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Leadership corruption and the implications to the corporate brand

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Leadership corruption and the implications to the corporate brand

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Content Copyright 2016 | Blythe Jameson

LEADERSHIP CORRUPTION
AND THE IMPLICATIONS
TO THE
CORPORATE BRAND
BLYTHE JAMESON
UNIVERSITY OF SOUTHERN CALIFORNIA
ANNENBERG SCHOOL FOR
COMMUNICATION & JOURNALISM
M AST E R OF ARTS
STRATEGIC PUBLIC RELATIONS
DECEMBER 2016
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For Morgan, always.

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TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................ 5
LEADERSHIP .................................................................................................................................. 7
Leadership vs. Management ..................................................................................................... 8
STRENGTHS OF A LEADER .......................................................................................................... 10
Emotional Intelligence ............................................................................................................ 10
Table 1: The Five Components of Emotional Intelligence at Work ........................................ 12
A Transformational Visionary ................................................................................................. 13
Table 2: Characteristics of Transformational and Transactional Leaders .............................. 14
Makes Extraordinary Things Happen ...................................................................................... 15
Empowers and Connects Others ............................................................................................. 15
An Honest and Compelling Voice ............................................................................................ 16
THE RELATIVE IMPORTANCE BETWEEN LEADERSHIP AND THE CORPORATE BRAND ............. 18
CORRUPTION .............................................................................................................................. 22
An Abuse of Power .................................................................................................................. 22
LEADERSHIP CORRUPTION ........................................................................................................ 24
CASE STUDY #1 | Mark Hurd ..................................................................................................... 26
Background ............................................................................................................................. 26
Leadership Style ...................................................................................................................... 27
Issue ........................................................................................................................................ 27
Resolution ............................................................................................................................... 29
Immediate Effects ................................................................................................................... 29
Where is Mark Hurd Now? ...................................................................................................... 30
CASE STUDY #2 | Tom Coughlin ................................................................................................ 31
Background ............................................................................................................................. 31
Leadership Style ...................................................................................................................... 31
Issue ........................................................................................................................................ 32
Resolution ............................................................................................................................... 34
Immediate Effects ................................................................................................................... 35
Where is Tom Coughlin Now? ................................................................................................. 36
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CASE STUDY #3 | John Browne.................................................................................................. 37
Background ............................................................................................................................. 37
Leadership Style ...................................................................................................................... 38
Issue ........................................................................................................................................ 39
Resolution ............................................................................................................................... 42
Immediate Effects ................................................................................................................... 42
Where is John Browne Now? .................................................................................................. 43
THE SCALE OF CORRUPTION ...................................................................................................... 45
Table 3: Categories of Unethical Business Behaviors ............................................................. 46
Table 4: Scale of Leadership Corruption ................................................................................. 48
SUCCESSFUL PUBLIC RELATIONS STRATEGIES AND CRISIS RESPONSE ..................................... 50
Johnson & Johnson ................................................................................................................. 50
Preparation, Speed and Accessibility ...................................................................................... 53
Best Practices .......................................................................................................................... 54
An Opportunity for Change ..................................................................................................... 56
IT ALL COMES DOWN TO TRUST ................................................................................................ 59
REFERENCES ............................................................................................................................... 63

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INTRODUCTION
“It takes 20 years to build a reputation and five minutes to ruin it,” (Daskal, Inc.) | Warren
Buffett, Businessman and Investor
———
Successful leaders and effective leadership are areas of increasing interest in the
business community, academia and the media. There is considerable discussion around the
traits, style and success factors that make a good leader. Unsurprisingly, there is equal
attention paid to the downfall of a chief executive or otherwise perceived successful leader,
particularly in the media. Many of these stories are a train wreck, almost impossible to avoid
watching and every bit as destructive. Legal and ethical issues arise, families are destroyed and
reputations evaporate. Consumers, shareholders and employees are exposed to speculation,
rumors and titillating details; truth is proven stranger than fiction, time and time again.
Why would someone so powerful and successful risk so much? What provokes unethical
decision-making at the highest levels of an organization and, ultimately, catalyze a scandal or
crisis? And, how do these decisions affect the businesses these individuals were charged with
running as well as the various stakeholders’ safety, well-being and livelihood with which the
perpetrators were entrusted?
The author is interested in these questions and has discovered what makes an effective
leader and the traits that set apart such a person from the status quo. Additionally, the author
takes a deeper look at the darker side of leadership: exploring corruption itself, researching
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several case studies of leadership corruption, defining the scale of corruption and how a
scandal ultimately affects the brand and reputation of an organization.
Finally, the author examines agreed-upon best practices in public relations and crisis
communications to discover how an organization can best handle a scandal or crisis, the
opportunity that arises during a time of significant upheaval, and the ultimate discriminator of
effective leadership and crisis avoidance: trust.
To frame the discussion, the author focuses on Fortune 500 companies with significant
brand recognition, financial impact and global presence. As an employee of The Boeing
Company, the author has worked in Communications and Marketing supporting various
businesses within this organization. Because of the direct and personal relationship the author
has with aerospace and Boeing, this industry and organization in particular are purposefully
excluded.
But first, leadership. What is it and how is it known?

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LEADERSHIP
“A true leader has the confidence to stand alone, the courage to make tough decisions, and the
compassion to listen to the needs of others. He does not set out to be a leader, but becomes one
by the equality of his actions and the integrity of his intent,” (Kruse, Forbes). | Douglas
MacArthur, Military Chief
———
Merriam-Webster defines leadership as “the office or position of a leader; the power or
ability to lead other people; the capacity to lead,” (Learner’s Dictionary). There are scores of
leadership definitions in the literature and online. Many correlate to a laundry list of adjectives
describing a hero or team captain. Defining effective leadership, however, is deeper and more
involved. Bernard Bass commented on the complexity of such a definition and that it largely
depends on the reason one is looking to create one in the first place.
“The definition of leadership should depend on the purposes to be served by the
definition. Leadership has been seen as the focus of group processes, as a personality
attribute, as the art of inducing compliance, as an exercise of influence, as a particular
kind of act, as a form of persuasion, as a power relation, as an instrument in the
attainment of goals, as an effect of interaction, as a differentiated role and as the
initiation of structure. One complex definition that has evolved, particularly, to help
understand a wide variety of research findings, delineates effective leadership as the
interaction among members of a group that initiates and maintains improved
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expectations and the competence of the group to solve problems or to attain goals,”
(Bass, 1990).
Leadership vs. Management
Importantly, there is a marked difference between holding a leadership position and
acting in a true leadership capacity – clearly, effective leadership does not necessarily connect
to a person’s title. Most people just know it when they see it, experience it. It is, at times,
intangible. New York Times best-selling author of Employee Engagement 2.0, Kevin Kruse,
describes leadership as “a process of social influence, which maximizes the efforts of others,
towards the achievement of a goal. Notice key elements of this definition:
‘Leadership stems from social influence, not authority or power. Leadership requires
others, and that implies they don’t need to be “direct reports.” No mention of
personality traits, attributes, or even a title; there are many styles, many paths, to
effective leadership. It includes a goal, not influence with no intended outcome,’”
(Kruse, Forbes).
Many questions come to mind: How do leaders engage and inspire their team, influence
alignment to a particular long-term strategy or goal, connect with business partners and
command the confidence of their publics and shareholders? What makes an effective leader? In
their research, Warren Bennis and Robert J. Thomas concluded that exceptional leadership is
revealed by the way a person responds in the face of a crisis or a period of serious challenges.
“One of the most reliable indicators and predictors of true leadership is an individual’s ability to
find meaning in negative events and to learn from even the most trying circumstances. Put
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another way, the skills required to conquer adversity and emerge stronger and more
committed than ever are the same ones that make for extraordinary leaders,” (Bennis &
Thomas, Harvard Business Review). The duo interviewed more than 40 top business leaders
over a period of three years and found that, regardless of the industry, age or experience level
of the participant, all pointed to a “transformative experience” by which they came out
changed on the other side.
These experiences were “a trial and a test, a point of deep self-reflection that forced
them to question who they were and what mattered to them. It required them to examine
their values, question their assumptions, hone their judgment,” (Bennis & Thomas, Harvard
Business Review). These interviews and subsequent leadership stories revealed core
characteristics common to all leaders – grace under fire, a clear set of values, and personal
integrity – characteristics that were formed during this transformative experience. “In this day
and age, crises are inevitable but leaders are made by the way they handle them,” (Leader-
Chivée, Harvard Business Review).

