Legal Crisis Strategies : Crisis Communications Lawyer & Attorney : McDermott Will & Emery Law Firm : Risk Mitigation, Mass Litigation

There was a lot of buzz recently about a study conducted by the Stanford Graduate School of Business titled, “Detecting Deceptive Discussions in Conference Calls.” The study’s authors analyzed transcripts of nearly 30,000 conference calls by American CEOs and CFOs between 2003 and 2007.  The researchers studied the linguistic features of narratives, and found that  CEOs at companies that subsequently announced a significant restatement of earnings used significantly fewer self-references, more third person plural and impersonal pronouns, more extreme positive emotions, fewer extreme negative emotions, and fewer certainty and hesitation words.  Furthermore, the “deceptive” CEOs and CFOs used more references to general knowledge, fewer non-extreme positive emotion words, fewer references to shareholder value and value creation.  In sum, there was a relationship between non-specific, non-factual language, and descriptive emotion words like “fantastic” and “great,” and a lack of credibility in the substance of the presentation. 

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We’ve talked before about crisis prevention in general. With any of the crises we’ve seen this summer, it would be hard to say, “This came completely out of the blue.” That’s because we all have an inkling of what could happen but few of us want to think about the worst case scenario. But without actually identifying potential crises, a company can never prevent it and will, in turn, not be prepared to deal with it effectively.

So CEOs and General Counsels need to think like their security officers and analyze the risk of a crisis by looking at the company’s vulnerability to a specific threat and identifying ways to lower that risk. Every police officer, federal agent and emergency manager knows the equation:

Risk = Threat x Vulnerability

Threats come in all forms. If you are a food processing company, it could come in the form of some health outbreak caused by a system failure or product tampering. There could be a catastrophic accident (such as we’ve seen recently in the Gulf), environmental harm, either from the accident or manufacturing processes, technological breakdowns, rogue employees (some rogue stockbrokers come to mind). The best way to prevent these potential crises is to sit down with senior management to examine the worst case scenarios, in order of likelihood, and assess the reputational, legal and economic damage each could do to the company.

Next, identify what systems are already in place to prevent these threats from occurring.  Where a company can really benefit economically from a crisis audit is by helping the General Counsel see what systems, trainings, and compliance regimes are in place, inadequate, or not properly implemented.  Do a cost/benefit analysis on what else could be done to reduce the threat. Sometimes it just isn’t economically feasible to “harden” every target, but keep in mind the cost of the potential legal liability if your inaction could be found “negligent.”

Third, develop a plan of action in the event that this threat becomes a reality. Make it specific, even down to potential messages that could be used in the first few hours. Identify which managers would be on the “crisis response” team and which law firms you would use to handle that particular type of crisis. 

Finally, but probably most importantly, make sure these crisis audits are done under privilege, through the auspices of the General Counsel. Bring in unit managers and, ultimately, your PR team, but make sure that all communications go through the legal department.

A crisis audit, if done regularly, will also help you establish an “early warning system” and avoid the crisis before it hits.

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General Stanley McCrystal, Virginia Senator George Allen and Carly Fiorina, among others, have learned the hard way that in today’s 24/7 news, blog, twitter and YouTube world, nothing is “off-the-record” and everything, even the most petty remarks, are up for endless debate. Those “off-the-cuff” remarks, whether told to a reporter allegedly under an “off-the-record” ground rule or caught on video or audio can so quickly shift focus from the person’s real message to a debate over inconsequential subtext that can derail careers, candidacies and reputations.

Even actions matter. Take the pictures of Tony Hayward, BP’s battered and buffeted CEO, who had complained that he wanted his “life back” after the oil spill, and moved back to Britain at the orders of the Chairman. The very first days after his arrival he was photographed on a yacht in crystal clear waters, which did not go unnoticed at the White House, with Chief of Staff Rahm Emanuel commenting, “Well, to quote Tony Hayward, he’s got his life back, as he would say.”

Does this mean you should never engage with the media? No. With or without the mainstream media, there are more and more blogs, citizen journalists and just plain “watchers” out there. In fact, the Democratic National Committee is working on replicating that “Macaca Moment” of Senator Allen’s by organizing “The Accountable Project,” by encouraging people to go to Republican events and upload videos to show candidates engaged in gaffes, double-speak and hypocrisy.

Unfortunately, this kind of “gotcha” citizen journalism means no one is ever truly “off” the record. Which is why a company should warn key managers, the public face of the company, to guard against those embarrassing photos, quotes, and quips that can be caught on a camera-phone and uploaded instantly to Facebook, Twitter or a consumer website. Facebook and Linkedin are nice, but having lived and worked in Russia for the last 20-odd years, after the spy scandal broke last week, I immediately checked my friends and “LinkedIn” list for any of the suspects. You never know.

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No matter what your crisis is, and no matter what your media strategy may be, the best way to manage a crisis is to respond to reporters and to do so in a timely manner. It may sound obvious, but too many companies fail to do this, whether because executives have stuck their heads in the sand, don’t feel prepared to talk with the media, or simply don’t make media inquiries a priority. But ignoring the media is a huge mistake that can be easily avoided.

No “no comment,” please!

When a crisis situation breaks, it is imperative to put together, at a minimum, a statement—no matter how short—that will serve as your response to media inquiries until you are prepared to provide further information. Even if it is something as generic as, “we are taking this situation seriously and conducting a full investigation.” Anything is better than a “no comment,” which can leave the public with the impression that you or your company has something to hide. 

