Should Reputation Management be Used to Cover Up Failures?
Are you familiar with the story of Love Canal?
In 1890 a New York businessman named William Love proposed building what he called “a model city” by Lake Ontario. His community would include factories, parks, homes, and a shipping lane to bypass Niagara Falls. Love worked on the project for 17 years, through repeated economic crises, but eventually had to give up when technology made his model community unnecessary.
Only 1 mile of the canal had been built and only a few homes. The canal filled up with water and children enjoyed swimming in it. Unfortunately, the City of Niagara Falls began dumping waste into the canal in the 1920s. The Hooker Chemical Company drained the canal in the 1940s and began burying barrels of chemical waste there.
The landfill was covered with clay in 1952 and no more waste was buried there. Meanwhile, housing projects had been constructed close to the former canal, and the city wanted to build a school over the old canal itself. Hooker’s executives decided to unload potential future liability for the chemical waste to the city by selling them the land for $1.
The document transacting the sale included precise language absolving Hooker and its legal successors of any liability for damage incurred from the chemical waste.
By the 1970s an alarming number of families in the area had experienced severe illnesses from exposure to leaking chemicals, and an abnormal number of children were miscarried or born with birth defects. Local journalists investigated the area and for several years residents and supporters lobbied for government help. In 1978 President Jimmy Carter declared a federal health emergency.
The federal government bought 400 contaminated homes and cleaned up the property.
The sad story had all the makings of a dramatic horror movie complete with evil corporations, an uncaring public, and a long buried secret.
Could Reputation Management Cover This Up?
The story of Love Canal is a great example of how a corporation became a victim of its own advanced planning. Without the Internet residents of the communities around Love Canal had no way of sharing information. It was only when 2 local reporters heard about health concerns and began looking into the area’s history that anything was done.
It took several years for the story to spread to national news media. By the time it was a major story on all three U.S. television networks, Occidental Petroleum (the company that had bought Hooker Chemical Company in the 1960s) was in no position to spin the facts in its favor.
State and federal officials acknowledged that the chemical waste had been disposed of in compliance with prevailing laws and standards in the 1940s and 1950s. But what turned public and government opinion against the chemical industry was the 17-sentence clause in the sale contract that sought to absolve the company and its successors of financial liability.
The school board that bought the property also denied liability. Ultimately Congress had to step in and change the situation, creating the Superfund law that levied taxes on the chemical and petroleum industries to pay for cleaning up sites like Love Canal.
Occidental Petroleum eventually reimbursed the government $155 million in a 1995 settlement. Other lawsuits brought by residents had been settled for undetermined sums.
When looking at this story, one can only ask if a disaster like this could be covered up in the age of the Internet and social activism.
Although Occidental Petroleum was eventually held accountable for the sale of Love Canal, the problem was undetected for decades. Worse, after the serious leakage was exposed in local news media it took several years for public interest to heighten to a point where governments had to take action.
Companies Unwittingly Fail the Future Every Year
Everything the Hooker Chemical Company did was legal. Company executives realized before they sold the land to the city that their chemical waste posed a health risk to local residents. They took the decision to stop burying waste in what would be deemed a proactive decision today.
But even though they followed the rules of the law, they were eventually held negligent (but not reckless) in a court of law.
There’s no way any company can look that far into the future and see that its decisions will be held against it. And by 1995 the executives and school board members who had transacted the sale were all dead or retired. The people who settled the lawsuits had nothing to do with the transactions.
It would be natural for a company in that position to want to defend itself and its executives against public criticism and potential liability.
But should a company in that position do so?
After all, Occidental Petroleum made the decision to buy Hooker Chemical Company. The onus of conducting due diligence was on them. The internal memoes Hooker’s executives wrote when making their decisions were preserved and used to expose what they did.
Everyone should have known that Hooker attempted to unload liability for chemical waste to a local school board. And for that reason, Occidental Petroleum assumed a moral and legal liability for all that subsequently went wrong.
Business Decisions Often Have Far-reaching Consequences
When the U.S. paper mill industry was at its height, environmentalists sought to expose how their waste products poisoned rivers, killing wildlife and threatening downstream communities’ water supplies.
When power companies began investing in wind farms to generate electricity, they had no idea that the huge blades of their wind turbines would kill tens of thousands of birds and bats every year. While these problems have been or are being mitigated by new technologies, another consequence of wind turbine technology is that older windmill blades cannot be recycled.
These giant metal structures can only be buried in the ground and left to nature’s forces.
All of these decisions are legal. In some cases, they have been rewarded by government incentives.
Green energy companies tout their environmentally friendly practices and technologies, but as the years go by science determines that what was once thought safe and friendly to wildlife may not be.
But now the Internet has become a battleground for information about environmental technologies. Activists seek to expose the flaws in plantations and facilities that major corporations invested hundreds of millions of dollars into, all with the intention of being environmentally friendly.
It is almost as if big business has no safe choices to make. But these companies create jobs and provide products and services that millions of people around the world want or need.
Are they really evil corporations or just unable to change fast enough to stay on top of scientific and technological advances?
Reputation Management Gone Wrong Destroys Reputations
History, cliché novels, and dramatic movies all share one thing in common: people who try to cover up their mistakes are eventually found out.
While there is no way to hide a disaster like the Exxon Valdez grounding, most companies that find themselves targeted by hostile publicity are still relatively unknown to the general public. Congress is not intervening every time local restaurant fails multiple health inspections.
Whether a company has been accused of selling dangerous baby furniture, slamming its customers with secret charges, or violating some government regulation – most of these stories unfold on the local level.
But they are documented on the Internet. Reputation management specialists are often called upon to “bury the bad news” and “make it all go away”.
But is that really the best strategy?
It’s not the reputation management specialist’s responsibility to make the business decision. There is always a chance that a reputation management campaign will be exposed by an insider or through a mistake. The exposure may come years later or happen as the campaign unfolds.
The business decision to engage in reputation management should be informed. There are ways to atone for corporate sins – and improve a reputation – without being dishonest. Publicists, lawyers, and business executives should ask their reputation management providers how to go forward without laying the seeds for creating a future public relations challenge.
The onus is on the business leaders, not on the people who are charged with cleaning up the mess. When embattled executives are driven from their companies after failing to end controversial business practices, it’s because people will settle for nothing less than some form of atonement.
The human instinct to dig in and avoid facing the consequences of past actions can be very powerful. A reputation management specialist’s job is not to pass judgment on clients. But no one can stop the Internet.
An effective reputation management strategy may have to include dealing directly – acknowledging – the highly negative controversy that leads to the decision to engage in the strategy. Being part of the conversation is often better than trying to avoid it or hide from it. This is a very difficult conversation to have with powerful executives who are accustomed to having their way. It may not be possible to advise them in any capacity. But when it’s your turn to solve the problem, be careful not to make it worse.