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STRENGTHS OF A LEADER
“I have three precious things which I hold fast and prize. The first is gentleness; the second is
frugality; the third is humility, which keeps me from putting myself before others. Be gentle and
you can be bold; be frugal and you can be liberal; avoid putting yourself before others and you
can become a leader among men,” (Haden, Inc.). | Lao Tzu, Philosopher
———
There are a number of traits that people commonly assign to a good leader and experts
from business and academia have been studying leadership attributes for some time. “While
research shows that the possession of certain traits alone does not guarantee leadership
success, there is evidence that effective leaders are different from other people in certain key
respects. Key leader traits include: drive (a broad term which includes achievement, motivation,
ambition, energy, tenacity and initiative); leadership motivation (the desire to lead but not to
seek power as an end in itself); honesty and integrity; self-confidence (which is associated with
emotional stability); cognitive ability; and knowledge of the business,” (Kirkpatrick & Locke,
Academy of Management Executive).
Emotional Intelligence
In his research of almost 200 large, global companies, Daniel Goleman discovered that in
addition to traditional leadership qualities such as intelligence, determination and vision, more
was needed to develop true leadership effectiveness.
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“I have found that the most effective leaders are alike in one crucial way: They all have a
high degree of what has come to be known as emotional intelligence. It’s not that IQ and
technical skills are irrelevant. They do matter, but mainly as ‘threshold capabilities;’ that
is, they are the entry-level requirements for executive positions. But my research, along
with other recent studies, clearly shows that emotional intelligence is the sine qua non
of leadership. Without it, a person can have the best training in the world, an incisive,
analytical mind, and an endless supply of smart ideas, but he still won’t make a great
leader,” (Goleman, Harvard Business Review).
The five key components of emotional intelligence are self-awareness, self-regulation,
motivation, empathy and social skill. Goleman found that the higher an individual ranked on the
corporate ladder, the more prominently emotional intelligence figured into her/his
requirements for success. “When I compared star performers with average ones in senior
leadership positions, nearly 90% of the difference in their profiles was attributable to emotional
intelligence factors rather than cognitive abilities,” (Goleman, Harvard Business Review).

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Table 1: The Five Components of Emotional Intelligence at Work
Definition Hallmarks
Self-awareness The ability to recognize and
understand your moods,
emotions and drivers, as well as
their effect on others
Self-confidence
Realistic self-assessment
Self-deprecating sense of
humor
Self-regulation The ability to control or redirect
disruptive impulses or moods
The propensity to suspend
judgment – to think before acting
Trustworthiness and integrity
Comfort with ambiguity
Openness to change
Motivation A passion to work for reasons
that go beyond money or status
A propensity to pursue goals with
energy and persistence
Strong drive to achieve
Optimism, even in the face of
failure
Organizational commitment
Empathy The ability to understand the
emotional makeup of other
people
Skill in treating people according
to their emotional reactions
Expertise in building and
retaining talent
Cross-cultural sensitivity
Service to clients and
customers
Social skill Proficiency in managing
relationships and building
networks
An ability to find common ground
and build rapport
Effectiveness in leading change
Persuasiveness
Expertise in building and
leading teams

Source: Daniel Goleman

Table 1: Truly effective leaders are distinguished by a high degree of emotional intelligence. Daniel
Goleman found direct ties between emotional intelligence, successful leadership and measurable
business results.

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A Transformational Visionary
Leadership expert Bernard Bass’ Transformational Leadership Theory is an extension of
the work completed by leadership theorist James MacGregor Burns. Bass compares
transactional leadership, a style he describes as more of a “carrot and stick” management
approach that seeks to maintain the status quo, to transformational leadership, which involves
inspiring leaders who work with their team toward common goals.
“Superior leadership performance – transformational leadership – occurs when leaders
broaden and elevate the interests of their employees, when they generate awareness
and acceptance of the purposes and mission of the group, and when they stir their
employees to look beyond their own self-interest for the good of the group.
Transformational leaders achieve these results in one or more ways: They may be
charismatic to their followers and thus inspire them; they may meet the emotional
needs of each employee; and/or they may intellectually stimulate employees,” (Bass,
Organizational Dynamics).

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Table 2: Characteristics of Transformational and Transactional Leaders
Transformational Leader Characteristics Transactional Leader Characteristics
Charisma
Provides vision and sense of mission, instills
pride, gains respect and trust
Contingent reward
Contracts exchange of rewards for effort,
promises rewards for good performance,
recognizes accomplishments
Inspiration
Communicates high expectations, uses
symbols to focus efforts, expresses important
purposes in simple ways
Management by exception (active)
Watches and searches for deviations from
rules and standards, takes corrective action
Intellectual stimulation
Promotes intelligence, rationality, and careful
problem solving
Management by exception (passive)
Intervenes only if standards are not met
Individualized consideration
Gives personal attention, treats each
employee individually, coaches, advises
Laissez-faire
Abdicates responsibilities, avoids making
decisions

Source: Bernard Bass

Table 2: Transformational leaders are more likely to be seen as effective leaders by coworkers and
employees, typically receive higher performance ratings and have better relationships with external
stakeholders.

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Makes Extraordinary Things Happen
While researching what would ultimately become The Leadership Challenge, James
Kouzes and Barry Posner (1987) identified skills required of a leader to make extraordinary
things happen. While the two have continued to interview and collect tens of thousands of
responses from a variety of leaders over the ensuing 30 years, they posit that five common
concepts – or practices of exemplary leadership – continue to hold true:
• Models the way: Establishes how the team treats each other and how to accomplish
goals, sets an example for others, creates interim goals toward larger objectives,
eliminates bureaucracy and creates opportunities for wins.
• Inspires a shared vision: Believes in making a difference, creates an inspiring image
of the future and enlists others in that journey.
• Challenges the process: Searches for innovative ways to change and improve how
things work; experiments, takes risks, learns from mistakes.
• Enables others to act: Fosters collaboration, involves others, builds engaged teams,
and creates an atmosphere of trust and dignity.
• Encourages the heart: Recognizes the contributions of individuals, celebrates
accomplishments and makes people feel like winners.
Empowers and Connects Others
In a recent study, certified organizational scientist and leadership development
consultant Sunnie Giles asked 195 global leaders in 15 countries to choose the 15 most
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important leadership competencies from a longer list of 74. Five major themes emerged,
illustrating that a strong leader:
• Demonstrates strong ethics and provides a sense of safety that creates a trusting
environment, conveys a commitment to high ethical standards and communicates
clear expectations. Behaves in a way that is consistent with one’s values.
• Empowers others to self-organize so that the team is more productive and proactive,
enabling stronger customer service and higher job satisfaction.
• Fosters a sense of connection and belonging so that the team feels secure,
appreciated and a greater sense of well-being.
• Shows openness to new ideas and fosters organizational learning, which enables
continuous growth, learning and appropriate risk-taking.
• Nurtures growth, which shows a commitment to ongoing training and helps each
individual maximize their potential (Giles, Harvard Business Review).
An Honest and Compelling Voice
The research conducted by Bennis and Thomas referenced earlier in this text identified
four essential skills:
• The ability to engage others in shared meaning
• A distinctive and compelling voice
• A sense of integrity, including a strong set of values
• Adaptive capacity, defined as an ability to understand context and hardiness
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In addition to the sources cited above, many more studies and articles delineate the
necessary traits of a true leader – all illustrating common ground. The consensus seems to
indicate that key leadership attributes align around creating a vision; inspiring, building up and
connecting others; and promoting integrity and trust.

