ under Clean Water Act; possible criminal
charges for manslaughter BP has sued Cameron and Transocean for $40 billion
Costs in Money and Credibility Possible ultimate liabilities of $80-100 billion Litany of future investigations Provoked costly drilling moratorium Faces tougher regulations in the future Reputation is stained Branded stations lost sales and customers Stock cut in half, rebounded now down 1/3 Public credibility is low but has recently doubled
Industry Risk Management Newer risks from deep-water drilling Industry’s Chernobyl; Gulf is Silicon Valley New industry initiative to build equipment to contain and
cap well blowouts; National Center for Offshore Safety to improve self-regulation
Reilly: “…the spill is a game changer. The industry has never been more alert to safety.”
Leaders are pushing laggards Largest companies will benefit as small companies lose to
increased costs
Minerals Management Service Collaborator or partner with industry; adopted industry standards;
part of re-inventing government Capture theory at work Built-in conflict of interest – promoter and regulator of drilling Encouragement of more drilling from Watt through Babbitt (like
Levitt) and Norton. Categorical exclusions from environmental reviews if “no
significant effect on human environment” (1970 NEPA) Royalty-in-kind program and Lakewood sex & drugs scandal Similar problems at Mine Safety Agency and Nuclear Regulatory
Commission
Reforms in MMS Bureau of Ocean Energy Management,
Regulation, and Enforcement Split functions in agency New conflict of interest controls Appointed Michael Bromwich as director Same staff but hiring new people as well
Recommended