Holmes Report 20 Jan 2020 // 6:55AM GMT
1. Boeing's 737 MAX disasters
In the highly-complex aviation sector, it is rare that a corporate PR crisis is the result of poor communication alone. The majority of reputational crises tend to involve some combination of product, operational, customer, structural, leadership, governance, cultural, political and regulatory issues.
What we saw with Boeing and its handling of the 737 MAX affair last year — in which 346 people died when two aircraft crashed in Indonesia and Ethiopia, just over four months apart — was an almost unprecedented alignment of pretty much all these factors, plus human tragedy, in one crisis, with communication acting as an exacerbating element.
Independent corporate and crisis comms consultant Rod Cartwright was part of the team that worked on the disappearance of Malaysian Airlines flight MH370 in 2014, so knows better than most in the industry just how challenging such a major event, let alone more than one for the same company, can be to handle. His view of Boeing’s handling of the 737 MAX aircraft disasters is damning.
“There appears to be little doubt that the deaths stemmed from the flaws in the MCAS system fitted to Boeing's best-selling 737 MAX fleet. A slew of stories suggesting the company was well aware of problems with MCAS — and ignored repeated warnings from employees — makes it hard to sustain the argument made by some that the crashes were largely to do with poor airmanship and pilot training among low-cost carriers in developing markets,” he says.
“Add to that a cozy relationship with its key regulator, the FAA — which saw numerous regulatory responsibilities 'delegated' to Boeing — and you already have a dangerous cocktail of corporate challenges in relation to a new plane described in one recently-leaked employee email exchange as ‘designed by clowns who in turn are supervised by monkeys’.”
Cartwright continues: “Such corporate and operational issues have only served to undermine a snail-like, tentative, legalistic and largely empathy-free communication response, which saw Boeing initially treat the crashes as a technical and training issue. The now-ousted CEO, Dennis Muilenburg, insisted ‘we know our planes are safe’ and as China and then the EU grounded every 737 MAX following Ethiopian Airlines flight 302, he unsuccessfully lobbied the US President to keep the planes flying.
“Boeing’s stated values include ‘valu[ing] human life and well-being above all else’, ‘tak[ing] personal responsibility for our own actions’ and ‘act[ing] with integrity, consistency, and honesty in all that we do’. While the entire 737 MAX fleet remains grounded, Boeing’s position as part of a global duopoly may mean recent events do not prove fatal financially. However, the disconnect between these values and the airline’s behaviour — operationally, culturally and as communicators — will ensure the 737 MAX affair will grace many a crisis comms training deck for years to come, in all the wrong ways.” – MPS
2. Bayer/Monsanto's stakeholder mapping affair
Very publicly suspending your public affairs agency after it carried out fairly standard stakeholder mapping two years previously is an interesting, and rare, move by any client, let alone an already-controversial chemical company, so it was inevitable that Bayer’s suspension of FleishmanHillard would attract attention. In May last year Bayer — which had acquired pesticide manufacturer Monsanto in 2018 along with its Roundup weedkiller — came under widespread criticism for its handling of the situation, which looked to insiders like a mountain had been made out of a molehill.
The way Bayer reacted to the situation turned it from an esoteric, European data privacy issue into a global example of poor crisis communications. After French newspaper Le Monde and broadcaster France 24 filed complaints that Monsanto has broken data protection laws by compiling a list of journalists, Bayer’s new SVP of public and government affairs, Matthias Berninger, issued a rapid and robust statement announcing the suspension of Fleishman from public affairs work with its crop science division, its support of the authorities and – most surprisingly – an apology, before any internal or external investigation had taken place.
As news about the case spread, the language being used to describe the “Monsanto Dossier” became darker: terms such as "the latest PR scandal to engulf Bayer", "shady PR firm" and "Monsanto file scandal" spread quickly in coverage across the world.
The response from the global communications industry could have gone either way, but this was no Bell Pottinger moment: far from being held up as a pariah of bad practice, most of those who spoke to us on- and off-the-record came to FleishmanHillard’s defence. This was partly because the tactics the team had used in France were so commonplace-yet-crucial across the global PR and public affairs industry that accusations of wrongdoing made little sense, and partly because it was universally felt that FleishmanHillard had been treated unfairly by Bayer, particularly after the agency’s longstanding relationship with Monsanto. It was also observed that Bayer’s move had “an element of panic” and was “naïve”.