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THE RELATIVE IMPORTANCE BETWEEN LEADERSHIP AND THE
CORPORATE BRAND
“For better or for worse, our company is a reflection of my thinking, my character, my ideas,”
(Wapshott, Reuters) | Rupert Murdoch, Businessman
———
Organizations may think they know what their corporate brand represents yet this
assumption might be more in line with what the brand aspires to become and not necessarily
reality. Brand image is an outcome of public perception and, regardless of corporate
communications and marketing, it embodies what is in the minds of the consumer and general
public. Today, with myriad traditional channels, social media and emerging platforms available
in video, print and imagery, brand perceptions are not limited to family conversations at home,
ultimately evaporating when everyone goes to bed. A shared photo, complaint or accusation
can reach thousands of people in seconds and the digital fingerprint left behind is enduring.
As our world becomes more and more connected, the relative distance between
company and consumer is becoming miniscule; office walls are not as high as they once were
and the role of the CEO is ever more visible. Consumers are less inclined to edit themselves and
are more attuned to what company leadership is saying and doing – and watching to see if the
two match. It is the age of transparency.
“In today’s ultra-connected and social-media savvy world, a CEO’s role has increasingly
evolved,” says Jetstar Asia CEO, Bara Pasupathi. “A CEO is not only a leader but also an
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advocate and face of the company and its brands. CEO’s are at times regarded as the
Chief Brand Ambassador in facilitating the communication and promotion of the brand
values, ideas, experiences or products of the company. This convergence of individual
and corporate identity in the CEO, if aligned, can be a powerful tool to bring to life the
brand and its values with partners, customers and employees alike. Social media has
also made companies more transparent and its brands intertwined with customer
experience. A CEO empowers brands with trust, credibility and relevance in developing
them as a strategic asset,” (Hardasmalani, Today).
Many CEOs have larger-than-life qualities. Some observers might say that this is a
required trait to achieve such leadership status as it takes incredible confidence and self-
importance to shoulder enormous responsibilities. This, too, plays a part in influencing
perceptions of the corporate brand.
“A strong corporate brand is an important asset; it drives consumer choice, increases
customer loyalty, enables entry into new markets and can enhance employee
recruitment and satisfaction. Think of Steve Jobs, Richard Branson, Steve Ballmer… you
instantly think of the companies they lead. These personalities undeniably influence the
corporate brand and set the culture of the company. The infusion of corporate brand
with their CEO’s personality happens naturally as vision is articulated, budgets are
allocated, hiring decisions are made and organizational culture is reinforced. So, as
much as any logo, tagline or ad campaign, a CEO’s personal brand permeates the brand
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of the company he or she leads, therefore, playing a critical role in the value of the
company,” (Hardasmalani, Today).
Thus, the image of the CEO ultimately becomes the image of the company s/he leads. In
this “convergence of individual and corporate identity” (Yale Insights, 2014) is a complicated,
three-dimensional environment that includes the business, a public-facing CEO and the many
stakeholders that have an interest in the corporation. In many ways, by virtue of being the CEO
and company leader, the CEO also wears the chief branding officer hat with “a responsibility to
keep the brand alive, organic and authentic in an intuitive way as company decisions are made.
Companies with intuitive clarity are best positioned to seize each competitive moment
decisively,” (Graj, Forbes).
“When you become a CEO you’re no longer your own person, you’re a public property,”
said PepsiCo CEO Indra Nooyi. “To some extent, this phenomenon is a condition imposed by the
expectations of the media, investors and other constituencies,” (Yale Insights, 2014). This is
undoubtedly a risk, but it can be an incredible opportunity for a CEO to better promote
company strategy and direction, take control of the public narrative and drive stronger
connections with employees and other stakeholders.
In the literature, practitioners and academics acknowledge the direct importance of a
company’s CEO in communications and image-making with the public and other relevant
stakeholders; business leaders agree. The CEO oversees the management of company-wide
resources and represents the entire organization. Leading by example – walking the talk – is an
assumed prerequisite for effective leadership. The images of CEOs and C-suite leadership play a
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significant role in determining the success of a company and building important relationships
(Jin & Yeo, 2011).

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CORRUPTION
“Nearly all men can stand adversity, but if you want to test a man’s character, give him power,”
(Kruse, Forbes) | Abraham Lincoln, 16
th
U.S. President
———
Having reviewed some of the literature about the positive side of leadership, the author
concludes there is general agreement around the characteristics and skills that comprise an
effective leader. Similarly, there are common themes related to the negative aspects of
leadership, particularly related to what might cause corruption in an organization and among
those at the most senior levels of a corporation.
Merriam-Webster defines corruption as “dishonest or illegal behavior especially by
powerful people (such as government officials or police officers); impairment of integrity,
virtue, or moral principle; inducement to do wrong by improper or unlawful means (as bribery);
a departure from the original or from what is pure or correct,” (Learner’s Dictionary). But like all
things, an answer is usually driven by where an individual is standing. Depending on one’s
perspective, ethical lines may not always be clear.
An Abuse of Power
A global organization that works with governments, businesses and citizens to eliminate
the abuse of power calls corruption “the abuse of entrusted power for private gain. Corruption
can be classified as grand, petty and political, depending on the amounts of money lost and the
sector where it occurs,” (Transparency International). Many can agree that corruption is simply
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a decay in a person’s morals or ethical code that results in behaviors that abuse power for a
personal gain. Importantly, to realize an abuse of power, one must be in a situation of power to
begin with.
More than a century ago, Lord Acton stated: “All power tends to corrupt; absolute
power corrupts absolutely,” (Moreell, Acton Institute). Due to the hierarchical, and in some
cases militaristic, design of most organizations, corporations tend to be complicated
environments steeped in titles, status, politics, power plays and personal agendas. As the CEO
sets the tone of an organization and leads by example, s/he ultimately dictates the brand as
well as the culture. “As for the cause of corruption, research suggests that social situations as
well as personal factors may induce corruption,” (Bendahan, Zehnder, Pralong & Antonakis,
2014). Therefore, corruption is dependent on one having power and rests on a leader’s
personality, character and core beliefs regarding – or the propensity for – corruption.

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LEADERSHIP CORRUPTION
“People will forgive you for not being the leader you want to be – but never for not being the
leader you claim to be,” (Peterson & Kaplan, 2016) | Diane Sawyer, Journalist
———
An ongoing rhythm of well-publicized corporate scandals and CEO ethical violations
underscores general public sentiment: big business defines corruption, is driven by greed, and
its leaders are only looking out for “number one.” There are numerous cases of CEOs and C-
suite executives pursuing financial deception for personal gain – activities at the direct expense
of shareholders, employees and other stakeholders and not in the long-term interest of the
organization as a whole (Pearce, Manz & Sims, 2008).
In a study of business news reports between 2000 and 2005, Ronald Clement reported
that 40 corporations on the Fortune 100 list had committed unethical behaviors including
fraud, discrimination, undisclosed executive pay, antitrust activities, patent infringement and
other legal violations (Clement, Business Horizons).
“By now almost everyone is becoming at least partially desensitized to the large amount
of attention that has been devoted to the many organizational scandals that have
rocked the business world. Corporate names including the likes of Enron, World Com
and Tyco have all but become clichés when discussing the degradation of anything
approaching wholesome values in business. In such cases, prominent leaders who held
the trust of thousands of employees in their companies’ workforces, made decisions
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that reflected dramatic misuse of power and that have become the image of deeply
corrupt values. Subsequently, deception and financial manipulation have emerged as
symbols of modern organizational practices for all too many. And the spectacle of top
leaders tumbling in disgrace has emerged as an indelible image of today’s corporate
landscape,” (Manz, Anand, Joshi & Manz, 2008).
The number of violations are staggering and, although financial gain proves time and
again to be a powerful incentive for corrupt behavior, ethical breaches among corporate
executives are not limited to monetary means.

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CASE STUDY #1
“Success requires excellence at three things: the ability to set a proper strategy, the ability to
pick the right people, and the ability to drive continuous, razor-sharp execution of that
strategy,” (markhurd.com) | Mark Hurd, Businessman
———
Background
With a bachelor’s degree in business administration and more than 30 years working in
and around technology and technology development, Mark Hurd is a recognized leader in the
tech industry. He spent more than two decades at NCR Corporation, a computer hardware
company, beginning as a junior salesman in 1980 and progressively moving up the ladder
through operations, sales and marketing before ultimately taking over as CEO and president of
the organization in 2003.
Under Hurd’s leadership, NCR moved from a net loss position of $2.25 per share in 2002
to net income of more than $3.00 per share just two years later (Mark Hurd, The Wall Street
Journal). In 2005, computer-maker Hewlett-Packard (HP) recruited Hurd as its new chairman,
chief executive officer and president replacing Carly Fiorina, who had been forced by the HP
board to resign.

