On Wednesday, Philip Morris Cos. conceded that tobacco isn’t safe after decades of contesting the health risks of smoking.
On Tuesday, CNA Financial Corp. acknowledged it knew about a cracked window in June–four months before it shattered and fell, killing a woman 29 stories below as she walked with her 3-year-old daughter last Friday in the Loop.
Both of these constituted high-profile corporate confessions. But the two companies arrived at their public pronouncements in very different ways, presenting contrasting case studies on how best to handle a crisis situation.
The experts say corporations should follow these basic rules: Tell the truth, tell it fast and tell it all.
And this week, CNA did in a few days what took Philip Morris years.
“The rule is: the quicker you recognize the problem, admit to the problem and the fact that you are going to correct the problem . . . the better off you are going to be,” said Ken Love, president and creative director at New York-based image consultant Lippincott & Margulies.
Love and other experts say it’s good public relations to come clean quickly, and it may have the added benefit of limiting legal liability later.
It may be too early to know the long-term impact the falling window tragedy will have on CNA, but educators in crisis management say that at least in its quick admission, CNA may have done its best.
“The American public realizes accidents are going to happen, but companies have to have things in order, get to the public and admit just how much you are responsible,” Love said.
Philip Morris didn’t follow Crisis Management 101, the experts say, before finally admitting tobacco isn’t safe despite decades of criticism from medical and scientific researchers.
“In CNA’s case, it seems like it took 72 hours to get out and it took (Philip Morris) 50 years,” said Martin Stoller, professor of organizational behavior with Northwestern University’s J.L. Kellogg Graduate School of Management. “Henry Kissinger once said: `If the truth’s going to get out eventually, get it out immediately.’ “
Even in the face of years-old medical evidence documenting the health risks of smoking, Philip Morris and the tobacco industry disputed that smoking is addictive and unhealthy.
Philip Morris now is trying to remake its image with a $100 million advertising campaign, the tobacco giant said Wednesday.
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But crisis experts say the decision to stonewall rather than admit to the truth cost the tobacco industry dearly. Tobacco companies already have reached settlements under which they will pay $246 billion to 50 states over 25 years to help pay the costs of treating sick smokers and to discourage children from smoking.
“For far too long we have let others define who we are,” Steven Parrish, senior vice president for corporate affairs for Philip Morris, told The Associated Press.
Indeed, critics of the tobacco industry were quick to emerge and were relentless.
“If they would have said, `yes, our product can be addictive,’ then how else can you criticize,” said Larry Smith, president of the Louisville-based Institute for Crisis Management.
“The critics have been saying all of these years that cigarette smoking is addictive,” Smith said. “When you take that argument out or don’t contribute to that argument, you have gone a long way to silencing your critics.”
CNA, which was blasted by Mayor Richard Daley for delaying the window replacement, also faces a wrongful death suit, filed Tuesday by the family of Ana Flores, the woman who was killed by the falling glass.
CNA could face a seven-figure settlement, but crisis experts say CNA’s decision to at least own up to the window flaw could limit damages.
“It’s not to say that CNA’s not going to have a large legal judgment, but they would have had that anyway had they not admitted what they did was wrong,” said Northwestern’s Stoller. “In these days when emotion and fact have blurred together in legal proceedings, the fact that (CNA) did ‘fess up can only help later when it comes to the size of the punitive damages.”
But it’s also the court of public opinion that corporations should be concerned about when a damaging situation arises, because of the potential to lose customers.
“Honesty and telling the truth works 99.9 percent of the time,” Smith said.
Corporations should be ready with crisis strategies in place that draw on the resources of more than just attorneys.
CNA wouldn’t disclose whether the company has a crisis management team or strategy in place, but acknowledged the firm has “many people in many disciplines working on it,” CNA spokesman Clark Walter said.
“This is an ongoing situation,” Walter said. “We are concentrating on dealing with the facts of the case and trying to be a good corporate citizen.”
Corporate crisis management can provide instant positive results, Smith said, citing Pepsi-Cola Co.’s response to hypodermic syringes reportedly found in its soft drinks several years ago.
Pepsi responded by showing videos of its production operation where pop cans “were a blur to the human eye,” Smith said. “It was physically impossible to tamper with the cans. The public saw that and said this couldn’t possibly happen.”
Pepsi was eventually vindicated when investigators found the soft drinks were tampered with outside of production.
Despite these examples of crisis situations, experts say many companies ignore the need for specialized management.
“You would think it would be common-sense strategy in 1999, but it’s still absolutely the exception,” Stoller said. “Companies continue to bury their heads in the sand and let their lawyers stonewall. You see it every day. Pick any corporation’s legal case and it’s a stonewall.”