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.

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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.

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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.

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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)

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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?

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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

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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.

Murdoch guilty of 'willful blindness' - YouTube.webarchive Download this file

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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.

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 Summary of LA Times Story

In this April 26^th story about this unraveling, far-reaching tale of corporate wrong-doing of the most powerful media mogul and his media empire, The LA Times covers the latest in the inquiry into the practices of Rupert Murdoch and News Corporation.  http://lat.ms/IfdWjW   

 The elder Murdoch is chairman and chief executive of News Corp., the world’s second-largest media conglomerate. Its U.S. companies include Fox Television, Fox News, the New York Post and the Wall Street Journal.

Last Thursday, Murdoch apologized for the phone-hacking scandal that has tarnished his company but then blamed subordinates for covering up the problem and police for failing to investigate it properly.  Practically in the same breath, he also acknowledged that, as chairman of News Corp., he hadn't bothered to look into the issue himself when evidence of wrongdoing began emerging in 2006.  Then, when the scandal erupted last year when evidence surfaced that the cell phone of a kidnapped girl was among those hacked, he shut down the 168-year-old News of the World in a rush of fear.

This latest revelation took place during Murdoch’s statements in the Leveson inquiry into media culture and ethics.  The media storm started just prior to Murdoch taking the stand, when communication regulators announced an investigation into email hacking by employees at Sky News.  The head of Sky News, John Ryley, characterized email hacking as being in the public interest. News Corp. tabloids in particular, are noted for sensational and intrusive stories.  It’s said that politicians have done special favors for Murdoch, in an effort to avoid having their private lives played out on the front pages of Murdoch’s publications.

The article contrasts statements made by Murdoch with earlier contradictory statements, leaving the reader convinced that Murdoch is not on the up and up about his dealings with his company’s infractions.

Reaction to LA Times Story

Murdoch describes himself as the victim of a corporate cover-up.  It is widely known that he has a tremendous amount of influence over the corporate culture at News Corp.  How could this be that he is a victim?  Murdoch’s demeanor during the inquiry has been characterized as cagey, defensive and combative.  He admitted that he failed, yet denied that he knows anything about a culture of hacking.

With regard to email hacking and justification by Sky News’ Ryley, a press release was issued by News Corp., http://www.newscorp.com/news/news_518.html indicating that their management and standards committee cooperated with police, which led to the arrest of former employees who had hacked phones and that they would continue to give their total support.  Since when does this support include justifying a criminal offense with a public interest defense?  There is definitely some talking out of both sides of the mouth 

Layer after layer of damaging information has surfaced over the past several years and this latest episode has raised serious doubts with US investors and rightly so.  The FOX network is one of News Corp.’s most valuable assets and it – along with all of News Corp. TV and broadcasting licenses -  is in jeopardy as famous US actors come forth about phone hacking, raising the specter of the foreign corrupt practices act coming into play.

 The latest verdict:  

You can join in the conversation on the Stop Rupert Murdoch Facebook page at http://www.facebook.com/StopRupertMurdoch. 

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Overview

Popular toy maker Mattel was ranked 12^th on CRO Magazine's "100 Best Corporate Citizens" List. This is the fourth consecutive year Mattel has made the list. Among specific categories of performance, Mattel received high scores for excellence in Corporate Governance, as well as Human Rights and Philanthropy.

Mattel received this award just one year after their messy “toxic toys” crisis, and every year since then.

Mattel Toxic Toys, Fast Facts:

• On August 14^th, 2007, Mattel recalled millions of toys that were covered in lead paint or had harmful magnets.
• The recall included 83 products made between April 19, 2007 and July 6, 2007, when Mattel stopped factory production.
• All of the tainted toys were produced in a Chinese factory called Lee Dir Industrial, which shut down due to the toxic toy crisis.
• The toys included Polly Pocket, Barbie, “Cars” movie items, Sesame Street and Nickelodeon characters.
• At the time of the recall, no injuries had been reported.
• Mattel was informed of the lead toys by a European retailer, which prompted Mattel to issue an investigation and notify the Consumer Protection Safety Commission, who took control of the investigation.
• This was Mattel’s 17^th recall in 10 years
• Lead paint is very dangerous, especially for young children. Exposure to low levels of lead paint can lead to problems in brain development, damages to the kidneys and nervous systems, and death.
• 65% of Mattel’s toys are made in China.
• The Lee Der factory shut down but Mattel still apologized for the incident even though the lead was technically the factory’s fault. The magnets, however, were a design flaw by Mattel.
• There has been an issue with china producing defected toys.
• Mattel is under pressure to produce more toys at a cheaper cost, but with production costs rising, this has been difficult. So, Chinese toy makers are forced to cut corners to meet demands. 
• A 2005 investigation into a Mattel factory in China (not Lee Der) revealed awful conditions.
• Total cost of crisis: $12 million