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Leadership Style
Hurd graduated from the University of Baylor on a tennis scholarship and is well-known
on and off the court as a serious contender with a highly competitive nature. Business
associates and employees see him as a direct, results-driven deal-closer and a strong proponent
for clear accountability. When Hurd took the top spot at HP he began implementing a variety of
moves, from enterprise-wide pay cuts to lights off at 6:00 p.m., including disassembling the
complex leadership structure matrix that former CEO Fiorina created. Company performance
started to climb and Hurd is widely credited with turning HP around. “The more accountable I
can make you, the easier it is for you to show you’re a great performer. The more I use a matrix,
the easier I make it to blame someone else,” (Gitman and McDaniel, 2008). Although often
misquoted and taken out of context, Hurd saw the importance of clear roles and responsibility
as a business essential. Some took this to mean he was looking to shift fault from himself.
However, with a strong reputation for cutting costs and streamlining oversized
organizations, Hurd is not well known for driving employee engagement or morale. Following
major cost-cutting in HP’s research and development unit, Hurd found himself the target of
significant, public employee backlash. The now defunct website, f**kyoumarkhurd.com, was
full of negative stories from angry current and former employees that highlighted perceived
shortcomings and allegations of mismanagement (Lashinsky, Fortune).
Issue
Two years into his role as CEO of HP, Hurd became frustrated that he was often trapped
spending valuable time with less significant customers and that he could not adequately
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connect with important customers during meetings and conferences. He looked to his chief of
staff, Caprice McIlvaine, to find a marketing consultant that could provide additional support
shepherding clients, thereby freeing up his time, during these events.
McIlvaine interviewed and considered several actresses from “The Bachelor”-like reality-
dating television series “Age of Love” (Rocchio, Reality TV World), ultimately hiring film and
reality-television actress Jodie Fisher to act as a greeter at events where Hurd met with top
customers. “Her job was to gracefully steer clients, ensuring that Hurd spent the right amount
of time with the right people. These ‘CEO/CIO Executive Summit’ events—chief information
officers are crucial in major tech-buying decisions—worked well enough. Fisher performed her
duties at about a dozen events, in the U.S. and abroad (but never Silicon Valley) for about two
years, before her role ended in late 2009,” (Lashinsky, Fortune).
In June 2010, attorney Gloria Allred sent a letter to HP’s board of directors. In it, Allred
accuses Hurd of inappropriate behavior, sexual harassment and leaking insider information. The
eight-page letter detailed a number of questionable exchanges in hotel rooms and other
locations between Jodie Fisher, her client, and Hurd over the course of several years. Although
the letter was supposed to remain confidential as part of Hurd’s private legal settlement with
Fisher, an HP shareholder sued to make the letter public, arguing that it should be up to the
stockholders to determine if Hurd’s $12 million severance package was appropriately awarded
(Goldman, CNN Money). Hurd fought the public release of the letter for months, only to have a
judge dismiss his concerns.

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Resolution
Once HP’s board of directors became aware of the contents of the letter, they
conducted a six-week investigation, including reviewing expense reports, conducting a forensics
analysis of computers and interviewing Hurd, McIlvaine and other HP employees. Many had no
knowledge of Hurd’s CEO/CIO Executive Summits, let alone the hiring of a former reality-
television actress for the purposes of mingling with major clients.
Hurd settled privately with Fisher and she published a short note indicating the Allred
letter contained “inaccuracies.” The very next day, Hurd was fired from HP – not for sexual
harassment, but because the board determined that Hurd acted inappropriately with a
subordinate, misused HP resources, and was dishonest about his activities when confronted
(Blodget, Business Insider).
Immediate Effects
Initially, the HP board was strongly criticized for Hurd’s sudden departure. There was an
immediate loss in stock value and multiple shareholder lawsuits were filed. “The question of
whether the board needed to disclose the harassment allegations remains murky. ‘This is one
of those practical issues that turn on human judgment and motivations,’ says Robert Daines, a
law professor at Stanford and an expert on securities law. Clearly, there is no need to disclose
an unfounded allegation, says Daines. What’s more, disclosure of small business-conduct
violations could hurt shareholders more than the violations themselves (Lashinsky, Fortune).”
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However, HP’s board uncovered a number of questionable practices at the top of the
organization. These, coupled with another recent, well-publicized ethics scandal (the phone
record “pretexting” used to determine which board members were leaking information to the
press), drove the board to make its decision. HP’s stock performance steadily declined during
this period – from just over $40 a share in 2010 to approximately $12 in October 2012. It is
unclear whether the devaluation can be attributed to Hurd’s very public ethical lapse or a series
of business challenges, including several senior-level leadership changes and failed acquisitions
(Yarow, Business Insider).
Where is Mark Hurd Now?
The sexual harassment scandal that hit Mark Hurd in 2010 barely left a scratch. Within
two weeks of leaving HP, Oracle founder Larry Ellison brought Hurd over to act as co-CEO,
alongside trusted partner Safra Catz. Ellison was less than concerned with Hurd’s personal life
and more interested in his resume. With a continued focus on his undisputed strengths around
sales and marketing, Hurd is currently seen as a top contender to succeed as Chairman once
Ellison retires. And, since joining Oracle, the stock price has more than doubled.

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CASE STUDY #2
“Anyone who is taking money from associates and shareholders ought to be shot. That greed
will catch up to you.” (Hagerty & Nassauer, The Wall Street Journal) | Tom Coughlin,
Businessman
———
Background
Cleveland, Ohio, native and former Walmart Executive Vice Chairman Tom Coughlin
began his career in the retail industry working for R.H. Macy’s, and moved to the world’s largest
retailer in 1978. Over his 26-year career with Walmart, Coughlin worked in loss prevention,
personnel, procurement, online operations and Sam’s Club. A protégé of company founder Sam
Walton, Coughlin played a key role in bringing Walmart from its humble beginnings into the
retail giant it is today – with 2.3 million employees at more than 11,000 stores in 27 countries
(walmart.com).
Leadership Style
Coughlin was known as a fiercely loyal, hardworking leader that demanded the most out
of his team. He often spent time “visiting stores and speaking directly with rank-and-file staff.
Coughlin was also a tough task master: managers were expected to stand at his meetings and
were reminded of the virtues of quick execution by a quote from World War II General George
Patton he put on the wall,” (Layne, Business Insider).
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“The people who worked at Walmart really connected with [Coughlin],” according to
Ken Langone, a co-founder of Home Depot who worked with Coughlin on several company
boards. “It’s a God-given gift, you can’t practice it. He had it in length and in strength,”
(Nassauer, The Wall Street Journal). Many even compared him to Walmart mentor and
company founder Sam Walton, claiming he would stand behind anyone that did their job.
Retired Walmart executive Ronald Loveless said that “he would back you and support you, run
through a wall for you,” (Layne, Business Insider).
Issue
In November 2004, Coughlin approached a junior executive with a request to approve
company expenses of approximately $2,000. Coughlin did not submit any receipts and
mentioned the expenses were in support of a union project. Because of the unusual request
and lack of receipts, Jared Bowen, a 31-year-old vice president at the time, spoke with another
executive at the company for advice and direction (Bandler & Zimmerman, The Wall Street
Journal). At the same time, Coughlin visited a local Walmart and completed his purchase of
contact lenses using a gift card reserved for recognizing store employees. The cashier called
Walmart headquarters, triggering an investigation of Coughlin, his bookkeeping and expense
reporting (Barbaro, The New York Times).
Following an internal review, Walmart officials determined Coughlin falsified expense
reports, created fake invoices and receipts, and stole money, goods and gift cards worth up to
$500,000 over a period of at least seven years (The Associated Press). Once the company made
the discovery, Coughlin announced his retirement in December 2005 and Walmart turned
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evidence over to federal prosecutors for an official investigation. The retirement
announcement made no reference to the investigation and company leadership praised
Coughlin and celebrated his many achievements. In a Walmart press release, President and CEO
Lee Scott stated:
“Tom Coughlin has achieved one of the most successful business careers that anyone
could imagine, and he is a great example of what a person can accomplish in the retail
field today. I have seen first-hand the significant difference that Tom has made at
Walmart. This is a day for anyone connected to our company to reflect on the kind of
leader Tom Coughlin is, and to celebrate the difference he has made at Walmart.”
Rob Walton, Walmart chairman, was quoted as saying:
“I know that my father Sam Walton would be proud of Tom’s career at Walmart and the
role he has played in the growth and development of the company. Tom is a talented
leader, and I particularly respect the special relationship that he has built with our
associates in the field. This says a lot about how well Tom Coughlin represents the
Walmart culture,” (Walmart).
The federal investigation uncovered a number of surprising facts about the well-paid
executive. Coughlin’s total compensation at Walmart was in excess of $6 million and he held
more than $20 million in Walmart stock in the same year the company launched their internal
investigation. And yet, the “questionable transactions” were remarkably small, ranging from
alcohol to dog gates and from alligator skin boots to hunting trips (Bandler & Zimmerman, The
Wall Street Journal).
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Once the investigation went public, Coughlin declared that the monies were used in
support of a secret, company-approved project around union containment and discouraging
union organizing activities at the company. Walmart denied that any such activity existed and
filed a lawsuit against Coughlin to end his retirement agreement and recover the money
Coughlin was accused of mishandling (Kabel, USA Today). Walmart made moves to distance
itself from Coughlin. During a conversation with financial analysts in October 2005, former Chief
Executive Lee Scott stated “certainly, for me personally and for this company, the Tom Coughlin
issue has been an embarrassment,” (Kabel, USA Today). Coughlin had since resigned from his
board seat in March 2005, and his resignation letter, filed with the Security and Exchange
Commission, contained two sentences. “I leave with warm feelings for the company and all the
people who have made it great. I have appreciated the opportunity to serve,” (Joyce & Johnson,
The Washington Post).
Resolution
Over the course of the investigation other Walmart employees were fired, including
Coughlin’s deputy Robert Hey and Jared Bowen, the junior executive that called attention to
Coughlin’s questionable expense reporting in the first place. In 2006, Coughlin pled guilty to
wire fraud and tax evasion. Although he faced a maximum of 28 years in prison and fines up to
$1.35 million, Coughlin avoided any real jail time due to his declining health. He was sentenced
to 27 months in home detention and five years of probation. In addition, Coughlin was ordered
to pay a $50,000 fine and $411,000 in restitution to Walmart and the Internal Revenue Service.
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During the hearing, Coughlin stated “there is no excuse for my conduct,” (The Associated Press,
The Washington Post).
Immediate Effects
Although Walmart initially rescinded more than $17 million in retirement benefits from
Coughlin, the company later agreed to provide him $6.8 million to settle litigation related to
those benefits (Hagerty & Nassauer, The Wall Street Journal). The U.S. attorney’s office never
found evidence to support Coughlin’s claims about a company-approved anti-union effort (The
Associated Press, The Washington Post).
Yet even after playing the leading role in one of Walmart’s biggest scandals and pleading
guilty to tax evasion and wire fraud, Coughlin continued to command a significant presence and
influence in the small town of Bentonville, Arkansas, the birthplace of Walmart (Layne,
BusinessInsider.com). Moreover, Walmart’s business performance remains steady and strong.
Following his conviction, Coughlin formed a consulting firm, Tom Coughlin & Associates,
specializing in business efficiency, operations and loss prevention (tomcoughlin.com). He also
continued to serve on the boards of a number of nonprofit groups and for an online retail site.
The retail industry remained interested in his counsel and expertise. In a 2012 interview,
Coughlin confirmed that he remained a loyal Walmart shopper, “Walmart’s best days are still
ahead,” he was quoted as saying in the article. “I buy just about everything at the Walmart
store in Jane, Missouri, and the ‘big man’s shop’ at Dillard’s,” (Souza, Talk Business & Politics).
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In 2015, SmartStore Business Intelligence Solutions, a global provider of cloud-based
point-of-sale analytics, named Coughlin as their executive advisor. SmartStore President Ken
Claflin celebrated Coughlin’s “remarkable” career. “Coughlin’s legendary accomplishments and
his deep operational knowledge will be a tremendous asset to our ongoing product
development efforts,” Claflin said at the time. “His expertise will help us drive best practices
both internally and in the field, so our clients can gain even more from our solution,” (PR Web,
Fierce Retail).
Where is Tom Coughlin Now?
He was well known and viewed as a keeper of Walmart’s legacy. Even within a year of
his death, Coughlin is said to have been called upon for counsel by a top executive at Walmart
(Nassauer, The Wall Street Journal). Upon hearing of his death, current and former Walmart
employees inundated Facebook with words of sympathy and tribute and, at his funeral service,
the church was packed with current and former Walmart employees.
“The few speakers who addressed the funeral service spoke mostly about the individual,
less about his various roles at Walmart. They talked about his compassion, his
leadership skills, his ability to recognize in each individual those special skills that
worked to enhance the retailer while benefitting the individual as well. They spoke as
well of Coughlin’s humor…old stories resurfaced, stories which focused on Coughlin’s
self-deprecating humor and his ability to laugh at his company – and at himself,” (Pinto,
Chain Drug Review).

