Corporate Communication

The Story 

On May 10, 2012, J.P. Morgan Chase held an impromptu conference call at 5 P.M. where, at the start of the call, CEO Jamie Dimon announced the bank had “trading losses of $2 billion since the start of April,” according to a CNN Money article. He explained the losses were caused by "errors," "sloppiness" and "bad judgment." The remainder of the call was spent by Dimon apologizing and explaining how the losses happened. He later stated, "This was a unique thing we did…Obviously it had a lot of problems. It was a bad strategy. It became more complex. It was poorly managed."

Dimon then went on what has been called an apology tour, including an interview on Sunday’s Meet the Press where he explained, “We made a terrible, egregious mistake. There’s almost no excuse for it.”

Watch the Meet the Press interview.   

The Monday after Dimon appeared on Meet the Press, the Chief Investment Officer (CIO) whose department was responsible for the loss stepped down. Since then, the SEC and FBI have launched investigations of the incident and several class action lawsuits have been filed according to the New York Times and Washington Post.

The financial giant is now exploring clawbacks according to a Reuters article. According to the article, clawbacks are when a company “cancel(s) unvested awards or require(s) that the value of distributed shares be repaid when ‘the employee engages in conduct that causes material, financial or reputational harm to the firm or its business activities.’" 

Analysis

Chase has done a great job of handling this situation with shareholders and the general public. While there were initial rumblings in April that the bank was suffering these losses, Chase was quick to react once the losses became official instead of trying to minimize or cover up the losses.

Throughout all interactions with the media, CEO Dimon continually apologized, explained in common terms and took ownership for the actions of his company. In addition, he demonstrated he understands the public’s feelings as is evident in the following quote from Meet the Press: “I understand fully why you, or anyone else, would question us generally.” 

Dimon has continually remained cooperative with authorities and the press, as well as maintained a dignified stance on items. When the CIO stepped down, Dimon handled it very well by mentioning that she was the one ultimately responsible for the billion dollar loss but also touted the many contributions the now former CIO provided the company.

The way this whole situation has been handled by Chase has been described as a textbook example of good crisis communications by several industry professionals in a recent PR Daily article. While I agree that it is a perfect example thus far, I don’t see how Chase could have handled it any other way considering the environment in which they operate in where banks are highly watched and not trusted. I believe Chase’s leaders realized they had to be transparent, sincerely apologetic and accountable for this situation or it would cause immediate and major repercussions to not only them but the whole financial industry. Chase would suffer a significant loss of trust as well as a huge monetary loss as investors quickly pull out.

Stockholders continue to support Dimon, evidence he has responded appropriately the loss. A Reuters article explains that investors rejected a proposal earlier this week to split the jobs of CEO and chairman during the bank’s annual shareholder meeting. While the company’s stock has taken a substantial hit, it is inevitable in this type of situation. 

Chase's stock performance since the announcement of the $2 billion loss

It will be interesting to see how the rest of this situation plays out, especially since Dimon has been very vocal against government regulation. Chase can use this as an opportunity to minimize potential governmental regulatory impact by showcasing how quickly they resolved the problem and launch a new checks and balance system that will prevent any situation like this from occurring ever again and proposing it be an industry-wide practice.

Chesapeake CEO Aubrey McClendon, probably calling his lawyer

Summary

Beleaguered oil and natural gas giant Chesapeake Energy’s (CHK) stock bottomed out at its lowest level since 2009, when the Oklahoma City-based company’s credit rating was downgraded after taking out a $4 billion loan to pay off existing debt.

Now bordering on “junk” level debt status, Chesapeake’s latest downgrade comes on the heels of an SEC investigation into CEO Aubrey McClendon’s personal business dealings. In early May of 2012 Reuters reported that McClendon secretly ran a $200 million hedge fund that traded in the same commodities Chesapeake produces, allowing him to retain a personal stake in every well the company drilled.

To make matters worse, McClendon allegedly took out $1.1 billion in loans against his personal stake in the company.  The board of directors responded by stripping McClendon of his chairmanship and announced that “it is reviewing the details of the loans.” According to the Wall Street Pit, Chesapeake’s stock had dropped almost 40 percent to $15.52 at this Monday’s close since its high this year of $25.58 in March.

In addition to this increased financial scrutiny, CNBC has raised the possibility that Chesapeake may be involved in “artificially inflating ticket prices for the Oklahoma City Thunder basketball team.” McClendon owns nearly 20% of the team, which spent $3 million last year to rename the Thunder’s home venue Chesapeake Energy Arena.

