Corporate Mea Culpas
Thursday, April 27th, 2006
Can good PR advice avert the demise of a corporation and the filing of federal fraud and conspiracy charges against the company’s top executives? During his recent testimony, former Enron Corp. Chairman Ken Lay bemoaned his decision back in September 2001 to stick his head in the sand when the Wall Street Journal requested an interview for a series of articles focusing on the company’s bookkeeping practices. “My policy has always been that it is better to talk to the press than not to,” Lay testified. Ignoring his own advice, Lay listened to subordinates who felt the damage from not doing the interview would be minimal. Lay now credits the articles that appeared a few weeks later with destroying confidence in the company, ultimately leading to its bankruptcy filing in December 2001.
While it’s impossible to speculate on the outcome had Ken come clean with WSJ, he would have been well advised to follow the example of Chrysler Corporation Chairman Lee Iacocca in the wake of criminal charges involving odometer tampering in the mid-1980s. The situation led to the indictment of two Chrysler executives for driving cars with their odometers disconnected and then selling them as new. In some cases, the vehicles had been in minor accidents and repaired, then sold as new. In a dramatic press conference held in Detroit, Iacocca called the practice of test-driving cars without telling people “dumb.” And selling damaged vehicles “goes beyond dumb and all the way to stupid,” Iacocca lamented. “Did we screw up,” Iacocca questioned. “You bet we did…Simply stated, that’s unforgivable, and we have nobody but ourselves to blame.”
Iacocca’s mea culpa was textbook crisis communications of “Tell it all. Tell it fast. Tell what you’re going to do about it. Tell when it’s over.” In addition to giving owners of affected cars new vehicles and extending warranty protection for other vehicle owners, Iacocca emphasized, “Our big concern is for our customers, the people who had enough faith in Chrysler to buy a vehicle from us. These charges and the press reports about them are causing some of those customers to question that faith, and we simply cannot tolerate that.” Following Chrysler’s public apology, a survey found 67 percent of those contacted believed the company had adequately dealt with the issue. As a result, neither vehicle sales nor stock prices suffered.
Given that outcome, there was nothing “dumb” about Chrysler’s response to bad news. If only the same could be said in the case of Enron and its indicted chairman.