Upon receiving this honor, Mattel used their social media channels to announce this award. Specifically, their company Facebook page is filled with posts around their CSR efforts such as recycling initiatives and their recent decision to create a “bald Barbie” for cancer patients or those who suffer from alopecia.

While these efforts are certainly commendable, I question this ranking, especially since it was awarded within a year after their toxic toys debacle.  I personally feel there is a dichotomy between Mattel’s words and deeds. I think that Mattel is certainly taking steps in the right direction, but unfortunately not completely there.

In 2004 Mattel issued their first worldwide CSR report and issued the second report in 2007. The 2007 report was likely created before the toxic toys incident because it makes no reference to it. Their third and most recent CSR report was issued in 2009 and does briefly mention the 2007 incident. I found it interesting that in their 2009 report anytime they mention the recall they make sure to call it a “voluntary recall.” However, I have to wonder if they hadn’t voluntarily recalled, would they have been forced?

I think to really move in the right direction Mattel should make it a priority to produce this report on a yearly basis.

Additionally, I find it odd that a company who is ‘so committed’ to CSR does not have an executive dedicated to the task. They do not have a CCO, but instead their executive team is built by brand. Each brand may have their own CSR advocate, but if that’s the case I suggest being more transparent with who those leaders are.

Mattel shared the press release with the CRO ranking on their Facebook page which received approximately 70 likes. However, I found it interesting in the comments section that people accused them of removing negative comments from their page. Overall, the comments on the rankings seem positive, but I have to question if it is because the other comments were removed?

However, it’s not all negative for Mattel. On the ‘pro’ Mattel side they have Consumer Relations Call Center, and let consumers can make contact 24 hours a day via the company's Consumer Relations Answer Center website.

Additionally, they have a well defined mission and CSR statement:

Mattel's Corporate Responsibility mission is to positively impact our people, our products and our planet by playing responsibly. This commitment resonates in our actions and through our company values each and every day, as we:

• Play Fair by continually encouraging the Mattel organization to align decision-making with the company's values.
• Play Together by working with employees, partners, vendors and regulators to bring the world safe toys that grown-ups trust and children love.
• Play to Grow by committing to a sustainable future through efforts to work smarter and reduce our impact on the environment.
• Play with Passion by volunteering in our communities and helping underserved children experience the joy of play.

So, what do you think of Mattel and their CSR? Have they bounced back from Toxic Toys and proved themselves or do they need to realign their words and deeds?

***

Press Release Full Text:

Mattel Ranks No. 12 Among 100 Best Corporate Citizens in 2012 Ranking Demonstrates Company's Commitment to Corporate Responsibility

EL SEGUNDO, Calif., Apr 19, 2012 (BUSINESS WIRE) -- Mattel, Inc. MAT +1.14% today announced it has been named one of CRO Magazine's "100 Best Corporate Citizens" for the fourth consecutive year, ranking No. 12. This is the magazine's 13th annual ranking of best corporate citizens.

Among specific categories of performance, Mattel received high scores for excellence in Corporate Governance, as well as Human Rights and Philanthropy.

"At Mattel, we have the privilege of positively impacting the lives of children through play and we continually strive to play responsibly in all aspects of our business," said Lisa Marie Bongiovanni, vice president of Corporate Affairs for Mattel. "We are truly honored to be recognized for the fourth consecutive year as one of CRO's 100 best corporate citizens."

Last year, Mattel launched efforts to implement new sustainable sourcing principles and establish goals to measure progress on packaging. The company's sustainable sourcing goals include a commitment to composing 70 percent of paper packaging with recycled material or sustainable fiber. In addition, by year-end 2015, Mattel's paper packaging goal will increase to 85 percent.