From a public perception standpoint, this is bad timing for Chesapeake – especially with the national spotlight shining on the Oklahoma City Thunder basketball team in the Western Conference finals against the Lakers. 

My reaction

Obviously the company, led by its CEO, has made some bad decisions and put themselves on shaky financial ground.  From a communications standpoint, however, the company has handled the situation relatively well. 

Even with the SEC informal investigation and lowered stock rating, Chesapeake has successfully communicated its financial plans to media outlets and through press releases.  Every news story I’ve read includes carefully crafted statements by McClendon that focus on the company’s assets – he says they’ve got $50 - $60 billion in assets, and that Chesapeake should have positive cash flow by 2014.

A statement quoted McClendon, who will stay on as CEO, saying that the move will enable him to focus his "full time and attention on execution of the company's strategy."  Obviously the media, investors, the board of directors and employees have been infuriated at McClendon’s business practices.  I don’t blame them.

But despite these tenuous circumstances, the CEO has done a good job of helping mitigate the company’s losses and protecting its brand, employees and financial future.  I’m not condoning these actions, and it’s clear that McClendon made some bad decisions, but from a communications standpoint his reaction could have been much worse.

by Jeff T.

Avon Products (AVP) appears to be the perfect target for a takeover, according to recent news.  Why is this? To understand the events that have transpired and to try to answer this question, I developed the below timeline that summarizes the situation.

Timeline of Events Transpired Over the Last Year

2011- Avon celebrates 125 years in business and operates in 100 countries, with 80% of total revenue coming from overseas.  However, falling profits have been reported for the last three years and even stronghold markets such as Brazil and Russia are suffering.

January 2012- The company faces a bribery investigation that suggests a violation of the Foreign Corrupt Practices Act, that led to its vice chairman's ouster. The probe initially involved only executives in Asia, but it spread as federal regulators began looking into the company's dealings with financial analysts.

March 2012- Discussions between Coty and Avon begin behind closed doors.

April 2, 2012- Coty made a public offer for Avon Products at the $10 billion level, which would have made it the largest U.S. acquisition of the year (according to Dealogic).  Avon responded the same day, saying “Coty's indication of interest of $23.25 per share does not provide a compelling reason for Avon to deviate from its current plans. Under the circumstances, Avon's Board is convinced that rejecting Coty's indication of interest is in Avon shareholders' best interests.”

April 9, 2012- Avon announces new CEO, former Johnson & Johnson executive Sherilyn McCoy.

May 1, 2012- First quarter earnings are announced.  Avon reported that its first-quarter net income tumbled 82 percent, even more than Wall Street had feared.

May 9, 2012- Coty sends a letter to Avon with a new offer and commentary regarding their process in the development of bid.  The new bid reflects an increase of about 6.5 percent, to $24.75 per share from $23.25 per share and also names financing partners, including Berkshire Hathaway.  A deadline is set for a response by end of day May 14.

May 10, 2012- Avon releases a copy of the letter with simple statement “Avon's Board of Directors will consider the letter in due course.”

May 13, 2012- Coty issues press release simply saying “Avon Products, Inc. today advised Coty Inc. that Avon's Board of Directors, in conjunction with management and the company's financial and legal advisors, will consider Coty's letter dated May 9, 2012. Avon's Board expects to respond within a week.”

May 14, 2012- Coty officially closes the door and withdraws it bid after not receiving Avon’s response by deadline.  Investors follow suit.  Avon shares end day down 11%

VIDEO

May 15, 2012 at 1:30am Eastern- Avon releases a statement only saying that they responded promptly, noting they needed a one week timeframe, but that Coty withdrew its bid.

May 16, 2012- Rumors surface that Richmont Holdings (which led the management buyout of Mary Kay cosmetics in the mid-1980s and was once Avon Products' largest shareholder) is considering making an investment or acquisition of Avon.

My Reaction

First off, this is not over.  Avon will continue to be the target for takeover bids.  And, after reviewing the timeline, it is easy to see why.  However, if the company wants to operate professionally and not have a sinking stock price, they need to majorly alter their communication strategy.  