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CASE STUDY #3
“Giving up the illusion that you can predict the future is a very liberating moment. All you can do
is give yourself the capacity to respond to the only certainty in life—which is uncertainty. The
creation of that capacity is the purpose of strategy,” (Kotler & Casoline, 2009) | John Browne,
Businessman and Author
———
Background
Born to a British Army officer and a Hungarian Auschwitz survivor, Edmund John Phillip
Browne began his career at British Petroleum (BP) in 1966 at the suggestion of his father, a BP
employee. Browne worked as an apprentice with the company for three years while he
completed a degree in physics at the University of Cambridge (Craine, Encyclopedia Britannica).
The company would pay for his master’s degree in business at Stanford University and, over the
course of the next 30 years, Browne took on a number of roles of increasing responsibility at BP
in exploration, production and finance until ultimately being named CEO in 1995 (Fisher,
Forbes).
When Browne took the helm, BP seemed directionless and he was looking for a way to
bolster and refresh the company. Browne developed a plan to grow and expand BP and
announced a $57 billion merger with Amoco, eliminating one major competitor and sending the
competition back to their boardrooms to develop merger strategies of their own. Two years
later, BP acquired Atlantic Richfield Company for $27 billion, making BP Amoco one of the
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world’s top producers of oil and gas (Craine, Encyclopedia Britannica) and bringing BP more
front and center in the industry.
Leadership Style
Browne was known for closing daring deals and calling for environmentally-progressive
business practices when it wasn’t popular, particularly in an energy-intensive industry. He was
interested in keeping the whole team on the same page – alignment to a fundamental objective
– if the company would thrive over the long-term. During a presentation to Stanford students in
2005, Browne highlighted the importance of a company’s sense of purpose and a commitment
to mutual advantage, which he said had shaped his own leadership philosophy.
“In any business, it’s absolutely critical not to lose the plot. You have to remember what
your purpose is, and you have to be disciplined about sticking to it in order to create
shareholder value. It doesn’t work the other way around – you can’t start with
shareholder value and work your way backwards to establish your organization’s values.
In my career, the times when I’ve made mistakes have been times when I’ve crossed the
line between feeling self-confident and feeling self-important. That line—though it’s
extremely important—is almost invisible. The only antidote is surrounding yourself with
incredibly good people. Remembering that they are there because they want to be
there – and reminding yourself that they’ll leave if there’s a reason to do so – will keep
you on the straight and narrow,” (Vollmer, Stanford Business Insights).
Although unassuming, Browne was known as a PR genius. In 1997, he went about
rebranding BP as more of a “green” company – publicly accepting global warming, replacing the
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BP logo with a green-and yellow sunburst, running ads that suggested BP stood for “Beyond
Petroleum” and investing in solar power, albeit at a fraction of what was invested in
conventional energy ($100 million compared to $10 billion).
Browne was not as popular in the United States or with employees more closely aligned
to the production side of operations – they feared that the BP executive’s ignorance of refining
would create safety issues. Consensus was that Browne might know how to run a business but
he didn’t know how to run a refinery, which is recognized as one of the most complicated and
dangerous workplaces in the world.
There was a growing dislike of BP’s hierarchical management structure and seemingly
handpicked high-potential employees who served as Browne’s interns before replacing other
executives. Some feared that the culture was becoming more about intimidation and less about
innovation as employees were asked to sign a written business plan, known internally as “the
promise,” that could be used against an employee who didn’t meet company goals. While some
employees nicknamed him the Sun King, others called him the “elf,” an acronym for “evil little
f****r,” (Swartz, Upstart Business Journal).
Issue
At the end of 2005, the exceedingly polite BP executive was living an unassuming, quiet
existence in his homes in London, Cambridge and Venice (Swartz, Upstart Business Journal)
until a series of major safety and environment incidents at a Texas refinery, an Ohio refinery
and a pipeline at Prudhoe Bay, Alaska, prompted lawsuits and investigations of BP operations.
In addition, the company was facing a dilemma. Browne was approaching the mandatory
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retirement age of 60 and there was no clear decision on who would succeed him as CEO. After
discussions with the board, Browne agreed to commit to a retirement date.
At the same time, his personal life was falling apart. Browne’s former boyfriend and
prostitute, Jeff Chevalier, was selling their story to London newspaper the Mail on Sunday. Only
those closest to Browne knew of his homosexual lifestyle, something that he carefully kept out
of the public domain as he had spent more than five decades in the closet. Initially, the
Canadian-born Chevalier approached Browne for money to disappear. He sent a message to
Browne stating “I have nothing left to lose. I am facing hunger and homelessness after four
years of sharing your lifestyle… The least I am asking for is some assistance… Please respond… I
do not want to embarrass you in any way, but I am being cornered by your lack of response to
my myriad attempts at communication,” (Swartz, Upstart Business Journal).
Chevalier then took the story of their four-year relationship to the tabloids. In addition
to personal details – Chevalier disclosed that the two met on a male-escort agency website,
Suited and Booted – the story included details of a BP study to relocate the firm overseas and
the value the company assigned to human life in the event of a major company disaster
(Swartz, Upstart Business Journal).
In January 2007, Browne took legal action to prevent the newspaper from publishing
details that came out of their interview with Chevalier, and the paper appealed the injunction.
On January 12, 2007, Browne publicly announced his retirement with the public none the wiser
of the Chevalier interview. Over the next few months, Browne and the Mail on Sunday battled
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over the legality of running the story. When Browne lied about how he met Chevalier, the judge
dismissed the case, allowing the story to go to press.
“It is ironic that the claimant should choose to tell this lie at a time when he was
maintaining that I should heavily discount the factual account of [Chevalier] and also any
evidence from him,” High Court Justice David Eady stated at the time. “A wholesale
attack was being made on his credibility. It was said that he is a liar, unstable and
adversely affected by dependence on alcohol and illegal drugs… It is thus clear that it is
not only the claimant’s willingness to tell a deliberate lie to the court, persisted in for
about two weeks, that is relevant in assessing his own credibility and overall merits. So
too is his willingness casually to ‘trash’ the reputation of [Chevalier] and to discredit him
in the eyes of the court,” (Swartz, Upstart Business Journal).
Browne did not excuse his dishonesty, stating “my initial witness statements contained
an untruthful account about how I first met Jeff. This account, prompted by embarrassment
and shock at the revelations, is a matter of deep regret. It was retracted and corrected. I have
apologized unreservedly and do so again today. For the past 41 years of my career at BP I have
kept my private life separate from my business life. I have always regarded my sexuality as a
personal matter, to be kept private. It is a matter of personal disappointment that a newspaper
group has now decided that allegations about my personal life should be made public,” (Cowell,
The New York Times).

