In recent years, we’ve seen a number CEOs create problems for the companies they run with ill-timed tweets, ill-advised statements, or behavior unbecoming of their leadership roles. As was recently detailed in a terrific piece in PRNews, there are a number of considerations to make when companies determine how best to respond. Here’s a look at the seven I believe are most important.
1. Determine the severity of the sin.
There are a thousand shades of grey and every case if different, but the first question the company must ask itself is “Can the CEO regain the trust of our consumers and stakeholders?” Off color or offensive remarks made via social media are one thing (such as those made recently by Chick-fil-A’s Dan Cathy). Protecting the likes of Jerry Sandusky is another. The severity of the sin dictates whether or not to sever ties with the CEO. As such, it is the first element the company must consider.
2. Determine the IR Response.
Private companies usually have fewer audiences so there is more latitude. Public companies have an audience of shareholders to cater to, and their concerns need to be gauged and addressed by the board. That said, shareholders’ greatest concerns will likely be tied to how the company’s consumers are responding to the CEO’s gaffe. So, above all, they will want to know that the company has a sound strategy in place to restore the company’s brand to its previous state – as well that of the CEO if he or she is remaining on board.
3. Determine whether the CEO’s brand can be distanced from that of the company.
Some brands are inexorably tied to the men and women who lead them (such as Martha Stewart or Paula Deen). Others are not (such as HP’s Mark Hurd or Yahoo’s Marissa Mayer). If the two can be reasonably separated, they should be via statements that the sin does not reflect the company’s values. If they can’t, a much more aggressive response is necessary.
4. Determine how the sin relates to the company’s brand and marketplace.
While the DOMA comments made by Chick-fil-A CEO Dan Cathy were certainly offensive to some, a significant number of the company’s customers likely felt the same way (as evidenced by spikes in sales). At the same time, do you think that most of Martha Stewart’s fans really cared that she lied to the SEC? Remember that the same sin can be judged differently by different audiences. As such, gauging how the CEOs misstep relates to the company’s brand, marketplace, and target demographics is an absolute imperative when formulating a response strategy.
5. Determine how the sin’s timing affects its impact.
A number of CEOs have survived sexually related scandals. But when Restoration Hardware CEO Gary Friedman faced his, it was on the eve of his company’s IPO. That left the board no choice but to show him the door, despite the fact that Friedman had built the company into what it was. Timing is everything – and sometimes demands a more aggressive response than would normally be called for.
6. Determine the cost/benefit of sticking with an embattled CEO.
Sometimes, a CEO is so visionary and essential to success that the company can afford to take the temporary reputational hit that comes with standing by him or her. That wasn’t the case for HP’s Mark Hurd. Nor was it the case when the Food Network parted ways with Paula Deen. When the harsh spotlight fell on Martha Stewart, however, it was a different matter entirely.
7. How much goodwill resides in the CEO’s trust bank?
Has the CEO built up enough credibility and trust to be given the benefit of the doubt for one misstep? Investors didn’t revolt against Warren Buffett when he backed higher taxes on the rich because Buffett was the one that made them rich in the first place. That meant Berkshire Hathaway didn’t need to respond to the comments at all – even though others would have a tough time stonewalling in the same situation.