Coty’s letter from May 9^th points out publicly that Avon was non-responsive in the many attempts for conversation.  Avon should have understood the risks and the potential backlash from their shareholders for not responding promptly and according to the rules following this letter.  Additionally, this appears to have been both an attractive and well thought out bid.  Avon’s responses should not have been one-sentence press releases (which two of them were), but also well thought out and include details for their reasoning behind their process.  Of course, I would be remiss to not point out that there was never a single individual named or quoted in the statements made by Avon.  They lacked any type of personality or humanization, which is likely another reason that the public was put off.  The lifeless tonality on top of an executive team with a bad reputation (or in the case of the CEO, no real reputation at Avon yet), leaves little confidence for the investor.  At this stage, Avon should be considering some outside expertise in crisis communication and image repair before they are in a worse position than my timeline already lays out.

 Sources: Information for this blog post was found via Wall Street Journal, Bloomberg, Morningstar, Avon corporate website and Coty corporate website.

Summary

Of course, we know that Facebook is in the midst of its IPO, and investors everywhere are eager for the company to go public.  However, there are some groups that are not so pleased with Facebook right now.  In fact, groups that represent over half of Facebook’s 800 million users- women- are up in arms.  Earlier this year, Facebook released the names of its seven all-white, all-male board members. (http://www.nbcbayarea.com/blogs/press-here/Group-Protests-Facebooks-All-Male-Board-148883475.html)

On April 25, UltraViolet, a women’s right activist group delivered an online petition with 53,000 signatures to Facebook’s New York offices.  The petition demands Facebook include women on their board before the company goes public.  UltraViolet’s co-founder Shaunna Thomas says, “Facebook is going to launch one of the largest IPO’s in history this summer, a success built largely on the participation of women – 58% of their users are women and the vast majority of sharing on the site is done by women – and yet zero people on the board are women”. (http://www.forbes.com/sites/evapereira/2012/04/26/protest-outside-facebook-hq-challenges-pale-male-and-stale-board-video/) 

Many news sources are calling attention to Facebook’s Chief Operating Officer, Sheryl Sandberg, who has publicly stated support of gender equality on boards in Silicon Valley.  She even offers women advice to get ahead in a TED talk, “Why we have too few women leaders”.  Facebook’s critics are saying that if the company trusts a woman to be such a powerful executive, why then would they not include her at least to sit on the board?  Others are pointing out that other leading tech companies including Google, who has three female board members and Apple, who has one, are obviously ahead of the tech-curve. (http://www.ted.com/talks/sheryl_sandberg_why_we_have_too_few_women_leaders.html)  (http://www.npr.org/blogs/thetwo-way/2012/04/25/151368287/womens-rights-group-protests-facebooks-all-male-board)

Zuckerberg and other board members have not commented after several reputable news sources including NPR, NBC, and Forbes have questioned their reasoning.  The most recent and relevant response found from Zuckerberg comes from last July when he was in the midst of seeking out board members.  "I’m going to find people who are helpful, and I don’t particularly care what gender they are or what company they are. I’m not filling the board with check boxes," Zuckerberg told the New Yorker. (http://www.huffingtonpost.com/2012/04/25/facebook-protesters-all-male-board_n_1453267.html)

My Reaction

            How do I feel about Facebook’s complete disregard to adding women to their board?  I am a woman; of course I think Facebook should have women on their board.  Perhaps they asked some women to be on the board and they all refused?  (I sincerely doubt that).  Matt informed me that there was not a single company that did not have at least one woman on their board in all of the 21 class papers on proxy statements.  European countries such as France, Belgium, and Iceland have even initiated percentage quotas to include more female representation on boards. (http://www.30percentclub.org.uk/research/international-comparison/)

I tend to agree with Anne Mulcahy’s response to Facebook’s actions.  The former chairman and chief executive officer of Xerox Corp. and a director at Johnson & Johnson Co., Target Corp. and Washington Post Co. said, “We’re long past having to defend or explain why women should be on boards, given all the data that shows how companies with female as well as male directors perform better.  It’s unfortunate when companies with a large percentage of women constituents don’t reflect that in their boardrooms.” (http://www.bloomberg.com/news/2012-02-02/no-women-on-facebook-board-shows-white-male-influence.html)

            I feel as though the easy fix would be to put Sandberg on the board, if Zuckerberg already trusts her.  However, we know that considering all of the women on other tech-based company boards, it would not be difficult for Facebook to reach out and find “someone qualified”.  I believe very strongly in corporate governance and I find it diffcult to understand how Facebook can stand by their decision proudly.