FleishmanHillard was eventually cleared of doing anything untoward, but the damage was done, thanks to the global press attention and the impact on its work for Monsanto. But the agency’s reputation can hardly have been damaged as much as Bayer’s: the chemical company may have scored something of an own goal in terms of its future relationships with agencies: it’s hard to be a trusted advisor, after all, without a trusted client. — MPS
3. Facebook keeps digging
Last year, we included Facebook in our top crises of 2018 because of its failure to address charges that the company had disseminated fake news during the 2016 election, and its hiring of a “public relations firm” to smear its critics. This year, Facebook changed its approach dramatically—for the worse. Rather than attempting to deny that it was spreading fake news, the company boldly announced a commitment to aggressively promoting even more lies on its platform in the run-up to the next election.
While continuing to downplay the role of Russian interference in the 2016 election, founder and CEO Mark Zuckerberg made it clear Facebook would not attempt to filter out ads that contain misinformation and outright falsehoods: “While I certainly worry about an erosion of truth, I don’t think most people want to live in a world where you can only post things that tech companies judged to be 100% true.”
Specifically, the company informed Democratic presidential frontrunner Joe Biden that it would not remove an ad from President Donald Trump’s reelection campaign that included demonstrably false information.
Facebook has since come under renewed attack by activist groups including media watchdog Media Matters for America, which says Facebook has given special treatment to conservative media; from technology experts like The Guardian’s Julia Carrie Wong, who tweeted that “Zuckerberg has shown himself willing to support anyone in power that doesn’t threaten his power”; and from its own employees, who sent an open letter to Zuckerberg urging him to address misinformation in political ads, saying the company’s current position is “a threat to what FB stands for.”
A Buzzfeed report at the end of the year went into remarkable detail about “Facebook's growth at any cost mentality.” And Facebook came in second in Slate’s “evil list” of tech companies: “You could attribute many of Facebook’s problems—the years-long looseness with user data… the unwillingness to ever offend conservative critics—to its obsession with growing its user base and revenue first and dealing with harms whenever.”
While accepting disinformation with open arms maximizes advertising revenue, evidence is emerging that Facebook’s political bias is impacting its business in other ways. Slate reported in December that European finance ministers have agreed to block the company’s cryptocurrency venture Libra, while several US politicians have voiced their concerns about the project—in part because Facebook’s reputation has taken such a hit.
The Reputation Institute, meanwhile, describes Facebook as a company whose reputation is “in freefall.” According to Stephen Hahn-Griffiths, executive partner and chief reputation officer at the Institute, “Facebook now has one of the lowest scores in our US RepTrak rankings. The only company ranked lower is the Trump Organization; above Facebook is a cigarette company.”
On the company’s role in spreading propaganda, he adds: “Facebook is one of the wealthiest companies in the world. It absolutely has the resources to seriously crack down on the misinformation and hate speech that proliferates on its platform.”– PH
4. Huawei's US ban
After appearing on this list 12 months ago following the arrest of CFO Meng Wanzhou, Huawei's return to the crisis list underlines the Chinese tech giant's status as a lightning rod for geopolitical scrutiny. In 2019, the company faced continued opposition from the US government, which stepped up its efforts to ban Huawei from the country's communications networks. And the US has tried to make other countries follow its lead; Australia has also banned Huawei on national security grounds, while the UK, Germany and New Zealand are yet to make a final decision.
Huawei's attempts to win over international scepticism are hardly a new phenomenon. For the better part of a decade, China's flagship tech company has been locked in a seemingly neverending series of battles to ease suspicion, particularly in the West, where its links to the Chinese government have made it easy fodder for the charge that it could act as a proxy for Beijing. And neither is it the first Chinese company to complain about unwarranted scrutiny from the West.
But despite the continued opposition to its remarkable rise, Huawei continued to grow at a rapid clip in 2019. And 2019 also provided, perhaps, the first evidence of a more enlightened PR strategy at the company, after years of stonewalling and silence. "Huawei should pat themselves on the back for their efforts in 2019," says Harrup Advisory founder Iain Twine. "No other global company felt the glare of Trump's trade games than them. Yet, they went about their business, found deals they could close, made friends in different countries and paid all of their staff a bonus for staying loyal. That's leadership, effort and the benefits of a broad global perspective."
As Twine notes, the sheer range of issues faced by Huawei would have scuppered lesser companies. "The arrest of the CFO and daughter of the founder, blacklisted out of networks, accusations of security hacks and a heap of fake news," he explains. "Some of these individual shocks have taken down other companies before."
Yet Huawei's communications efforts demonstrated that it understands two things — one, the importance of playing the long game and, two, the need for a robust response to the fundamental charge — that its telecoms equipment poses a security risk, one that is heightened by the advent of 5G technology.
