Crisis Communication: Lessons from Martha Stewart and Michael Vick
The Price of Lies and Half Truths
When a corporation or organization is faced with an in-house crisis that is certain to go public, their respective public relations departments immediately go into damage-control mode. They are under pressure to minimize the damage at all costs — even if it means disseminating misleading information, twisting the truth or even outright lying.
Public relations departments would do well to understand that the lie will do the company more harm than the transgression being lied about. Lying is what earned Martha Stewart and Michael Vick mandatory invitations to be houseguests of the federal penal system.
Celebrity style-setter Martha Stewart was convicted of profiting from illegal insider stock trading. Stewart owned 4000 shares of stock in biotech drugmaker ImClone, a company whose chief executive officer Sam Waksal was a personal friend of Stewart.
On December 27, 2001 Stewart got word through Waksal that approval of ImClone’s promising cancer drug Erbitux was going to be rejected by the Food and Drug Administration the next day. Stewart immediately sold her shares and saved herself $40,000 when the stock tumbled the next day.
Stewart’s five-month stay at the Alderson Federal Prison Camp in Alderson, West Virginia was not the result of the insider trading but rather the result of lying to federal investigators and to the Securities and Exchange Commission about it.
Had Stewart simply admitted to illegal insider trading she probably would have been slapped with a hefty fine (which she could easily have paid) and would maybe have been barred from trading stocks for a certain period of time. As a first-time offender prison time for her would have been unlikely.
Former National Football League star Michael Vick was sentenced to 23 months in federal prison for his role in a dogfighting conspiracy. Had Vick simply admitted his involvement in the conspiracy rather than lying to federal investigators it is highly unlikely he would have been ordered to federal prison. At the worst he may have been fined and ordered to do community service.
Dogfighting doesn’t earn you time in federal prison. Lying to the feds does.
Corporate lies to the media certainly do not meet the level of federal offenses, but the consequences can be just as devastating as a prison stay at Club Fed or Camp Cupcake, the name affectionately given to the Alderson Federal Prison Camp. The media will always get to the bottom of the corporate lie, half-truth or misleading statements at which point the corporation will have to answer not only to the initial transgression but also as to why they lied about it. Regardless of how the corporation tries to twist things the media eventually figure it out and then report the coverup as well as the details.
Case Study: How Not to Announce You Fired 2,500 Employees
A longtime big box store chain fell on hard times resulting in the closing of 23 stores and 2,500 people being let go. This was terrible news because the store was a fixture in the community. Everyone shopped there and most people knew at least one person who worked there. But the news release announcing the chain’s financial dilemma was anything but personal. It was cold, misleading and backfired on them. The following is a reprint of part of the news release with the name of the company changed as my goal here is to teach and not embarrass anyone.
BenStop Announces Strategic Initiative to Enhance Financial Performance
YOUR TOWN, USA (September 7, 2020) BenStop, Inc. (NYSE: BNS), today announced that its board of directors approved a strategic reorganization plan. Under the plan, 23 BenStop stores and the company’s distribution center in Splitrock, RI will be closed. The company’s corporate structure will be downsized with the reduction of approximately 2,500 employees.
Stop already! Does the PR flack and the corporate criminals he answers to really believe that we in the media are buyin’ this crap? Do they honestly believe that this is how we’re going to report the story? Here we have a situation where 2,500 lives have been turned upside down, thousands, if not millions of longtime, loyal shoppers are effected as is the tax base of each community the 23 stores to be closed are located in.
Yet, what’s the first piece of information the company imparts to us? What is it that they deemed most important in this news release? Their stock symbol! Nevermind the destroyed lives and communities in turmoil. Get that all- important stock symbol out there. Perhaps they didn’t understand that if their business operations are in such rough shape to force the closing of 23 stores, the average investor is probably not going to call his broker to buy stock in the company.
Now notice how deviously the first line of the news release is written: “…its board of directors approved a strategic reorganization plan” as if that’s the most important part of the news release! The board didn’t approve anything! They simply gathered around their mahogany corporate conference table, stared at each other and said, “We either close a bunch of stores or we’re all outta here. Everyone in favor, say aye!” The line is written in such a fashion as to make it appear the board carefully deliberated and then gave the plan the ok. Next in their twisted order of importance is the closing of the stores, followed by the closing of the distribution center. Then finally, almost as an afterthought, they get around to mentioning that 2,500 people are out of a job.
BenStop would have been thrilled had the media reported the story exactly as the PR flacks fed it to us — A Strategic Initiative to Enhance Financial Performance my foot! Here is exactly how it was reported by my television station and the local newspaper.
Television Anchorperson’s Lead:
BenStop announced plans today to close 23 of its stores in seven states and release 25-hundred workers.
Afternoon Newspaper Headline:
BenStop Slashes 2,500 Jobs
Perhaps you noticed that neither media outlet used the words strategic initiative or enhance financial performance. And what do you think the next morning’s conversations at the gym and the watercooler sounded like?
(A) “Hey, how ‘bout that strategic initiative BenStop announced last night.” (B) “I notice BenStop is going to enhance its financial performance.” or (C) “Did you see that BenStop is layin’ off 2,500 people?” Which do you think is the correct answer, (C), (C) or (C)?
Our television station attempted to contact company officials for an interview, but as we expected no spokesperson was available. The only phone numbers the news release provided were for Investor Contact — no media contact number.
Sadly, BenStop suffered some bad press when they didn’t have to. All it would have taken was a well-coordinated news conference and a spokesperson who understood that all news conferences have an audience of one — the person sitting in his or her easy chair in their living room. Speak to that person. It can be a prepared statement but make it personal and sincere. All that needs to be said is, “Because of the current business climate BenStop is sad to have to report that we’ve been forced to layoff 2,500 of our dedicated and trusted employees. BenStop has been a part of this community for 30 years and we know this does not come as welcome news to our thousands and thousands of loyal customers.”
That’s all you have to say! You’ve set the tone. A much different tone than the cold news release that put profits before people. Yes, reporters will now ask for the specifics as to the the amount of financial losses, the timetable for the closings and details of severance packages for those who were fired. But those things aren’t important to the average viewer who also happens to be the average customer. Your news conference conveyed a message of concern, sadness and empathy and it’s that tone that will be highlighted in the subsequent media coverage.
Don’t lie. Don’t mislead. Don’t tell half-truths. Anything less than the truth will get you in more trouble than the initial transgression.