            Besides Facebook’s decision to not include women on the board, how are we to feel about Facebook’s lack of response to an issue that began making news in February?  Obviously, from all our experience with media frenzy, we know that transparency and open communication is crucial for successful public relations.  That being said, I am not certain what Facebook’s tactic is here. 

I searched for some statements from Sandberg herself on the topic, and I only found a CNN Opinion article about her ‘speaking out’ on being a mother and how companies should accommodate family life.  I question if this was a tactic to make Facebook seem more woman-friendly.  I think Sandberg speaking out on Facebook’s lack of female representation would do wonders for its reputation; though at this point, it may be too little, too late. (http://www.cnn.com/2012/04/16/opinion/stone-leave-work-day/index.html)

I wonder if Facebook is so arrogant as to think that they do not need to address the public on their decision here.  A Huffington Post article from February was titled, “Facebook's All-Male Board Draws Investor Scrutiny -- But Don't Count On Change”.  I have little faith that the company will add a female board member and make amends with the angry public if it has not done so already.  Do you think that this debacle will hurt Facebook when the stock is finally released?  Is Facebook the Apple of social media?  I guess we will find out when they finally go public. (http://www.huffingtonpost.com/2012/02/08/facebook-all-male-board-_n_1263278.html)

For 126 years Sears department stores have been synonymous with the American middle class.  It was The one stop shop for everything from clothing to appliances and even automotive repair.  Now the former behemoth is struggling not only to stay relevant, but to survive.

http://bcove.me/x46bmmkg

Amid this chaos, Sears Holding Corporation has embarked on two very new corporate social responsibility campaigns.  The Kmart Latina Smart Fund is a scholarship program and essay contest was launched on Facebook in 2011 to make higher education more accessible for Hispanic youth.  The program awarded its first scholarships in March 2012 to four candidates.  The 1^st place recipient received a $10,000 scholarship and each of the three runners up received a $5,000 scholarship for a total of $25,000 awarded. 

The Sears retail stores have taken a different approach and chosen to attack the hot-button issue of teen bullying with their Team Up to Stop Bullying campaign.  This program, announced on May 9, 2012, will create a comprehensive online resource center where parents and teens can go for support, referral information, and information on how to become an anti bullying advocate for your community.  The website plans to be fully operational in time for the start of the 2012-2013 school year, but students can access the site now to take the anti-bullying “Power Pledge.”

Reaction

First, let me say that I am a strong proponent of CSR and I feel that any attempt to give back to the community is a positive endeavor.  However, the reason there is so much controversy around CSR programs is that corporations often engage in campaigns to atone for some wrongdoing (such as BP), to give themselves a much needed PR boost, or they arbitrarily pick a cause to support that is completely unrelated to their core business. 

At first glance you would want to applaud Sears for their efforts to be good corporate citizens.  However, if you consider the timing of these campaigns and the slew of bad press Sears has received over the past year it is difficult to dismiss the emergence of these programs as a coincidence.  It is even more difficult to ignore how half-hatched these ideas seem to be.  The Kmart scholarship only awarded a total of $25,000 to four students.  That is less than the annual in-state tuition, room and board at the University of Illinois which is estimated at $29,002.  Can this program really make a significant impact or is it simple pandering to a valued demographic?

The anti-bullying campaign is definitely culturally relevant, but one can’t help but wonder if Sears aims to help solve the problem or capitalize on social epidemic.  The website appears to have a benevolent tone but shamelessly inserts a plug to the new Sears “Kardashian Kollection.”  It also seems very ill thought-out to launch an incomplete website so far in advance of the project’s completion. 

It could be that Sears has finally decided to join the 21^st century and dove in head first with their new internet and social media based campaigned.  Or it could be that they have very little market share amongst younger consumers and picked the first two social issues on the front page of this week’s newspaper.  Their foray into modern CSR programming seems in-line with their recovery efforts, too little too late. 

Where do we draw the line between good CSR programming and classic corporate pandering?

Summary

What would a day in the corporate world be without a scandal that revolved around lying? Last week, accusations began surfacing about Yahoo! CEO Scott Thompson fibbing on his resume, claiming he had a computer science degree from Stonehill College. Thompson has only been top dog at Yahoo! for approximately four months. His rookie status combined with his dishonestly are causing quite the uproar with directors and stakeholders, including director Patti Hart, who was in charge of the search that lead to the hiring of Thompson.

