It was a fear expressed over and over by panelists throughout Foley & Lardner’s 2004 National Directors Institute (NDI) – "You don’t want to read about it in the paper." The "it" referred to corporate misdeeds, or even just the allegation of them. Today more than ever, in a climate of intense scrutiny by state and federal law enforcement authorities as well as agency regulators, U.S. companies are quaking at the prospect of seeing their corporate names tarnished by negative publicity.
"We’re seeing it more," acknowledged Thomas F. Carlucci, a partner in the San Francisco office of Foley & Lardner and chair of the firm’s White Collar Defense & Corporate Compliance Practice Group. "Another major company, another multimillion-dollar fine." Mr. Carlucci, who served as a federal prosecutor for 10 years prior to joining the firm, indicated that most businesses will have to deal with the U.S. Securities and Exchange Commission (SEC) or another governmental agency at some point, often with adverse consequences.
Mr. Carlucci, who moderated a breakout panel discussion, "Media Relations in a Corporate Crisis," said white collar defense had changed dramatically in the past five years because of the stepped-up federal enforcement, including the passage of Sarbanes-Oxley (SOX) and other listing standard reforms introduced by the New York Stock Exchange, Inc. and The NASDAQ Stock Market. Because they are under more scrutiny than ever, companies are learning to manage the way they deal with – and prevent exposure to – the media.
"In dealing with the press," Mr. Carlucci warned, "you have to be very careful. The days of ‘spin and control’ are gone. You can no longer simply influence the message and the timing of it. The message itself has changed."
"It’s not so much a science as it is an art," said panelist Myron L. Marlin, former Communications Director of the United States Department of Justice, and now a senior vice president and strategist for APCO Worldwide Inc., a global communications consulting firm. "There’s no single, right way to handle media relations in a crisis." But Mr. Marlin listed seven general principles to follow when handling media relations:
Think ahead – Events move quickly in a crisis, so it is important to prepare for possible crises in advance. When Mr. Marlin conducts crisis-management training with clients, he begins by asking clients to name the crisis they would most dread, and what they would do and say if the media began inquiring. Mr. Marlin asks them to imagine the worst questions they could be asked, how they might respond, and the roles and duties each principal player in the organization would have. "So start thinking through the issue and who the players would be," Mr. Marlin advised.
Create an infrastructure to deal with the crisis – It could include the general counsel and his or her assistant, the head of marketing, the investor relations manager, the board and the top executives, or others. "Be aware that the key players might change depending on the nature of the crisis." Mr. Carlucci noted that with multinational companies, it is more difficult to identify authorities who can respond.
Say something – "‘No comment’ or some variation of it immediately sinks a company in the minds of the public," Mr. Marlin said. Nor would it be wise to say something like: "‘We’ll let our court testimony speak for itself.’ That doesn’t necessarily mean you spill out your entire story," he said, and suggested companies instead express a commitment to investigate and to get to the bottom of the problem or explain that they are cooperating closely with government authorities. If that is not possible, then perhaps a corporate spokesperson could state: "I'm aware of the allegations. I'm going to look into them and get back to you."
Attorneys traditionally recommend their clients not say much, especially if the data are raw, Mr. Carlucci said. He admitted he has been persuaded from abandoning his instincts to clamp down on his clients’ responding to the media, to a position in which he believes the company’s message is important – as long as it is carefully controlled. Mr. Marlin likened it to an airline pilot reassuring passengers on a rough flight by saying: "We’re experiencing some turbulence, so please fasten your seat belts." It makes passengers feel someone has the situation under control, he added.
Do the right thing – If wrongdoing did occur, or if the facts are not fully known, then blindly defending the company's actions is not likely the best course to follow. If some remediation is under way, mention it. It might create good will within the community and the enterprise. "Don’t simply think, ‘What could we do to put a good face on this?’ but rather, ‘What could we do to make it right?’" Mr. Marlin said.
Mr. Carlucci noted that, under corporate governance reform’s transparency mandates, activities that have a material impact for investors must be disclosed as soon as they are known. "It really changes how you manage your message."