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Resolution
Browne elected to further expedite his resignation, a departure that already had been
accelerated due to earlier issues with the refinery explosion in Texas that killed 15 employees
and an Alaskan oil spill that saw 200,000 gallons of crude oil leak into the Prudhoe Bay (Doran,
USA Today). BP’s board accepted Browne’s resignation “with the deepest regret. For a chief
executive who has made such an enormous contribution to this great company, it is a tragedy
that he should be compelled by his sense of honor to resign in these painful circumstances
(Cowell, The New York Times).
Immediate Effects
During the 10 years that Browne served as CEO, BP’s stock price grew 250 percent and
its market value grew five times over (Cowell, The New York Times). Following Browne’s
resignation and subsequent publicity, there was no noticeable effect to the company. BP was
dealing with safety and environmental issues that were driving more significant ripples in stock
price, company performance and public sentiment.
Browne lost a bonus worth more than $7 million and forfeited inclusion in a
performance share plan worth nearly $16 million. He did, however, receive a pension worth
nearly $30 million and steady retirement income of more than $1.3 million a year. Company
officials defended the pension as it was based on more than 40 years of service at the highest
levels of leadership. “He is worth it,” stated a BP spokesman (Macalister, The Guardian).

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Where is John Browne Now?
Since stepping down from the top spot at BP, Browne has received strong support from
a variety of business leaders and politicians. He has published several books, written a number
of articles and conducted speaking engagements about leadership, climate change,
sustainability and lesbian, gay, bisexual and transgender (LGBT) rights. He remains a strong
figure in the business industry and is a seen as an authority in developing strategy, closing
mergers and acquisitions and connecting corporate visioning with sustainable business
practices (Aitkenhead, The Guardian).
Over time, there has been a steady evolution in Browne’s apparent comfort level with
discussing his sexuality, his sentiment about concealing it and in sharing his thoughts about the
transition.
“Compare, for example, Browne’s descriptions of May 1, 2007, the day that he resigned
from BP after a U.K. court gave the Daily Mail permission to publish allegations of
impropriety by a former boyfriend. In Beyond Business, Browne recounts his final
departure from BP’s London headquarters through the press scrum and into his car,
with the sole expression of emotion the epitome of British understatement: ‘It was
intrusive and unpleasant.’
“Here’s the same moment in The Glass Closet: ‘It felt as though all the air had been
sucked out of the vehicle. Driving away from the corporation that I helped to build felt
like dying. For decades, I dissembled and fenced off a large portion of my life to prevent
all of this from happening. I had ducked and weaved and been evasive for as long as I
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could. But on that day, almost inevitably, my two worlds collided. In the fallout, I lost
the job that had structured my entire life. After all those years of worry and dread, I
could not help but think that my fears were finally justified. At that moment, I was
convinced that I had been right all along,’” (Bader, Strategy+Business).

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THE SCALE OF CORRUPTION
“What you do has far greater impact than what you say,” (Kruse, Forbes.com). | Stephen Covey,
Educator and Author
———
Not all crises are equal. Some are related to unforeseeable or unavoidable events that
an organization is vulnerable to – such as natural disasters, major technical breakdowns,
product failures or economic downturns. There are other, more intentional crises, which are
driven by other forces. “The broadest and most inclusive subcategory of intentional crises is
unethical leadership. An extensive review of more than 6,000 newsworthy organizational crisis
events reported annually by the Institute for Crisis Management found that management was
in some way responsible for the majority of them. Worse, many of these crises were caused by
criminal acts of managers, (Ulmer, Sellnow & Seeger, 2015). It’s the latter intentional crisis that
is avoidable and often driven by corruption.
In Clement’s study of business news reports regarding unethical business practices at
Fortune 100 companies, 40 percent had committed serious infractions that were largely
financially-related. Some of the firms were involved in multiple misdeeds, but all of the
activities resulted in negative press, significant fines and, in some cases, jail time for executives.
Clement developed three categories characterizing the unacceptable behavior, based on his
findings, and ranked the misdeeds according to the magnitude of the fines and the number of
infractions:
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Table 3: Categories of Unethical Business Behaviors
Categories of Unacceptable
Behavior
Description of Category Level of Fine (or other
reason) for Corporation’s
Ranking
Category 1:
The most unacceptable
behavior
Involves behavior that led to
fines or settlements of $1
billion or more, and which
may have involved more than
one charge of misconduct
Promoted product that led to
multiple deaths
Paid billions for multiple
offenses
Criminal activity and
discrimination
Category 2:
The second most
unacceptable behavior
Involves behavior that led to
fines or settlements less than
$1 billion but more than
$100 million, or which
included more than one
charge of misconduct
Paid millions for multiple
offenses
Overstated profits
Category 3:
The least unacceptable
behavior
Involves behavior that led to
fines or settlements less than
$100 million
Paid millions for multiple or
single offenses
Paid to settle discrimination
charges
Violated pay disclosure
practices

Source: Ronald W. Clement

Table 3: Organizations engaged in unethical behavior can be ranked according to the level of
“unacceptability” of its behavior, including leadership actions and resulting fine(s).

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Not all leaders are corrupt and, in many cases, intentional crisis events involve a few
“bad apples.” However, it is well-established that the actions of a few unethical leaders are
driving far-reaching circumstances that affect many – and polluting the reputation of corporate
brands as well as business as a whole. Clement’s work provides a baseline ranking of
unacceptable behavior and highlights the need for stronger ethical leadership within
organizations. “Based on the evidence presented, any dramatic improvement in business
behavior depends upon the efforts of business leaders themselves and the broader American
public,” (Clement, Business Horizons) including improved corporate governance and greater
public demand for more responsible action from government leaders.
To put the magnitude of such events into context, the author has created a model that
identifies the degree, or scale, of corrupt activities, presented below, which provides insight
into why some scandals might have staying power, becoming synonymous with “everything
that is wrong with corporations,” while others fade quickly from the collective consciousness.
American lawyer F. Lee Bailey said that “the memory of the American public is about six
weeks,” (Goodreads). Depending on the degree of corruption, the brand and reputation of an
organization experiences either a minor hiccup, a major disruption or certain organizational
death. And, the author suggests that the level of corruption directly influences the level of
reputational impact.

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Table 4: Scale of Leadership Corruption
Degree of Event Resulting In Traits Exhibited by
Leadership
Far-Reaching Impacts

Affects innocent stakeholders
Major safety issue involving
death(s)
Major environmental issue
involving damage, wildlife
death(s)
Significant fines
Dishonest
Selfish
Greedy
Dishonorable
Valueless
Egotistical
Secretive
Some Impacts

Affects innocent stakeholders
Safety or environmental risk
Questionable product integrity
Noteworthy fines
Only Organization-Level
Impacts

Affects C-suite leadership
Exposed lie(s) or
mismanagement
Minor fines

Table 4: A scale of corrupt activities, based on organizational events/behaviors and exhibited leadership
traits. The brand and reputational impacts depend on the degree of corruption.