Yahoo! confirmed Hart stepping down from the board Tuesday of this week. The CEO of International Game Technology played a large part in the hiring of Thompson, who previously was president of eBay’s PayPal payments unit. Her electronic gaming company wanted her on a fast track away from the scandal. Hart is the first loss caused by this mess, but certainly won’t be the last. http://allthingsd.com/20120508/exclusive-yahoo-director-in-charge-of-botched-ceo-vetting-to-step-down-from-board/

Stakeholders are enraged. Yahoo!’s largest outside shareholder, Third Point, wants to appoint a new interim CEO. They suggest calling on the finance chief or head of media for the time being. Daniel Loeb, Third Point’s manager, was the one who initially exposed the falsity. He demanded Thompson be fired by noon Monday or face legal consequences. Loeb wrote, “Mr Thompson and the board should make no mistake: this is a big deal. CEO’s have been terminated for less at other companies.” Loeb controls a 5.8 percent stake in Yahoo!. http://www.reuters.com/article/2012/05/09/yahoo-idUSL1E8G9BAC20120509

So what is Yahoo! doing about this scandal? After being confronted on Thursday by Loeb, Yahoo! confirmed the findings to be true and credited the misrepresentation to an “inadvertent error.” (Careful with your word choice, Yahoo!.) The board has also appointed a committee to investigate Thompson’s background and the false findings on his academic history. They will review the “facts and circumstances” surrounding the hiring process of Thompson as well. http://money.cnn.com/2012/05/09/technology/yahoo-ceo-resume-reactions/index.htm

Thompson wrote a note to Yahoo! employees this past Monday, stating, “I want you to know how deeply I regret how this issue has affected the company and all of you. We have all been working very hard to move the company forward, and this has had the opposite effect. For that, I take full responsibility, and I want to apologize to you.” http://allthingsd.com/20120503/yahoos-response-on-computer-science-resumegate-inadvertent-error/

My Reaction

Yahoo! has gone through its fair share of CEO’s in the last few years. Thompson is the company’s fourth CEO in the last five years, and if all goes accordingly for the board of directors, they may be looking at a fifth. In my opinion, the company’s reputation is going to suffer unless there is a complete turn-around with this incident.

In their first statement, Yahoo! called this mistake a result of an “inadvertent error.” As I said above: careful of your word choice, Yahoo!. Inadvertent means: “Failing to act carefully or considerately; inattentive; resulting from heedless action.” I mean, if this doesn’t fuel the fire, I don’t know what does. This basically comes right out and says Thompson is careless and inconsiderate; not taking into account the effect his actions will have on the Yahoo! employees and stakeholders alike. While I agree Thompson’s apology was sincere, I think he should have come forward, addressing the issue in a more timely fashion. (I also think he should have hired someone to craft his apology.) http://www.businessweek.com/ap/2012-05/D9UI37E81.htm

As a side note, Yahoo! also sent a letter out to shareholders stating Loeb did not have the “relevant” expertise to be on the board of directors. It seems like they’re trying to place blame in other places to avoid looking inadequate.

Overall, this goes back to honesty and transparency in the C-suite. I think it’s completely unacceptable to lie to get ahead, and I don’t think it should be tolerated, especially in a company as large and reputable as Yahoo!. In my opinion, Thompson should step down. The company is going to have a hard time building its reputation back up with a leader who cannot be trusted by outside stakeholders and employees alike. http://www.prdaily.com/Main/Articles/fd3a11d0-f58d-4665-8cb8-b453015d060f.aspx?utm_source=twitterfeed&utm_medium=twitter

Background on News Corporation:

News Corporation (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) is a diversified global media company with operations in six industry segments: cable network programming; filmed entertainment; television; direct broadcast satellite television; publishing; and other media segments. The vast majority of News Corporation business activities are conducted in the United States, Continental Europe, the United Kingdom, Australia, Asia and Latin America.  As of December 31, 2011, News Corporation had approximately US$60 billion in total assets and approximately US$34 billion in total annual revenues. http://www.newscorp.com/ 

Summary: Rupert Murdoch Not Fit to Run a Major Company, British Panel Says

On Tuesday, May 1, 2012 the Washington Post published a sharply titled article, “Rupert Murdoch Not Fit to Run a Major Company, British Panel Says.”  The news just keeps getting worse for Rupert Murdoch, the 81-year-old chief executive and chairman of American-based News Corporation.  The story, like many others that circulated earlier this week, was in response to the scathingly worded report from a British parliamentary committee into the long-running hacking scandal at Murdoch’s British newspapers.  The report most notably determined that Murdoch is “not a fit person” to run a major company.