Rather than resorting to bland corporate branding efforts, Huawei's latest moves demonstrate a marked shift in its messaging strategy, focusing attention on why the US might be pressuring other countries to ban the Chinese company. Could it be to benefit the likes of Qualcomm and Cisco, while also turning into leverage for US/China trade negotiations?
Huawei and its representatives are also pushing the line that excluding the Chinese company will compromise the delivery of 5G technology at an affordable level, a message that appears designed to appeal not just to politicians, but to their voters. A recent New York Magazine feature, for example, states that "the US would be tying one hand behind its back by denying its carriers the ability to use Huawei equipment."
For anyone accustomed to the cut and thrust of public affairs work, this may all seem like business as usual. But for Huawei, this probably counts as a brave new world, one given an extra dimension by the dramatic reappearance of CEO Ren Zhengfei in front of journalists. Further appearances from their CEO have made it clear that Huawei is willing to take some "calculated risks", as a PR advisor puts it.
"In all of the shocks they took, none of their communication responses stood out," says Twine. "That's not a bad thing. The communications team didn't become part of the story. Not a bad job when you are in the sights of a President and his Twitter account everyday.
"Other global businesses should note that they can still be very profitable even if the USA is out of bounds," adds Twine. "Trade wars in 2020 will likely get worse. If getting squeezed out of a market means you need to find other ones, then communications needs to help make relationships in the new places."– AS
5. Purdue Pharma's opioid fallout
In September of 2018, Purdue Pharma filed for Chapter 11 bankruptcy protection, just days after announcing a settlement with more than 2,000 local authorities over its role in the opioid crisis. The Sackler family agreed to relinquish ownership of the company and to provide $3 billion in cash—as well as future revenue from the sale of OxyContin—to assist communities devastated by opioid addiction.
Under normal circumstances that would have drawn a line under the company’s leading role in the crisis. Except, this is Purdue, so there was still more bad news to come. A couple of months later, an audit presented during the company's bankruptcy proceedings found that the Sackler family had withdrawn more than $12 billion from the company during the OxyContin era—which means the Sacklers got to keep most of the money they made from the corrupt business practices.
As we noted in February, the Sacklers engaged in a concerted effort to conceal the dangers of their product. Responding to an email from the company’s head of sales and marketing, who suggested that the company should not do anything to correct the misconception among doctors that Oxy was weaker than morphine, Richard Sackler was emphatic: “I agree with you. Is there a general agreement, or are there some holdouts?”
Indeed, rather than correcting the misconception, a New York Times story revealed how management consulting firm McKinsey had given Purdue advice on how to “turbocharge” sales, how to counter efforts by drug enforcement agents to reduce opioid use, and how “to counter the emotional messages from mothers with teenagers that overdosed” on the drug. (A ProPublica report outlined the way the company worked with conservative think tanks to muddy the waters on OxyContin’s safety long after it knew the truth.)
It wasn’t just Purdue, of course. There’s a case to be made that the marketing tactics employed by Insys Therapeutics to hawk the company’s fentanyl products—founder John Kapoor and four of his former executives on charges they conspired to pay bribes and kickbacks to doctors—were even more egregious.
And Johnson & Johnson, once one of America’s most trusted companies, was also ordered to pay more than $500 million—as its reputation plummeted. “It’s fair to say that the opioid trial is probably the straw that broke the camel’s back for Johnson & Johnson’s reputation,” Stephen Hahn-Griffiths, an executive at Reputation Institute, said. “We’ve not in recent years seen Johnson & Johnson’s reputation dip as low as it’s currently tracking.”
In the end, the entire sector was tarnished by its handling of the crisis. As media analytics company Commetric noted, “As the media conversation around the ongoing US opioid epidemic becomes more and more intense, with the companies involved under ongoing pressure of litigation and public shaming, the pharmaceutical industry is experiencing unprecedented reputational declines.”– PH
6. The NBA (and others) clash with China
In October, we highlighted the impending clash between the growing expectation (among American and other Western consumers, and increasingly among consumers in Asia) that companies will behave in a principled and purpose-driven fashion, and the fact that principles and purpose can cost businesses dearly in the Chinese market.
The story blew up when Houston Rockets general manager Daryl Morey tweeted his support of pro-democracy protestors in Hong Kong: “Fight for freedom, stand with Hong Kong.” Within hours, a spokesperson for the Chinese consulate general in Houston had attacked the tweet and urged the Rockets to “correct the error.”