Earlier this year, Mattel also was recognized for the fifth consecutive year among FORTUNE Magazine's "100 Best Companies to Work For" in 2012, ranking No. 79.

Mattel's Corporate Responsibility mission is to act with integrity in all the company does and to bring the world safe toys that grown-ups trust and children love. Mattel is committed to positively impacting its people, its products and the world by playing responsibly. Learn more about Mattel's efforts in Corporate Responsibility.

The "100 Best List" documents 324 data points of disclosure--harvested from publicly available information in seven categories: environment, climate change, employee relations, human rights, governance, finance and philanthropy. The meteoric rise in the market for transparency was amply chronicled by companies' individual and aggregate performance. The research behind the CR Magazine rankings is conducted by IW Financial, an industry leader in market data and analysis. The List methodology is published by Corporate Responsibility Magazine, found online at www.thecro.com .

ABOUT MATTEL:

Mattel, Inc. MAT +1.14% ( www.mattel.com ) is the worldwide leader in the design, manufacture and marketing of toys and family products. The Mattel family is comprised of such best-selling brands as Barbie(R), the most popular fashion doll ever introduced, Hot Wheels(R), Matchbox(R), American Girl(R), Radica(R) and Tyco R/C(R), as well as Fisher-Price(R) brands, including Thomas & Friends(R), Little People(R), Power Wheels(R) and a wide array of entertainment-inspired toy lines. In 2012, Mattel was named as one of FORTUNE Magazine's "100 Best Companies to Work For" for the fifth year in a row. Mattel also is ranked among Corporate Responsibility Magazine's "100 Best Corporate Citizens." With worldwide headquarters in El Segundo, Calif., Mattel employs approximately 28,000 people in 43 countries and territories and sells products in more than 150 nations. At Mattel, we are "Creating the Future of Play." Follow Mattel on Facebook: www.facebook.com/mattel

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Summary of Walmart’s Cover-up of Bribery at Wal-Mart de Mexico

 On April 21, 2012, The New York Times published a story that revealed that a subsidiary of Wal-Mart, Wal-Mart de Mexico, had paid more than $24 million in bribes over a number of years to facilitate Wal-Mart’s growth in Mexico. Wal-Mart not only bought permits (such as zoning approvals) but also paid for “reductions in environmental impact fees and the allegiance of neighborhood leaders”—potentially violating the Foreign Corrupt Practices Act (FCPA), a federal law that makes it a crime for American companies and their subsidiaries to bribe foreign officials. However, the bigger story is that once Wal-Mart learned of the campaign of bribery in 2005 from Sergio Cicero Zapata, a former executive of the company, and found that Mexican and U.S. laws may have been violated upon conducting an initial investigation into matter, it took steps to quash rather than appropriately address it.

Reaction to Walmart’s Cover-up of Bribery at Wal-Mart de Mexico

 Wal-Mart issued two press releases, which included two different video statements (available on YouTube) from David Tovar, Wal-Mart’s Vice President of Corporate Communications, in response to The Times article, with the first one released on the same day the article was published. However, Wal-Mart makes no mention of the story nor does it issue a statement to address the bribery scandal and its alleged cover-up on the company’s Facebook page and it only sent two tweets related to the allegations. The lack of activity on its social media sites lends credence to my belief that Wal-Mart is more concerned about the impact this story will have on its shares/on investors rather than on how consumers view it.

The Times’ interviews with people who were involved with the internal investigation Wal-Mart conducted in 2005 revealed that some executives of the company were concerned with potential “legal and reputational harm” the company would face should news of the bribes become public. This was reflected in Wal-Mart’s swift response to The Times story, an effort that I believe was aimed at softening the blow to shareholders’ confidence in the company as it suffers another hit to its reputation and faces potential legal problems, including substantial financial penalties if Wal-Mart is found guilty of violating the FCPA. Thus far, its efforts do not appear to have been very successful; Wal-Mart’s stock price has lost about eight percent of its value since publication of The Times article. It is curious that Wal-Mart would have Tovar deliver the company’s response to the allegations of bribery and a cover-up. The company’s decision to not have Michael Duke, President and Chief Executive Officer of Wal-Mart Stores Inc., be the face of the company during this crisis may have further hurt investors’ confidence. The statements made by Tovar in the videos Wal-Mart produced in response to the allegations raised in The Times article are typical of what companies in a jam commonly issue:

As a consumer and Wal-Mart shopper, this bribery scandal won’t affect my decision to shop at Wal-Mart. I don’t think the regular Wal-Mart shopper will be rushing to the company’s website to look for the latest statement on the matter nor are Wal-Mart shoppers likely to follow the ongoing developments of the story. That said, The Times story further reinforces the negative opinions and views that critics of Wal-Mart commonly have of the company, including the belief that it engages in unethical and unlawful practices.

