Phone Calls and Bar Tabs Spell Crisis

The sixth of a six-part series examining prominent corporate crises impacting U.S.-based business operations during 2011.

I don’t believe it is a stretch to say that Netflix’s Reed Hastings would like a do-over for, at minimum, the last six months of 2011.

One has to wonder if Roy Bostock might desire a similar reprieve for the firing of Yahoo CEO Carol Bartz via a call on her cell phone. The decision to take the action was not an issue, not after an 8-0 vote by the Yahoo Board of Directors. Industry analysts agreed Bartz did not prove to be the turnaround expert the Board thought back when she was hired in January 2009.

No, it was Bosktock’s execution of the Board’s wishes that produced the company’s crisis. First, while cell phones are so intertwined with our identity and allow for instantaneous changes to our schedules, shouldn’t the firing of an employee remain a face-to-face conversation? Making matters worse, Bartz claims Bostock read remarks prepared by an attorney rather than converse with his employee from the position of power possessed by a Chairman of the Board.

Second, if removing the face of the company, which the CEO most certainly is, mandated an instantaneous response, why would the Board provide the now disgruntled ex-employee the first opportunity to provide the news to the employee population? After all, Bartz acknowledges nearly two hours transpired between the end of her conversation with Bostock and when she put fingers to iPad tapping out the message.

The appropriate communication strategy in these instances is to prepare messages in advance, either e-mail or video, from the Board chair and the incoming CEO discussing the future vision for the company while briefly referencing the corporate governance action. Board members can spend the remainder of their careers explaining their version of the events, but the indictment is they were collectively ill-prepared to fully execute the decision reached.

While her message to YAHOO employees was respectful, Bartz didn’t adopt a similar tone when discussing the firing with the news media. Known as a salty speaking lightning rod, Bartz was not kind in her assessment of Chairman Bostock and her fellow Board members. Bartz’s comments may have been costly as her contract included a $10 million non-disparagement clause. Not in doubt was Wall Street’s reaction as the stock price jumped six percent in after-hours trading after news of Bartz’s dismissal became known.

Hurd’s Place

What’s in the water out in Palo Alto, CA that HP senior executives cannot stay out of trouble?

First, Carly Fiorina proves to be more style than substance during her stewardship that included a $24 billion merger with formal rival Compaq. The Board grew tired of Carly’s act, forced her out and hired Mark Hurd in April 2005 to stabilize the company.

Hurd more than steadied the course to the point where HP surpassed IBM as the world’s largest technology company. About two years into Hurd’s tenure, Patricia Dunn, the company’s then chairwoman, was forced to step down for her actions in an espionage scandal involving spying on journalists and board members to determine the sources of leaks to the press.

Hurd survived that brouhaha but was forced to resign in August 2011 amid charges that he sexually harassed Jodie Fisher, a former actress and reality-television personality who worked for HP as a marketing consultant. Hurd settled the sexual-harassment claim with Fisher for an undisclosed sum, and Fisher has denied having an “affair or intimate sexual relationship” with Hurd, who is married.

An internal investigation proved Hurd did not violate the company’s sexual-harassment policies, but did identify nearly $20,000 in inaccurate expense reports Hurd submitted for costs spent to conceal his personal relationship with Fisher.

Before accepting Hurd’s resignation, the HP Board of Directors sought the opinion of the company’s public relations firm as part of its due diligence. While it is not uncommon for corporate boards to retain image consultants when considering staffing decisions involving high-profile executives, it is rare the consultant becomes ingrained within the board’s decision-making process. While involvement at the board table where decisions of this magnitude are being reached is favorable for the public relations profession, the typical consultant’s response, if asked, is to provide reputation strategies for whichever possible outcome the board elects to pursue.

Within one month of leaving HP, Hurd accepted the co-presidency and a seat on the Board of Directors at Oracle Corp. HP quickly filed litigation claiming Hurd’s contract included a 24-month non-compete clause that precludes him from business activities with HP rivals. Oracle and HP compete in several markets including computer servers and data storage.

Legal discovery in the case took an ugly tour for Hurd late in 2011 as communications related to the sexual harassment issue became public, instigating another round of crisis communications.

Take a moment to submit your “Top 5 Corporate Crises During 2011” poll co-sponsored by Evolving World Communications and the Institute for Crisis Management at http://tinyurl.com/828uuqg.

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