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The magnitude of the leadership corruption issue – such as considering the number of
people affected, whether or not there was a safety or environmental issue – will correlate to
any resulting impact to the brand. In some cases, such as those studied earlier in this text, there
was limited brand damage. In the case of Walmart, the brand was not affected at all and,
although Coughlin was convicted of fraud, his reputation did not suffer. The same can be said
for Hurd. Although he sexually harassed a subordinate and stole money from HP, the HP brand
was not affected and Hurd quickly earned another senior leadership position at Oracle.
These events contrast starkly with major scandals at Enron and WorldCom; events that
had far-reaching effects as thousands lost their jobs and life savings. The same can be said for
the recent BP “Deep Horizon” oil disaster, which cost the company billions and caused severe
harm to the environment. An organization’s brand and reputation are most at risk when
innocent stakeholders are hurt. If a scandal’s effects are limited to the organization itself, the
public is more likely to quickly forget and move on to the next issue of the day.

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SUCCESSFUL PUBLIC RELATIONS STRATEGIES AND CRISIS RESPONSE
“During times of universal deceit, telling the truth becomes a revolutionary act,” (Lombardi,
About) | George Orwell, Novelist
———
At the onset of a crisis, human nature is to stop, drop and head for cover. Panic
immediately sets in and self-protection is the top priority. Corporations are no different. In
times of an organizational crisis, the typical inclination is to hunker down and say nothing until
all the facts are known. By the time a company starts thinking about talking, other voices are
dominating the conversation and the organization has lost a huge opportunity to be proactive,
drive the message and demonstrate leadership.
Instead, by waiting too long, the company must then throw resources at defensive
efforts. Or worse, efforts are made to cover up or deny the truth. “In the end, the CEO must
make the decision, keeping in mind that the greatest of all risks is the damage that will result if
the truth is obscured, ignored or denied. Employees, customers, shareowners and the news
media easily recognize dissembling or spinning half-truths. When management’s actions or
statements don’t pass the ‘smell test,’ credibility is the immediate casualty,” (The Arthur W.
Page Society, 2004). But there are rare exceptions.
Johnson & Johnson
Public Relations practitioners are well-acquainted with Johnson & Johnson’s handling of
the cyanide-laced Tylenol crisis of 1982. Decades later, this case is still held up as the model
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approach for effective corporate crisis management (Latson, Time) and students study Johnson
& Johnson’s exceptional actions during an event of unprecedented risk, potential danger to
consumers, public pressure and uncertainty. At the time, Tylenol had more than 100 million
users, outsold all of its competitors combined and accounted for more than 19 percent of
Johnson & Johnson’s profits. Tylenol was considered the most successful over-the-counter drug
in the U.S., representing 37 percent of all over-the-counter sales at the time (Department of
Defense). In October 1982, seven mysterious deaths occurred in Chicago’s West Side. Shortly
thereafter, authorities linked the deaths to cyanide-laced extra-strength Tylenol and, as news
spread, the nation was gripped in a massive panic.
The top leadership at Johnson & Johnson quickly put their Credo – the company’s values
statement – into action by putting human life and public safety first. The company issued an
immediate nation-wide alert, warning the public not to consume any Tylenol product. It
recalled more than 30 million bottles of Tylenol, reportedly valued at more than $100 million
and activated two toll-free hotlines (one for the public and one for the media). It exchanged all
Tylenol capsules, which was the product formulation that was suspected to have been
tampered with, with solid tablets, and partnered with the Chicago Police Department, the
Federal Bureau of Investigation and the Food and Drug Administration in a joint search for
those responsible. The company also offered a $100,000 reward for information leading to the
killer (Susi, Effective Crisis Management). In a matter of days, Tylenol’s market share had fallen
to seven percent.
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Just six weeks following the deaths, Johnson & Johnson initiated efforts to recapture the
market with a marketing campaign and, a year following crisis, Tylenol had clawed back about
30 percent of a $1.2 billion market (Kleinfield, The New York Times). “Nothing good happens
without trust,” Johnson & Johnson CEO James Burke said of the events. “With it you can
overcome all sorts of obstacles. You can build companies that everyone can be proud of,”
(Bloomberg News, Advertising Age).
Johnson & Johnson acted quickly. This is difficult, particularly when a company does not
have all the answers. Yet the company’s example underscores how an organization can get out
in front of an issue, guide the messaging and demonstrate true leadership. The company had a
well-established values-based statement that helped direct its behavior, outlining in part:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers
and father and all others who use our products and services. In meeting their needs
everything we do must be of high quality… We are responsible to the communities in
which we live and work and to the world community as well,” (Johnson & Johnson).
Reliance on the company’s Credo was considered a seminal element of the company’s
response, as it proved to be an immutable guide during a crippling crisis. For its response to the
Tylenol crisis, Johnson & Johnson has been universally recognized for going “above and
beyond,” taking full responsibility and acting in a way that restored consumer confidence and
trust.

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Preparation, Speed and Accessibility
In times of crisis, preparation, speed and accessibility are critical elements in a
successful communications approach – Johnson & Johnson achieved all three. Most companies
can identify the top three to five threats or risks facing their organization. Depending on their
respective areas of greatest vulnerability, companies can plan in advance for a range of
potential corporate crises, better positioning the organization for a quick and effective
response. Some of the more common risk areas include corporate/executive scandals;
environmental risks; facilities-related/safety issues; financial crises; public health or
endangerment issues; labor strikes; product liability issues or acts of terrorism
(Communications Executive Council).
Once key risks are identified, developing a crisis communications plan, coupled with
practicing as a team, can go far to ensure a rapid, appropriate response when an issue actually
occurs. Team members will be less inclined to panic and more apt to feel confident when faced
with an emerging crisis as they will have a recognizable, concrete and vetted plan to put into
action. One public relations leader described the importance of planning:
“My father was an officer of the U.S. Army. Although I was never an active Boy Scout,
their motto “Be Prepared” was drilled into my head at an early age. As I’ve toiled in this
industry for the past two decades, it has amazed me how many companies are totally
unprepared to deal with a real crisis. Most either have a crisis plan that hasn’t seen the
light of day for at least a decade, or the plan is so complicated it would require an army
of engineers to figure it out. Sorry to say, far too many organizations have found more
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important items to address, leaving their crisis plans as to-do items until the day the
stuff hits the fan. They say it takes a lifetime to build a reputation and only a few hours
to destroy it. You’re almost guaranteed the latter, if you fail to plan. Being unprepared is
no excuse; it’s just a reflection of the importance you place on your reputation,”
(Magolnick, LinkedIn).
Speed and accessibility, particularly in today’s multi-channel social media environment,
will make or break any company during a crisis. The ability to act quickly is dependent upon
advance preparation, and responding during the first hours of any crisis is key. The faster an
organization responds, the fewer problems it will ultimately face. Where response time was
once measured in days or weeks, it is now measured in hours or even minutes
(Communications Leadership Council). Many times, a story is already up on social media
platforms before they reach conventional TV outlets or, in some cases, before corporate
officers are even aware something has occurred. It is now up to the public relations practitioner
to match this level of speed and get their message heard quickly.
“The longer you wait, the more time a reporter has to get the information they are
looking for from other sources; then you are stuck correcting things. In a similar vein, if
you are in a public ‘fight,’ try to get to the media first – that way you can frame the
issue, not your opponent,” (Pisciotta, Inc.).
Best Practices
To identify best practices for an effective crisis communication plan and crisis response,
Matthew Seeger reviewed the work and research of leading experts in the field as well as a
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panel of crisis communications experts. Seeger identified 10 best practices for crisis
preparedness, ranging from building partnerships to developing authentic and compassionate
messaging:
• Process approaches and policy development: Communication strategies should
be fully integrated into the organization’s decision-making process
• Pre-event planning: Prepare, plan and practice in advance
• Partnerships with the public: Accept the public as an equal partner and resource
• Listen to the public’s concerns and understand the audience: Ongoing
interaction with the public
• Honesty, candor and openness: Build credibility and trust
• Collaborate and coordinate with credible sources: Establish strategic
partnerships
• Meet the needs of the media and remain accessible: Maintain a free flow of
information
• Communicate with compassion, concern and empathy: Acknowledge concerns
• Accept uncertainty and ambiguity: Waiting until everything is known will limit
effectiveness of an organization’s efforts
• Messages of self-efficacy: Communicate what stakeholders can do to restore a
sense of control
No two crises are the same and there is no “one size fits all” in crisis communications
planning (Seeger, 2006). Several variables will ultimately influence a crisis communications
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strategy and approach, including the type of crisis, overarching goals and objectives, and the
fact that all crises are inherently dynamic and unpredictable. These factors will shape an
organization’s public relations strategy, crisis response and, ultimately, organizational impact
and effectiveness.
An Opportunity for Change
Scandals and crises are oftentimes couched in terms of destructive, threatening and
negative events without any redeeming value – and the communications following such an
event tends to be limited and defensive. Again, corporations do what comes naturally by
shifting blame, minimizing what really occurred, turning to the lawyers or doing nothing at all.
These reactions serve to further entrench existing public perceptions of corporate dishonesty,
greed and mismanagement. While all crises represent a significant level of threat to
organizational reputation, there can be a silver lining.
A crisis innately carries an opportunity “to learn from the event, communicate honestly
and ethically, work to minimize harm to those most directly impacted by the crisis and develop
a prospective vision with which the organization can move forward,” (Ulmer, Sellnow & Seeger,
2015). It forces an organization to question and examine long-held beliefs or attitudes that may
no longer work and ultimately demonstrate to employees and the public that the company is
listening, making necessary changes and creating a lasting transformation (Derousseau,
Fortune). At the same time, organizations can respond quickly and authentically by enacting
and promoting “strong and positive ethical core values and effective crisis communication
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principles” (Ulmer, Sellnow & Seeger, 2015) – all working in concert to guide communications
strategy and execution.
In 2007, when German energy and health-care giant Siemens was under fire for a global
bribery investigation, its board of directors was looking for a change and decided to hire a new
company leader. It was the first time the organization had hired an “outsider” since its founding
in 1847 and the newly-appointed chairman, Peter Löscher, used the event as a catalyst for
organizational change.
“I arrived at Siemens at a very difficult moment. The company faced allegations of
bribery in several countries, and eventually it paid $1.6 billion in fines. But as I always
remind anybody who is listening, never miss the opportunities that come from a good
crisis – and we certainly didn’t miss ours. The scandal created a sense of urgency
without which change would have been much more difficult to achieve, regardless of
who was CEO. Siemens is a very proud company with a history of innovation and
success. In the absence of a catalyst like this, people would have asked themselves,
‘Why alter anything?’ Yet Siemens had to change. It’s not so much the uniqueness of
your strategy that matters nowadays—it’s the strength of your execution,” (Löscher,
Harvard Business Review).
In his first 100 days with the company, Löscher set two goals: get to know his new
company and quickly change how it was organized. He traveled around the globe to meet with
customers, employees and business leaders. Löscher learned quickly that employees were
frustrated with the bureaucracy that burdened the system and wanted more independence in
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making decisions to become a more nimble organization. At the same time, these employees
were highly ashamed of the bribery scandal. Löscher reorganized the corporate structure,
replaced a number of managers and executives, added an environmental strategy, recognized
the importance of diversity, and emphasized customer relationships as priority number one.
Over the next four years under Löscher’s leadership, Siemens’ revenue grew approximately 14
percent and net income increased more than 56 percent.
With more publicity around ethical breaches and CEO scandals, these events create an
opportunity for an organization to be responsive, focus on the right culture, develop short- and
long-term goals, create a dialogue with key stakeholders and demonstrate action. It is the first
step in restoring trust with right-to-be suspicious stakeholders. Develop a strategy,
communicate in simple terms and follow through – and business results won’t be far behind.