When I read The Times article and juxtaposed Wal-Mart’s actions as described in the article with the statements it issued upon the story’s publication, those statements rang hollow and I come away with the belief that had Wal-Mart not learned that The Times was conducting an investigation, it would not have informed the Justice Department this past December that it had begun an internal investigation into possible violations of the FCPA and would have continued with business as usual. Had it truly aimed to comply with the FCPA, Wal-Mart would have immediately informed U.S. and Mexican authorities when its own preliminary investigation in 2005 revealed that there was potential wrongdoing; instead, the company took steps to sweep the problem under the rug. The lack of transparency that Wal-Mart’s actions illustrate that it doesn’t walk the walk and simply talks the talk, making its present-day statements untrustworthy.

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http://www.nbcdfw.com/video/#!/news/top-stories/AA-Employees-Picket-at-DFW/148555845

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Background/Summary:

This story first started to unfold about a year and a half ago, when a factory fire in Bangladesh resulted in the deaths of 29 workers.  This garment factory produced clothing for brands such as Tommy Hilfiger, H&M and Kohl's, all of whom pledged $37,500 each towards a fund for the relatives of those who perished.  They also collaborated on ideas for improving fire safety, but as the media attention began to fade, so did their efforts (cite: Good Morning America).  

A little over a year later, ABC News decided to follow up on the story with an investigative piece for Nightline and World News with Diane Sawyer.  It focused on Tommy Hilfiger, due to the fact that labor groups identified Hilfiger (and PVH, the fashion firm that owns the brand) as the company least receptive to labor improvements.  So ABC went backstage during New York Fashion Week,  and questioned Hilfiger about the factories and their efforts to improve conditions (click on link below).  

http://abcnews.go.com/Blotter/video/high-fashion-deadly-factories-15970983  

The expose aired on March 21st, and that same day, PVH (which also owns Calvin Klein, Van Heusen, etc.) announced a landmark initiative to improve working conditions in Bangladesh.  The agreement states that PVH will work with NGO's and trade unions to improve fire and building safety, and they also mention that this will be a legally binding contract, not just a verbal promise or voluntary initiative.  Kohl's released that they were still investigating the matter, but H&M announced their own plans to start a new training center for Bangladeshi factory workers.    

These announcements bring hope that things will start to change in Bangladesh, but recent incidents have cast a dark shadow on the good news.  Two and a half weeks ago (April 6) Aminul Islam, an important labor activist at the Bangladesh Center for Worker Solidarity (BCWS), was found dead in the manufacturing hub of Ashulia.  His body showed signs of torture, and fellow activists interpreted his death as an attempt to scare off anyone involved in fighting low wages and poor working conditions (cite: New York Times).  In reaction to the incident, Tommy Hilfiger released an e-mail statement saying that they remain committed to improving conditions, but that has been their only acknowledgement of this increased turmoil.    

Reaction:

This communication crisis can be split into two parts: before ABC News, and after ABC News.  The first part provides a terrific example of how companies need to remember that actions speak louder than words; ABC News was able to publicly call Tommy Hilfiger's bluff, and as a result his company's reputation was severely jeopardized.  Not only did the company and the other brands involved put a price cap on death ($37,500), but they came across as even more heartless for doing little else to help out the victims' families. Their Facebook page from December 2010 (when the fire broke out) does not mention anything about the incident; in fact, the first thing they posted after the fire was a recommendation from their holiday gift guide.  In addition to increased action. it could also be said that more transparency might have been beneficial; if Hilfiger had even just been in talks to improve working conditions, a simple acknowledgement or announcement may have gone a long way in preventing this fall out via ABC News.