To many observers, Tuesday’s parliamentary report proved to be far harsher than most had initially expected.  The 121-page document says that Murdoch “turned a blind eye and exhibited willful blindness” over phone hacking that took place at his now defunct News of the World tabloid.  It also found that the company sought to cover up widespread phone-hacking at News of the World and that three senior Murdoch executives misled Parliament in testimony.  Their “reluctance” to be honest, said the panel, was “understandable” given Murdoch’s “fearsome reputation.”

Although this embarrassing report has no immediate legal force over Murdoch or his company, it does offer new insights that suggest further damages may be on the horizon.  Many experts have noted that Murdoch’s nearly 40% stake in satellite TV service, British Sky Broadcasting (BskyB), could be in jeopardy with the British Office of Communications.  The independent agency has strict regulations that could take a TV license away from anyone considered “unfit” to hold one.  The agency is currently conducting its own investigation of News Corporation’s activities and reading Tuesday’s parliamentary report “with interest.”         

Tuesday’s report also proved that bad news travels quickly.  The Washington-based organization, Citizens for Responsibility and Ethics in Washington, requested that the Federal Communications Commission revoke News Corp.’s licenses to operate local stations following Parliament’s report.  Once again we see another organization arguing that only individuals of “good character” should hold licenses and Murdoch’s role in the phone-hacking disqualifies him.

http://www.washingtonpost.com/world/europe/rupert-murdoch-not-fit-to-run-a-major-company-says-a-british-panel/2012/05/01/gIQApey9tT_story.html?sub=AR 

Reaction: Rupert Murdoch Not Fit to Run a Major Company, British Panel Says

While it doesn’t appear that Tuesday’s select committee report will have any immediate legal consequences, it certainly adds to the dark cloud that has descended over Rupert Murdoch’s personal reputation and that of his international media operations.  Within the United States alone, News Corporation owns several of its most profitable business assets including: Fox News Channel, Fox broadcast network, 20^th Century Fox studio and the Wall Street Journal. Allegations that have surfaced across the Atlantic are proving to be more than just a whisper away.  Since the British phone-hacking scandal erupted in Britain, the U.S. Justice Department attorneys and the FBI have been investigating whether any phone hacking took place on American soil.  News Corporation is also facing separate federal investigation and bribery allegations in Britain.  As the story continues to unfold, it won’t be shocking to see more damaging discoveries.              

From a communications perspective, particularly in recent weeks, News Corporation has been very quick to respond to Parliamentary findings.  Earlier this week after the select committee issued its report, News Corporation had a press release posted to their site within minutes.  The first release simply stated that the company was in the process of carefully reviewing the full report and that further communication would be posted shortly.  The company also wrote that they fully acknowledge significant wrongdoing at News of the World and apologized again to everyone whose privacy was invaded (http://www.newscorp.com/news/news_529.html).  When News Corporation issued a final statement they noted that Parliament’s findings were “unjustified” and “highly partisan.”  According to a New York Times article, the final select committee report was approved by a 6 to 4 vote.  Four Conservative Party members staunchly disapproved that Murdoch was deemed an “unfit” leader.  This response makes you wonder if at the end of the day it’s all about politics.  All website communications were also echoed through twitter (https://twitter.com/#!/NWScorp).

http://www.nytimes.com/2012/05/02/world/europe/murdoch-hacking-scandal-to-be-examined-by-british-parliamentary-panel.html

From a reputation standpoint, Rupert Murdoch should have taken greater responsibility for his role in the phone-hacking scandal.  Although admitting that he failed and made many mistakes, he portrayed himself as an innocent victim throughout the entire process.  In several video captions from testimony, it looked as though he thought this investigation was a joke.  On many occasions he didn’t even look competent.  He had great difficulty answering the majority of questions and seemed very foggy.  Based on his performance, it’s not surprising that a committee would call him “unfit.”  Given his level of influence and accomplishments, it really makes you wonder if it was all just an act of escaping real responsibility for what happened on his watch.

