Lawsuits come in all shapes and sizes. Those that become “business killers” are in a category by themselves and have increased in frequency in this last recession, especially securities cases. This provides unique opportunities for PR executives. But it also requires us to see the strategic issues in broader terms, and thus beyond the tactical mechanics of “message.” That means using analytical approaches and solutions that are more comprehensive, integrated and carefully aligned with stakeholder concerns and interests. Shaping perceptions is a strategic outcome here, not the strategy itself.
STAKEHOLDER TRUST IN JEOPARDY
Common to potentially lethal legal actions is that they detail allegations—whether from a private party, a regulator or law enforcement—that materially impact most or all of an organization’s stakeholder bonds. Accusations related to management’s obligation to disclose specific information to shareholders about earnings fall into this category. So, too, does a product liability case, charges of insider trading or options backdating, to mention just a few. Such allegations can seriously erode stakeholder trust, regardless of the eventual outcome of the case in court. The damage is early and fast, and few organizations survive as they previously were. If they do, it’s usually with a new CEO and lower revenues.
Plaintiffs have the initial advantage in shaping the news media’s treatment of the “story” and thus also stakeholder perceptions. Well-crafted plaintiff’s pleadings contain vivid accusatory language, a detailed fact-based narrative and dire-sounding statutory causes of action. It’s usually months before the defendant responds formally with the other side of the story. By the time the defendant’s pleadings are filed, the damage among stakeholders, and the business, is done.
DAMAGE CONTROL
It doesn’t have to be that way. PR executives are well-qualified to play a key role in preserving stakeholder bonds during litigation. PR often has the ear of top management; has access to critical corporate functions such as IR and HR; and, most importantly, possesses the skills needed to effectively communicate between these functions. Here are steps PR professionals should take when faced with a litigation crisis:
• Assess the situation. This requires a risk management approach—taking business, reputation and litigation issues into account when assessing the stakes of an impending legal battle. Important at this step is isolating the most critical “interactive” issues—meaning interrelated business, reputation and legal elements that all impact each other. This allows for the most comprehensive assessment of the situation. For example, one matter we advised on involved a product liability class-action suit against a plumbing supply manufacturer. The core interactive issue was a variation on the classic “what did you know and when did you know it?” In this case, questions concerned product’s design and performance under various conditions.
• Establish a process for stakeholder feedback. This process is set up to measure stakeholder opinions about the litigation and its impact on their part of the organization. This step is where PR’s position in the organization and communications skills really play a key role.
• Prevent stakeholders’ bunker mentality. Ongoing stakeholder engagement also means not letting the various functional groups “hide” in their bunkers—a natural human reaction early in the litigation but, of course, lethal to the organization. PR executives must “parachute” in to these groups and remind them of the strategic imperatives.
• Work closely with the business functions. The PR team’ should give ongoing advice to the relevant functional groups within the organization on how they can best protect stakeholder relationships through the ups and downs of the litigation process (and media coverage), which can occur over two or more years.
SUCCESSFUL OUTCOME
Now, back to the example of the class action case against the plumbing manufacturer. Through a comprehensive response strategy that emphasized clear stakeholder communications via the PR team, the suit was settled. The company survived, and largely because stakeholders believed it dealt with the matter from a position of total integrity. PRN
CONTACT:
Montieth M. Illingworth is president of Montieth & Company, a New York-based communications consultancy. He can be reached at [email protected].