Establish good will before a crisis occurs – A company that invests in its community and has established good relationships with key media and other influencers, including academia, is often able to draw on the good will in a time of crisis. An endorsement by a third-party individual who is perceived as independent establishes credibility. Those who wait until a crisis hits will find it difficult to sincerely and effectively demonstrate good will to the public once the crisis becomes public.
Know your audience – A number of constituents have a stake in a company’s success, including customers, employees, and shareholders. Employees are critical in a crisis. Because reporters often seek them out, it is vital they understand the company’s position. Too often, employees are the last to learn that their company is under investigation or experiencing some other crisis. Companies are encouraged to consider keeping employees apprised of the situation because, as Mr. Carlucci noted, "the morale issues in these investigations and crises are just devastating."
Coordinate response between legal and public relations – Do no harm, Mr. Marlin advised. "Sometimes there is initial tension between the company’s public relations department and its attorneys about how to proceed, but we ultimately find ourselves working closely together because we realize we’re able to help each other." This kind of collaboration can help the company convey its key messages while enhancing the legal strategy, he said. It can also reassure shareholders, who might otherwise be tempted to bail out of their investments and cause the stock price to plummet.
It is important not only to cooperate with the enforcement authorities but also to communicate that cooperation. Because developments can change quickly in a crisis, specific messages might have to change, but the overarching message should survive. Mr. Marlin added "The idea is that you not look at each little development in a crisis in a silo, but that you see the bigger picture."
Get Organized and Follow Through
Mr. Carlucci said companies might find it useful to gather all the parties that could be involved in the event of an agency investigation or other crisis. As part of the information gathering process, identify the following key elements when facing an investigation or crisis:
- The audience(s) to reach
- The key message(s) to be communicated
- The individual(s) authorized to speak on behalf of the company
- The individual(s) responsible for overseeing the media relations process
If the company has been notified it is the target of an agency investigation, it is critical for the company to prepare announcements that must be included in quarterly and annual filings with the SEC.
"You actually can be trained. You actually can become good at this," Mr. Carlucci reassured the attendees. Companies might not always know the motivation for an investigation, but Mr. Carlucci strongly advised they not attack the prosecutor "because that backfires very easily." Recalling his days as a prosecutor, he said: "Are you going to enrage them somehow? I was human. I made decisions based on the facts obviously, but if I had a lawyer on the other side or a company attacking me, I was going to work twice as hard to make sure the response for them was twice as painful."
An attendee asked for guidance for companies who were hit suddenly with an accusation but had not prepared a crisis management plan. "I want the seven rules for ‘You didn’t prepare for it. Somebody lied to the press. They insulted the regulator. It’s just gone to hell. It’s gone completely to hell.’ What to do?"
Mr. Marlin responded: "Tell them you are going to launch an internal investigation and you’ll get back to them."
"Do no harm if you can," reminded Mr. Carlucci. "You’re dealt a hand; don’t make it worse. Don’t try to sugarcoat it or spin it. Deal with it. Say you’re going to look into it and take every appropriate action."
In such a case, Marlin said, remember how former New York City Mayor Rudolph Giuliani responded after the September 11 attacks in 2001. "One of the things that made Giuliani so good in that situation was that [Mayor Giuliani] essentially kept saying ‘There are more questions than we have answers to, but we’re going to get the answers to those questions. Stick with us.’" It was the worst possible crisis, but the mayor made it clear that somebody was in charge and demanding answers.
In the case of an agency investigation, it is always helpful if a company can announce that it had voluntarily reported the wrongdoing to regulators. "That plays very nicely in the media," Mr. Marlin said. "If you have a relationship through your lawyers with the regulatory bodies, exploit that." In fact, it might not hurt to call the regulators ahead of making an announcement to the media to alert them to your plans. "Maybe you’ll be able to find out a bit more information from the government about your case."
Although he had earlier recommended against attacking the prosecutor if companies believed they were being unfairly treated, Mr. Carlucci nevertheless suggested company officials call them to say, "You know, we don’t like what you’re saying. You’re not playing fairly." It is helpful if the company already has established a relationship with the regulators through their lawyers.
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