Some of the other companies who produced garments at these factories (H&M, Kohl's) had similar reactions to Hilfiger, with Gap Inc. and JCPenny being some of the only exceptions.  The day of the fire, Gap Inc. released a statement saying they were deeply saddened by the tragedy, and urged factory owners and the Bangladesh government to do something to increase safetey precautions.  This is a great example of how a timely response can help prevent future mishaps, and their statement also hit on all four areas of a crisis communication response: commitment, expertise, transparency, and empathy.  Tommy Hilfiger would have been smart to take a page out of their book. 

The second half of this crisis ("after ABC News") gets a little more tricky.  After making the announcement of their landmark initiative, Hilfiger was hit with more news of turmoil surrounding his production factories.  The death of Aminul Islam was a sad and tragic incident, but his death is just one of several related to labor conditions in the Bangladesh factories. I think that Hilfiger was smart to re-affirm their commitment to improving the situation, but now they are also dealing with other rumors surrounding Islam's death.  The World Socialist Website (wsws.org) suggests that the government and even factory owners were involved in the unionist's demise (note: Hilfiger is not the owner of the factory, he simply produces there), with this being an attempt to "stifle unrest" in their factories.  As of right now none of it can be proven, and I think that Hilfiger is smart to stay away from acknowledging the rumors until further evidence has surfaced.  In spite of this though, I think that Hilfiger might do well to show some empathy towards Islam's family; Islam played a large part in putting together the ABC News expose (he provided ABC with the Bangladeshi people to interview), and it might help to show that there is no ill will if Hilfiger expresses some sadness over his passing. 

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Summary

Best Buy Co., Inc. (NYSE:BBY) has been in the news several times in the last few weeks. On April 10, they announced that their CEO, Brian Dunn, was leaving. Dunn worked for Best Buy for 28 years, the last 3 years as CEO. He worked his way up to CEO from a salesclerk, so he was very familiar with the Best Buy culture and well-liked by his employees. Interim CEO is G. Mike Mikan who has been a Best Buy director since April 2008.

The announcement that Dunn will be leaving comes two weeks after Best Buy reported a quarterly loss of $1.7 billion. (MSNBC; WSJ) Best Buy denied any reports that Dunn was leaving because of poor performance.

Four days after announcing Dunn was stepping down as CEO, Best Buy released the names of 42 stores that will be closed by May 12. This move was expected since Best Buy had announced in March their plan to close a total of 50 stores and had already closed eight stores. These two announcements were made public on their Twitter feed which linked to the press releases on their website.  

Since these announcements, there have been reports that Best Buy is investigating the personal conduct of former CEO Dunn to determine if he used company funds while pursuing an alleged relationship with a female subordinate. (WSJ)  The announcement that Brian Dunn left under suspicion has been deeply felt by employees. Wall Street Journal quoted former Best Buy Chief Executive Bradbury H. Anderson, "a lot of people are just heartsick. I have been in conversations with people who have been in tears."

Best Buy has received some criticism for not being more transparent about the investigation into Dunn, but maintains that “the investigation is ‘unrelated to the company's operations or financial controls’ and doesn't affect its core business.” (WSJ) (Chicago Tribune)

Reaction

I really like how Best Buy initially shared their two big announcements. They didn't put this information on Facebook – which they mainly use for deals, coupons, etc. – but they released two well-written press releases and linked to the press releases from their twitter account. The press releases reframed a lot of seemingly negative information in a very positive light.

Best Buy seems to be a failing company, but they do have a plan for their future. Before he left, Dunn planned to close all of Best Buy’s big box stores and replace them with smaller, specialized stores in an attempt to change the company’s business model so it would start to be successful again. I think when Best Buy released the names of the remaining 42 stores, they should have restated why they are closing so many big box stores to remind us that they do have a plan for their future and they are not just slowly giving up.

Finally, they seem to be handling the Dunn situation with as much grace as possible. The call for transparency as good corporate governance is valid, but the Board of Directors also needs to consider the negative effects of speaking about allegations before they are proven, especially with someone as beloved by his employees as Dunn is. Not commenting seems to be the best option for Best Buy.

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Summary of news event and company background:

CSX Corporation (NYSE: CSX), is one of the largest rail-based transportation suppliers.  According to their website (www.csx.com), “the CSX Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population centers in the nation. More than two-thirds of Americans live within CSX’s service territory.”

