Wednesday, May 30, 2012

Do we not care anymore about ethics in business?

            Someone asked recently if anyone cares, anymore, when a company blunders, or even commits a crime with the intent to profit from it.
            In fact I’ve been asked that question recently by a couple of news service business reporters. One was doing a story about Goldman Sachs and the other was following up on the latest JP Morgan Chase Bank $2-billion trading loss.
            And more recently, Aaron Kwittken, CEO of Kwittken Company wrote an article on in which he raised the question, can companies like Walmart and Apple recover from really negative media coverage of their sweat shops in foreign factories and paying bribes in Mexico.
            There was a time when behavior like those would cause serious business damage, if not force the company out of business.  Today, there seems to be almost no consequences to the Apple and Walmart news.
            Mr. Kwittken concluded in his article that Walmart’s average customer is “less concerned with the allegations of the retailer’s shady international business practices than the steep discounts on toothpaste, DVDs, French fires and the like.”
            Sadly, I have to agree, but I think his assessment doesn’t go far enough.
            The public reacts the same to retailers as it does to local, state and federal governments and the politicians that populate those offices.  We talk about greedy retailers and politicians, but many of us never bother to go to the polls. We complain about the banks and investment houses, but if we have a mortgage and no one is threatening to throw us out of OUR home, we don’t worry about the couple across town who may be about to lose theirs.
            I’m old enough to remember when customers and constituents, who saw something wrong, not only complained about it, they did something.  They took action.  They took their business down the street to a competitor, or they got out and campaigned for a candidate they had more confidence in – and they didn’t fail to vote.
            I don’t have a clue how to overcome our nation's self-centered lives, but I do still feel strongly that businesses (and politicians, too) who get into trouble still need to take responsibility for it, identify what went wrong and publicly commit to fix it and take action to prevent it from happening again.
            Chase and Walmart have done that, to a degree, and that may have something to do with why they seem to be weathering their latest storms without any major loss, yet.


Tuesday, May 22, 2012

CEO’s Are Not Exempt From Jail Time

            White collar crime and mismanagement have consistently been the biggest of the 16 broad crisis categories the Institute for Crisis Management tracks year after year.

The first year for the Annual ICM Crisis Report in 1990 Mismanagement led the list accounting for 24 percent of all crisis types and White Collar Crime was right behind totaling 20 percent of crises that year.
            The new 2011/2012 Annual ICM Crisis Report has White Collar Crime in first place with 19 percent and Mismanagement in second place with 11 percent.

In 2009 Mismanagement was in second place with 16 percent and White Collar Crime was in first place with 18 percent.  On average, people in decision making/management positions are credited with triggering half of all business and organizational crises. has just published an article “10 CEOs Who Went From The Boardroom To the Cell Block” and identified their top ten list of Fortune 500 CEOs who have been arrested and ousted in the past 12 years.

Martin Grass, son of the founder of the drugstore chain Rite-Aid and several other executives were indicted on charges of conspiracy to defraud, making false statements and accounting fraud. He reached a plea agreement that called for 8 years in prison, a half-million dollar fine and giving up $3-million salary.  The company survived, barely.

  Joseph Nacchio, CEO of telecommunications giant Qwest was charged by the Securities Exchange Commission with inflating revenue estimates, lying about non-existent contracts and profiting from his illegal deeds. He was sentenced to six years and fined $19-million and forfeited $52-million in profits from illegal trading.  The company was sold.

Another of the top ten CEO crooks was Richard Scrushy, longtime CEO of HealthSouth.   In 2003 he was indicted on charges of conspiracy, securities fraud, money laundering and mail fraud. At trial he was acquitted.  Four months later he was indicted on 30 counts of extortion, obstruction of justice, money laundering, racketeering and bribery.  He was sentenced to six years in prison.

The company survived but its reputation was tarnished.

Bernie Ebbers, former CEO of WorldCom and Jeffrey Skilling of Enron were both accused of “cooking the books” and both companies did not survive.

Another example of misbehaving executives and their terrible impact on the company that trusted them was John Rigas who was forced at as CEO of cable TV provider Adelphia after he and six others, including two of his sons were convicted of securities, bank and wire fraud. The company ended up in bankruptcy and Rigas ended up in prison and is not scheduled to get out until 2018.
     You can read the whole report at:   
      And download the latest ICM Annual Crisis Report at:  

Friday, May 11, 2012

20th Annual ICM Crisis Report

It was a "relatively peaceful" year for business and organizational crises -- but the crises that did strike were whoppers!

The 20th Annual ICM Crisis Report was published this week, with the airline/air transport industry leading the Top Ten Most Crisis Prone Industry list and, no surprise, News Corporation, Ltd., at number one on the Most Crisis Prone Business List for 2011.  BP, PLC was number two, Transocean at number eight, both still reeling from the Gulf Oil disaster from the year before.

BP/Transocean reinforce our argument that major crises never really end, at least not quickly.

The data for 2011 shows only a minor fluctuation in the average of two-thirds of all crisis that are what we call "smoldering crises" -- the kind of things that start out small, and usually internal, but not always, and should be recognized by someone as a potentially serious problem and fixed before it becomes a public embarrassment, or worse, a public disaster.

And, the more things change, the more some things stay the same.  Managers and executives continue to ignore those smoldering issues, or hope that if they ignore them they will go away.  And, they don't.

People with decision making responsibilities are still responsible for half of all crises while, on average over the past ten years, 32-percent of all crises were caused by "employees" and 18-percent were caused by outside forces, such as activists, disgruntled customers/patients/employees and natural disasters.

White Collar Crime accounted for 19-percent of all business crises, mismanagement for 11-percent, workplace violence for 10-percent and defects/recalls for 5-percent.

And the 2011/2012 ICM Crisis Report includes an example of how "not" having a crisis "crisis" cost Taco Bell at least $3-million to defend itself!

Read the complete report:

Wednesday, May 9, 2012

Good Call, Churchill Downs

We don't get the opportunity, often, to give an atta-boy to organizations that do something right and ultimately prevent or avoid a crisis.

But, this week, we can single out the management at Churchill Downs in Louisville, KY for their smart decision to evacuate the in-field last Friday, Oaks Day, when a potentially nasty thunderstorm bore down on the 112,500 gathered to enjoy the "day before" the Derby.

Churchill Downs' management has been a leader in many aspects of big event execution. And that was demonstrated by the decision making process and then the relatively orderly movement of thousands of people safely to shelter until the short-lived storm passed by.

It was just as well executed when those same thousands of fans, some inebriated, were invited back to their favorite spots in the infield to continue their revelry.

It was just a couple of weeks earlier that one man died, 16 were hospitalized and another 100 were treated at the scene when a sudden storm with winds exceeding 60-miles an hour downed a beer tent and tossed metal folding chairs through the air like missles following a Saturday afternoon baseball game at nearby Busch Stadium.