Chinese companies got involved too. Tencent suspended its broadcast partnership with the NBA. Fast-food chain Dicos said it planned to suspend "all marketing and publicity activities" with the League, and skincare brand Wzun said it would "terminate all cooperation.”
In response, Morey removed the tweet and apologized and the NBA acknowledged that Morey’s comments "have deeply offended many of our friends and fans in China, which is regrettable."
The ease with which the NBA repudiated human rights protestors turned a spotlight on several other incidents: Activision Blizzard, one of America’s biggest gaming companies, found itself under fire for “acting as China’s censor” after it suspended a Hong Kong-based player for a statement backing pro-democracy protests. Apple, a company that has taken a strong position on other human rights abuses, elected to remove a crowdsourcing app from its store after unsubstantiated allegations that it was being used by protestors in Hong Kong to evade the police.
Isaac Stone Fish, a journalist and senior fellow at the Asia Society's Center on US-China Relations, explained in a Washington Post column how China pressures American companies. “This is an effective public relations strategy, honed over decades, that co-opts some foreigners into facilitating the spread of Chinese propaganda,” he writes. “It has succeeded in creating a coterie of Western chief executives petrified of offending Beijing.”
New York Times columnist Farhad Manjoo went even further, writing: "A parade of American presidents on the left and the right argued that by cultivating China as a market—hastening its economic growth and technological sophistication while bringing our own companies a billion new workers and customers—we would inevitably loosen the regime’s hold on its people….
“It turns out the West’s entire political theory about China has been spectacularly wrong…. China’s growth did not come at any cost to the regime’s political chokehold. A darker truth is now dawning on the world: China’s economic miracle hasn’t just failed to liberate Chinese people. It is also now routinely corrupting the rest of us outside of China.”
The NBA eventually issued a second statement, stating: “Values of equality, respect and freedom of expression have long defined the NBA — and will continue to do so.”
Said Holly Helstrom, an associate at Logos Consulting Group and fellow at the Logos Institute for Crisis Management and Executive Leadership: “Leaders would be wise to revisit their organizations’ values or mission statements, and seriously consider if those are values the organization is prepared to enforce. If not, time for a revision. After all, it is less bad to reset an expectation than to fail to meet it altogether.”– PH
7. The rise of employee activism
If you tell people that your values mean something, sooner or later they will believe you—and when they do, they will try to hold you to those values. That was a lesson several companies—including some in the PR agency business—learned the hard way in 2019, and it’s one others will need to note heading into 2020, because employee activism is likely to create even more problems for companies going forward.
But examples came thick and fast in 2019: thousands of Google employees staged a walkout to protest the company’s handling of sexual harassment claims; Amazon employees criticized the company for selling its facial recognition software to police and urged Amazon Web Services to sever links with software company Palantir because of its links to a deportation and tracking program used by Immigration & Customs Enforcement; and employees at home goods retailer Wayfair staged a walkout in June after discovering what they believe is a large order of bedroom furniture the company supplied a contractor that works with the concentration camps in which children are being imprisoned near the US-Mexico border.
The same issue was at the center of controversies involving two giant agencies. First Edelman walked away from a short-lived assignment with GEO Group, a prisons company that runs immigrant detention centers on the Mexican border, after employees protested. Then Ogilvy came under scrutiny for its work with the US Customs & Border Protection agency.
That controversy blew up after Buzzfeed obtained a transcript of the discussion between CEO John Seifert and a group of concerned employees. “What I'm mostly hearing is that we're willing to work with clients that are allowing children to die and that are running concentration camps,” an employee told Seifert during that meeting.
Seifert admitted to being conflicted—“whatever my personal views are of what's happening around the world, what I am paid to do is to represent the company to the best of my ability as the senior leader of the firm”—but ultimately defended the decision to work with CBP, which he stressed was limited to handling recruitment advertising.
In May, Weber Shandwick, in partnership with its United Minds and KRC Research units, released a report on Employee Activism in the Age of Purpose, which found that nearly four in 10 employees (38%) reported speaking up to support or criticize their employers’ actions over a controversial issue that affects society.
Not surprisingly, millennials are the generation most likely to engage in employee activism (48%), a rate significantly higher than that of gen Xers (33%) and boomers (27%).
UK law firm Herbert Smith Freehills found similar cause for concern in its own research. “Across all sectors and geographies workers are becoming more vocal in articulating their views—about the workplace, their employer and about wider social issues – and increasingly holding organisations to account, enabled and amplified by social media. This trend is set to grow and gives rise to new and distinct risks for employers.”– PH