Click here to download:

Murdoch guilty of 'willful blindness' - YouTube.webarchive (1.21 MB)

Summary of Forbes Story
In the world of fashion, success can often times be fleeting. The “it” designer of today can be a thing of the past tomorrow. This may be why it came as such a surprise when Forbes reported that 34-year-old fashion brand Betsey Johnson had filed for bankruptcy protection. Listing “severe liquidity problems” and $4.1 million in outstanding unsecured obligations owed to vendors, manufacturers, service providers, and other creditors, the fashion icon now faces store closures and the dismissal of close to 350 employees. http://www.forbes.com/sites/hannahelliott/2012/04/26/betsey-johnson-declares-bankruptcy/
Many insiders did not seem to see this coming. This could have been due in part to an overly optimistic stance taken by the company, which according to the Wall Street Journal http://online.wsj.com/article/SB10001424052702303990604577368491252250420.html, had outlined plans to have 100 stores in 22 states by the end of 2012. Instead, they plan to keep just five flagship stores open, concentrating instead on a thriving wholesale business. The high end fashion apparel brand has actually been struggling quite a bit in recent years. In 2010, Steve Madden took a 10% stake in the company, forgiving a $48 million loan, and taking over as owner of the brand’s intellectual property. The private equity firm Castanea Partners holds the remaining 90%. This restructuring was not enough to make the company profitable again, though, and this led Betsey Johnson LLC to finally file for bankruptcy.

Betsey Johnson Chief Financial Officer Jonathan Friedman issued the following statement about the company’s recent decision:
“The decision to seek protection under chapter 11 comes after months of rigorously pursuing alternative restructuring arrangements to address Betsey Johnson LLC’s cash flow problems. After exhausting our resources and possibilities, it became apparent that neither a restructuring arrangement with a new equity investor nor a sale of the business enterprise as a going concern outside of bankruptcy was to be forthcoming. Accordingly, our board made the determination that a Chapter 11 store closing process will likely be the best way to maximize the value of the company’s assets, for the benefit of its creditors.”
He went on to blame the U.S recession’s effect on “higher-end apparel brands” as a reason for the brand’s retail profits falling by more than 20% since 2007.
Others, though, remain optimistic that the fearless fashion icon, and the fun, colorful clothes that make the brand endearing to so many people, will bounce back. Steve Madden has said, “While this particular licensee may be closing, the Betsey Johnson brand is stronger than ever, with a thriving wholesale business across a range of product categories. As the owners of the Betsey Johnson brand, we at Steve Madden remain firmly committed to Betsey Johnson-the designer, her vision, and our growing wholesale business-which is up 50 percent so far in 2012.”
Betsey Johnson herself plans to stay on as creative director of the brand. She also plans to still have a runway presentation in the fall, and she is shooting a reality show with her daughter Lulu this summer. Because she is, after all, the embodiment of the brand, Betsey made a statement of her own, saying, “I love our brand! As creative director, it’s full speed ahead at Betsey.” Reaction to the Forbes Story
I do feel that the initial handling Betsey Johnson’s filing for bankruptcy was done with timeliness and solidarity. The CFO, Betsey, and Steve Madden all released statements that addressed what happened. I think it was extremely important that this was done with optimism and honesty, and because it was, I think the brand will not take as big a hit in public opinion as it could have. By releasing the statements right away, they showed that they believe in the longevity of the brand. On the other hand, I feel like there is a big disconnect between the executives who actually run the business and the designer herself, Betsey Johnson. On the Facebook page, there was no real mention of the bankruptcy, except for a few comments by fans who said they were “saddened” to hear the news, but hoped that things would be ok. On Betsey’s Twitter, the only comment she made was the statement exclaiming she “loves our brand!” To me, even though she made somewhat of an acknowledgement of the current state of the business and her optimism for the future, it really makes her seem like she is out of the loop. I think the best thing that could have been done would have been a joint statement. While Johnson may not have much to do with the actual running of the brand, she is, in fact, the brand. It is her name and her personality that have sold her clothing and accessories all these years. Without her, there wouldn’t be a brand. Because there is so much going on behind the scenes, it is important going forward that they put up a united front. I do think, though, having Steve Madden be associated with the brand is a very smart business move. If there is anyone who knows about falling from grace and then reinventing themselves better than before it’s Steve Madden. He was convicted in 2002 and spent over 40 months in prison for stock manipulation, money, and securities fraud. While he had to step down as CEO of his own company, he stayed on as creative consultant, and in 2006, was named “Company of the Year” at the Footwear News Achievement Awards.