On April 2, in honor of Earth Month, the company launched  "Environmental Pursuit."   This contest was launched through the company’s social media sites (Twitter and Facebook) to allow their stakeholders to test their environmental knowledge, or "Green IQ," and giving them the opportunity to win “green” prizes.  At the end of the contest, three grand prizes of $1,000 will be awarded to the individual winner plus $1,000 to a charitable organization chosen by the winners.

Communication Efforts of Company and My POV

The railway transportation system is traditionally seen as the grandfather, old-world conservative mode of moving goods from point A to point B.  CSX Corporation realizes this but also knows that their company is heavily involved in environmental and sustainability efforts.  They are very business savvy to use social media to engage a new generation of eco-aware stakeholders. 

CSX Corporation’s "Environmental Pursuit" contest, using both their Facebook channel (http://tinyurl.com/cw8vz2j) and Twitter feed (https://twitter.com/#!/CSX), is a smart two-pronged strategy.   They use the contest to engage not only current environmentally-aware stakeholders via social media by raising awareness of their eco-friendly and sustainability practices. But, by doing this, create a new audience for their product and services.   They are also offering the opportunity for not only the individual stakeholder to benefit as a result of their environmental knowledge but also a charitable organization of the winner’s chose. This is brilliant because it allows the corporation to extend its CSR reach directly into non-profits and increases their bottom line.

This strategy, while not unique, is a popular one. Using cause marketing has proven successful in the past (GAP’s Red Campaign for example). While a smart and strategic move, I would have liked to see more publicity surrounding this campaign.  If they are trying to ride the wave of Earth Month, they could have had a more solid media blitz. But, in spite of this small ommission, using social media as another avenue to enhance the corporation’s CSR efforts while adjusting their archaic image,  is a smart and savvy business decision.

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Summary of Groupon’s Changing Financial Report

Groupon Inc., (NASDAQ: GRPN), operates in over 43 countries and is the world’s leading volume online coupon and discount website. Last summer, Groupon announced that it would file with the Securities Exchange Commission for a proposed initial offering of stock. In November 2011, Groupon valued the company’s IPO at over $10 billion, or $28 a share which is the larges since Google. Both the financial industry as well as the general public positively buzzed about the IPO. The momentum behind Groupon seemed endless, until fourth quarter announcements were made.

Groupon released the fourth quarter and full year 2011 results in accordance with the SEC in the company’s 10-K. Groupon announced on March 30^th the revised statements. There was a very large discrepancy between the two sets of numbers. The revised numbers were far lower than those in the initial filing. According to Groupon’s Investor page, “the revisions resulted in a reduction of fourth quarter 2011 revenue of $14.3 million. The revisions also resulted in an increase to fourth quarter operating expenses that reduced operating income by $30 million, net income by $22.6 million and earnings per share by $0.04.” Groupon’s stock fell. This is the second time Groupon had significant accounting errors, which is a huge red flag for many.

Groupon is now being sued by several investors over the revisions seeking a class-action suit claiming “Groupon did not reveal its poor and inadequate internal controls,” (Reuters). Groupon’s spokesperson, Julie Mossler, declined to comment, which can be seen as a legal necessity or as Groupon delaying a statement. If Mossler is declining to comment solely based on legal counsel, it would be beneficial for her to say that it is a matter only the legal department can discuss. This would create a perceived level of transparency even though it is still not providing information.

Reaction to Groupon’s Changing Financial Report

The majority of media coverage tears into Groupon for various reasons, the most prominent being the question of how the auditors internally, (Groupon), and externally, (Ernst and Young), missed the numbers. Groupon’s price has decreased significantly in the wake of the revisions. Since the numbers had to be revised, the confidence in Groupon is falling. While the revision may not have had a large impact on the earnings, it damages the credibility of the company. Groupon needs to portray itself as a strong resilient company and take responsibility as well as make the necessary steps to ensure this never happens again. This is, in fact, the second time Groupon had to revise its financials.