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IT ALL COMES DOWN TO TRUST
“All business in a democratic country begins with public permission and exists by public
approval,” (The Arthur W. Page Society, 2004) | Arthur Page, Businessman and Communicator
———
For some time, the public has witnessed leadership breakdowns, executive scandals and
C-suite crises; these ethical breaches further reinforce long-standing beliefs about corporate
greed and the pervasive image of CEOs. “Stories about the malfeasance of corporations and
corporate leadership have filled the news media. Chief Executive Officers (CEOs) are frequently
portrayed as arrogant, egregiously overcompensated, unrestrained in their greed, uncaring
with respect to employees, disdainful of laws and regulations and, in a few cases, as remarkably
incompetent,” (The Arthur W. Page Society, 2004). A steady stream of ethical lapses within
leadership, and the resulting media coverage, have fueled this thinking.
Although many would agree that the vast majority of leaders and managers operate
above-board, the questionable and illegal activities of a few speak loudly and destructively –
heightened by increasing media attention – ultimately tarnishing the reputations of all. People
don’t like or trust business leaders. Not only do these perceptions hamper business growth –
people do not want to buy from or invest in businesses or people that are unethical – they are
corrosive to a corporation’s culture and employee morale. People want to be proud of the
organization they represent and, in some cases, the company they have spent their lifetime
building and serving.
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Historically, leadership discussions largely centered around the leaders themselves –
cultivating the most desirable skills and personality traits and grooming high-potential
candidates for future roles within an organization. “Leadership theorists nowadays stress
authenticity, EQ and relationships. This makes intuitive sense. But it isn’t just a fad; there is
solid reason behind the shift. It is driven by changes in the world. Above all, it reflects the
growing importance of trust,” (Green, Forbes). Today, we see the importance of building trust
with key stakeholders – employees and shareholders to consumers and community partners.
And, when all is said and done, the person ultimately responsible for managing an
organization’s reputation is the CEO. Trust is central to the corporate brand and reputation and
“leaders in the new business world will be skilled at the art and science of trust,” (Green,
Forbes).
“Contrary to what most people believe, trust is not some soft, illusive quality that you
either have or you don’t; rather, trust is a pragmatic, tangible, actionable asset that you can
create—much faster than you probably think possible. While corporate scandals, terrorist
threats, office politics and broken relationships have created low trust on every front, I contend
that the ability to establish, grow, extend and restore trust is not only vital to our personal and
interpersonal well-being; it is the key leadership competency of the new global economy,”
(Covey, 2006).
In his recent book about the importance of trust in business, JetBlue Chairman Joel
Peterson outlines 10 laws that will help an organization build bonds and become better for it.
“We take trust for granted, not conscious of how it pervades relationships. Partners rely on
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partners; employers on employees; companies on each other; nations on other nations;
families on other family members. And in a world in which the peer-to-peer economy is gaining
ascendance, trust is all the more indispensable. Understanding the underpinnings of trust,
therefore, is increasingly important as companies become more global, more competitive, and
more diverse culturally and demographically. Each new thread of well-founded trust adds
strength and richness to the complex tapestry of our interwoven economic and personal lives,”
(Peterson, 2016). Peterson highlights the importance of personal integrity, respecting and
empowering others, honest communication and humble leadership as well as three key
elements of trust:
• Character: The people you trust believe that what is important to you will be
important to them.
• Competence: The people you trust have the expertise to attain goals that matter
to you.
• Authority: The people you trust deliver on what they promise.
It is clear that trust, a fundamental quality, is necessary for effective leadership as well
as crisis avoidance. Trust is the global currency by which all business is accomplished, and done
in a way that generates future opportunity and growth. At the same time, all corporate
stakeholders benefit. “We can’t do anything by ourselves,” said Chengyu Fu, chairman of
Sinopec, China’s largest refining company. “We have to work with all kinds of companies and
partners, so you have to be trusted,” (Yale Insights, 2014).

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To this author, the attributes of a great leader are clear:
• Cultivates and engenders trust among all stakeholders
• Demonstrates high emotional intelligence and business acumen
• Motivates and inspires others in pursuit of a shared vision
• Models confidence, takes calculated risks and empowers and rewards others for
doing the same
• Communicates simply, openly and regularly; demands transparency
• Creates organizational clarity; eliminates bureaucracy and removes roadblocks
• Understands the team, individually and collectively; seeks diversity of thought
and strengths that balance the team
• Celebrates team successes publicly, coaches individuals privately
George Washington, the first president of the United States, left a lasting legacy of
leadership, integrity and truth – all working together to build stakeholder trust. In particular, he
recognized early on that the ethics of a business leader are no different than those of a general
or president. The traits of effective, compelling leadership resonates whether political or
corporate in nature. “He wrote to Alexander Hamilton in 1788, ‘I hope I shall always possess
firmness and virtue enough to maintain what I consider the most enviable of all titles, the
character of an honest man,’” (Rees, 2007).

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Creator Jameson, Blythe (author)

Core Title Leadership corruption and the implications to the corporate brand

School Annenberg School for Communication

Degree Master of Arts

Degree Program Strategic Public Relations

Publication Date 09/28/2016

Defense Date 09/26/2016

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag abuse of power,brand management,Communications,corporate brand,corporate reputation,corrupt,corrupt leadership,Corruption,crisis communications,crisis response,definition of corruption,definition of leadership,effective leadership,emotional intelligence,ethics,leadership,Management,OAI-PMH Harvest,Public Relations,risk communications,scale of corruption,successful leadership,transformational leadership,Trust

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