Proactive Media Strategy

Depending on the circumstances, adopting a proactive media strategy can be the most effective way to manage a crisis situation. This requires some fact-finding ahead of time so that you can work closely with one or several reporters as events unfold. Even if there is some uncertainty surrounding the situation, building a rapport with reporters and providing them with the facts is the best way to get accurate, balanced coverage of an issue. News outlets can report the best facts you have on your side only if your provide those facts to them. Stated differently, take every opportunity to balance a bad story with all of your best facts—including the story of what you are doing to take accountability for what went wrong. This last step is the key to protecting your reputation and repairing trust among your stakeholders and customers in the aftermath of a crisis.

Rapid Response

Being prepared for the onslaught of media inquiries is a critical part of managing a crisis. We often work with our clients to set up rapid response operations, which is simply a small group of individuals tasked with receiving, organizing, and responding to media inquiries. Those in charge of responding to reporters should be one or two people who are very familiar with all of the relevant facts, statements, and/or messages (depending on your particular strategy) which should be vetted by executives and attorneys. These individuals should have experience working with the media, and should be prepared and available to return phone calls well within reporters’ deadlines.

When you are unprepared for a rush of media coverage, your side of the story becomes, “Company X was not immediately available for comment.” This is not as bad as a “no comment,” but it is a wasted opportunity to balance the story with good facts, and perhaps more importantly, a wasted opportunity to handle the negative facts. Obtaining balanced coverage requires ensuring that reporters have facts to report—whether positive or negative.

Conclusion

It is a worthwhile exercise to conduct a “fire drill” scenario to plan ahead for a negative event. Identify ahead of time who will comprise your team of inside employees and outside advisors that you will call when a crisis breaks. Make sure you plan for good communication and organization, especially when it comes to handling the media. Urge your executives to view each media inquiry as an opportunity rather than an annoyance, and you will see what the power of communication can do to shape public opinion.

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Just about every day since the digital revolution began, plaintiffs, regulators, prosecutors and members of Congress roll out damning and spicy quotes from email exchanges between employees as the basis of their litigation, investigation, charges or public hearings. And then there are voice mails, Facebook, mySpace and Linkedin messages to consider as well as those quicky emails and texts sent from blackberries and cell phones. We all remember them…the government convictions in recent years based almost solely on email or the love notes to a fellow employee that result in the boss getting fired. What can any CEO or general counsel do to protect against these inflammatory emails, taken out of context, often making assertions and not stating facts, from becoming the basis of legal action against his or her company and employees?

One simple solution is training and educating employees on how their words in emails and any electronically sent or saved message do matter. These are not “private” messages and once on a computer, particularly a company computer, they are discoverable and usable by your adversary in any way they want, either as evidence in the legal arena or to inflame customers, shareholders, or potential jurors in the court of public opinion. Most people don’t write emails thinking they will be blown up by an adversary, scrutinized for meaning and interpreted to their best advantage. What you meant to say may not be much of a defense against what you did say in black and white in front of the jury. 

While people pour over their transaction documents and briefs, rarely do they take that care over emails about those same documents—emails that can be much more telling about motivation and which can be more easily found and discoverable. Why? Because emails are electronically searchable and often sent around to a wider array of people, including non-attorneys or others outside the company,, that could amount to a waiver of privilege.

Therefore the best way to manage a crisis from a damning email is to prevent that damning email from being written in the first place.  Employees need to be told, “Unless you want this email blasted on the front page of the New York Times, or blown up on a placard in front of the Senate Judiciary Committee, the Golden Rule should be : Don’t hit send.”

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The tragic and deplorable terrorist attacks in the Moscow subway should remind everyone that crisis management begins at home. Press reports quoted many panicked Muscovites lamenting that they could not locate loved ones and had little information as to whether they were dead or alive. Cell phone towers were unable to keep up with demand, as millions tried to check in with their family and friends who were among the 500,000 people traveling on the subway at that time.

            Things could have been far worse if the attacks had continued, or the government had decided to order an evacuation of parts of the city. So how does one prepare for the unthinkable? You think about it by identifying the most likely terrorist or criminal threats and natural disasters and planning for them. You should also know and understand the plans of your workplace and community. You talk to family members about what to do in the event of an emergency by picking meeting locations, with one near home and one removed from home, in the event that your home is in the “hot zone.” You also develop a crisis communications plan for staying in touch if you are separated when the crisis occurs or afterward.

            The potential liability already exists for companies that do not properly plan for natural or man-made disasters. For example, after 9/11, several lawsuits were filed against companies, accusing employers of negligence for not having adequate evacuation plans or informing their employees about those plans. Some suits alleged the foreseeable risk of such an attack because the World Trade Center (WTC) was at risk for fires and had been the target of terrorist attacks in the past, specifically, in 1993. The court allowed cases to go forward against the WTC defendants because it agreed with plaintiffs that these risks were reasonably foreseeable. In re September 11 Litigation, 280 F. Supp. 2d 279, 301 (SDNY 2003).

            To mitigate the risk of liability from accusations of negligence, companies too must have plans, educate their employees about those plans and, most importantly, exercise those plans. The federal government has an excellent website with tools and information that can help you or your workplace formulate a plan.

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