Instead of tackling the issue head on Groupon blames the erroneous numbers on a variety of things ranging from the company’s refund reserve accrual for different price points and internal faulty financial controls. Groupon’s Investor page quotes Groupon CFO, Jason Child, “We remain confident in the fundamentals of our business, as our performance continues to highlight the value that we provide to customers and merchants.” While that statement sounds nice, it offers very little in the way of investor confidence. The key public relations message should have focused on the competence within the fundamentals of the business not discuss costumer value. Jason Child is Groupon’s CFO; therefore, he is the person who should know exactly how and why this happened. The CFO of any company should publically come across as having the ultimate knowledge of the company and be trusted to know the internal financials. That statement does not give any explanation or clarity to the events. Groupon already faces criticism that aggressive accounting was behind the IPO pricing and the CFO would be the ideal person to release a statement of a higher level of transparency as well as a sense of control and responsibility.

http://investor.groupon.com/

Groupon has done a poor job of handling this issue; however, the company was able to hit some key messages. The best point made in the Investor page is Groupon is focusing on correcting the internal accounting, which is important since the company must provide a solution in the key messages. The rest of Groupon’s Investor page seems to scapegoat its independent auditor, Ernst and Young, shifting the blame. It also states Groupon will work with an external accounting firm on the effectiveness of internal controls.

Groupon continuously brings up the SEC and filings in accordance and goes to the extent of stating what they are complying with SEC regulations. This is the law and Groupon seems like a child trying to play in a grown up world by hiding behind the SEC for credibility, as though following SEC regulation is something the company should be praised for. Groupon failed to use this error as an opportunity to create investor confidence.

Groupon_Charts.doc Download this file

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According to a press release issued on March 14, 2012, Encyclopedia Britannica Inc. announced that it would cease production of all print versions and focus solely on its digital products. The company explained that for the first time in 244 years the publication would no longer be available after the current stock is sold. The press release goes in detail to explain that this move to digital-only has been in the making for many years and that the online versions offer more information that can be updated with efficiency.

News Outlet Communication           

            In a story from CNN Money, president of Britannica Jorge Cauz speaks of the transition with an uplifting, forward-thinking attitude. He explains that while most might call this an end of an era, his company is not sad and that “ outsiders are more nostalgic about the books than I am.” Additionally, Cauz notes that the younger generation is consuming data differently now and his company aims to stay abreast of current trends.

            Also, an interview with Jorge Cauz on NPR elaborates on Britannica’s extensive online reference tool competition, mainly Wikipedia. In comparing several entries from both sites, NPR host Robert Siegel mentions that the Wikipedia posts are considerably longer than Britannica’s.  In response, Cauz explains that Britannica’s advantage over Wikipedia lies in the fact that they have several editorial processes in place to ensure reliability and factuality. He also speaks to the usefulness of Wikipedia for certain types of information gathering but focuses on the fact that they are two very different products with ultimately different end uses.

            In another story by the New York Times, Cauz explains that it is “ a rite of passage in this new era” and how the Internet equips Britannica with multimedia tools and a larger database for information storage. Additionally, the article explains how the series has become a luxury item that is primarily purchased by libraries, research institutions, and upscale consumers. The article also mentions a 2005 study, which found that Wikipedia entries had an average of 4 errors and Britannica had an average of 3 errors, which was fully denied by Britannica.

While examining the company’s social media usage to cover this story, they posted a nostalgic, uplifting story on the Britannica blog in addition to a linked tweet to the story and aforementioned WSJ coverage. The blog post entitled “ Change: It’s Okay. Really” elaborated on their decision to cease production of the iconic 32-volume series. The post positively reflects on this shift as part of “ the evolution of human knowledge” and how the Britannica brand as a whole will benefit from the digital expansion. Additionally, the post noted that the company was offering a free online version of Britannica for a week following the announcement.

Reaction

The decision to cease production of the print version of Britannica was likely tough for the company, and in my opinion they handled it in a dignified fashion. In evaluating the several news sources and company social media outlets, I think their tactic of painting a positive picture was probably the best way to communicate the “end of an era.”  While it is likely that the factors underlying this decision lie in the declining market share Britannica holds in the printed book realm, they did not mention this in any of their multiple communications with the public. So, their strategic shift to the positive future of the company in the digital age worked wonderfully for this announcement. Additionally, Jorge Cauz seemingly portrayed this as a change he had been prepared to make for a while.  As a side note, after their announcement, CNN reported that the remaining copies of the book were being sold at a record rate of 150 copies per day.

            While I think that Britannica handled this announcement very well with a clear, consistently positive message through all communication channels there are some factors of their decision I might have altered. Their announcement seemed abrupt in the fact that they announced they would no longer be printing editions whatsoever, which left an extremely limited supply. Personally, I would have made a similar announcement explaining that there would be one final special edition printed along with instructions for placing pre-orders.  By doing this, Britannica could have created a final legacy edition while still enjoying the same demand seen following the announcement. Additionally, while Jorge Cauz is the president of Britannica I might have chosen another executive for any coverage containing audio due to his accent. While listening to radio coverage or watching any video I found him to be a bit hard to comprehend at times and I assume others might have as well. So, Britannica could have possibly utilized a Vice President or Chief Marketing Officer to provide a clearer voice for the public and still provided quotes from Cauz for all print coverage. 

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The US unemployment rate has exceeded 8% since February 2009 and has plenty of Americans biting their nails over future planning.

“We can’t wait for Washington, we need to do more on own,” Starbucks Coffee Company’s CEO Howard Schultz was quoted in an April 3 Reuters article.

Our government’s neglect of committing to a plan and taking action has been the catalyst in Starbucks’ partnership with Opportunity Finance Network (OFN). Together they launched the Create Jobs for USA fund to raise money for US job creation last November.

OFN is a national network of Community Development Financial Institutions (CDFI) receiving grants that allow them to provide loans to underprivileged community businesses. The Create Jobs for USA fund was founded with Starbucks’ $5 million endowment and vow to create jobs within its own organization – Schultz has announced plans for a US plant potentially creating 240 manufacturing and construction jobs.

Starbucks is calling on its customers as well, offering an American-made “Indivisible” wristband for a $5 donation. Two weeks after the program’s initiation Starbucks announced through a formal press release, its Twitter handle and its Facebook page: $1 million was added to the fund solely from donation proceeds.

Sadly it seemed the program had lost its initial hype following this first milestone, raising only an additional $1.5 million in the subsequent months. Then according to a Yahoo! Finance article last week, Google and Banana Republic (Gap, Inc.) pledged a total of $4 million; a contribution expected to create 3,800 jobs. Starbucks again issued a press release announcing the partnership and the program’s Twitter and Facebook pages were refreshed with revitalized hope.

Review of Starbucks’ Create Jobs for USA fund

Not only did Starbucks fiscally establish the Create Jobs for USA fund and garner impressive initial support, the company strategically communicated its efforts using traditional and social media platforms including a Facebook page allowing small business owners to share their story and donators to confirm their money made a difference; a frequently-used Twitter handle, Indivisible and JobsForUSA hashtags; descriptive and eye-catching infographics; and a website explaining the program and how to get involved. The site includes a powerful quote authenticating Americans’ propensity to come together through rough times and describes the fund’s mission.

“We know that the Create Jobs for USA program won’t solve the problem by itself but we hope it can help create conversation, inspire ideas, and empower us all to take action in our communities…We want to bring together a community of people who are excited to help one another and get involved.”

The fund also teamed with NBC’s The Voice last week – the audience was adorned with Indivisible bracelets and the program received a shout-out from the show’s emcee Carson Daly.

The Create Jobs for USA fund positions Starbucks as a leader in attempted change of a controversial issue – one that has either directly or indirectly touched millions of Americans regardless of race and class. A recent Forbes article lauded the initiative and Schultz personally, stating that President Obama called Schultz to discuss the issue after Schultz began a moratorium on political contributions, securing support from CEOs at Pepsi, Disney, J.Crew and Whole Foods.

Starbucks has identified a problem in the US and inspired a creative and realistic step toward a solution by focusing on struggling small businesses. The company is working hard to keep the issue at the forefront of the nation’s minds but unfortunately our media doesn’t allow for continuous coverage of initiatives like Starbucks’.

How were the sponsorships by Google and Gap secured – did the companies come forward on their own or did Starbucks recruit those organizations? Why isn’t Starbucks publicly seeking more support from powerful organizations? Why aren’t companies opting to participate and boost their CSR images? The recent reminders of the program were fueled by newcomers’ support and Starbucks can only sustain its influence with the Create Jobs for USA fund if it continues to spark change for the better.

View the inspiring video below explaining the Create Jobs for USA fund:

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