2019 crisis leadership in review

Hogan Lovells

Hogan Lovells

What starts online won't stop there

There aren't many college basketball games that change the share price of a Fortune 100 company. But in February 2019, Duke University freshman star Zion Williamson blew out one of his Nike-brand shoes during a nationally televised game against rival North Carolina. It was a made-for-sharing moment, and within minutes Nike was a trending topic on Twitter and Instagram – mostly as the butt of a joke or as an object of scorn. The following morning, Nike's share price dropped nearly two percent in New York.

Nike's response was swift and certain: a team of Nike engineers was dispatched to Durham to diagnose what had gone wrong with Williamson's shoe, then flew to China to develop a stronger model. When Williamson returned to the court less than three weeks later, he did so wearing the shoes Nike had made just for him. The company's effort won them outspoken praise from Williamson's coach, and when Williamson was drafted No. 1 overall in the 2019 NBA Draft that June, he brought his significant media presence into the Nike family by signing with Nike's Jordan Brand.

Nike recognized its crisis for what it was and avoided brushing it off as an online fad-of-the-moment. The company then went beyond playing defense, earning goodwill from the affected party and driving the narrative of how the crisis played out. Instead of falling behind the swirling social media storm, Nike got out front and led the way to a successful end result.

Show you're taking it seriously

As Boeing faced questions in March 2019 about its 737 Max planes in the wake of two crashes killing more than 300 people, company leadership faced a choice: voluntarily call for the planes to be grounded while investigating the cause of the crashes, or insist that the planes were safe and the crashes likely caused by pilot error. Boeing chose the latter; months later, after the FAA and 40 other countries grounded the planes, CEO Dennis Muilenburg was mired in congressional hearings and lost his job just before Christmas while the company had lost more than US$8 billion. The cost of disrupting day-to-day operations and taking serious action may be great, and just as rational to fear. But the long-term cost of inaction – or even the cost of denial in the face of evidence – can be greater by an order of magnitude. The process of developing a strong crisis leadership plan allows organizations to prepare for those choices before the heat of the moment is on.

Collect the facts and protect your privilege

Every crisis requires fact gathering. Records have to be retained and reviewed, people have to be interviewed, and in some cases data must be analyzed. Together these steps form the foundation of the investigation, and they must be coordinated carefully to prevent problems down the road.

When BlackBerry tasked its chief legal officer with leading the investigation of and response to a damaging market report in 2013, it probably expected his work to be protected by privilege: attorney-client, attorney work product, or both. But in a decision from March 2019, the Southern District of New York disagreed, allowing plaintiffs in a class-action securities fraud suit to access dozens of emails and drafts of company documents. The opinion in Pearlstein v. Blackberry Limited, 13-cv-07060 (S.D.N.Y. March 19, 2019), 2019 WL 1259382, highlights some of the common pitfalls for protecting privilege during a crisis. The court determined that, because an in-house lawyer wears hats as both a business advisor and a legal advisor, the chief legal officer's crisis-response work was not sufficiently legal in nature to invoke attorney-client privilege. Even for some of the situations where attorney-client privilege was established, the company then waived the privilege by looping in third-party non-lawyer consultants. The court also declined to extend the attorney work product privilege, as the company could not clearly delineate the litigation it was contemplating at the time of the attorney's work.

A good crisis leadership plan accounts for these types of issues. As the BlackBerry case shows, the decisions made in the first few hours of a crisis can affect an organization's ability to protect its investigation from regulators or opposing counsel. Planning ahead and establishing clear guidance for those crucial few hours is essential for maintaining privilege throughout your response.

Don't forget to lead

Your employees, your customers, and the public all expect confident leadership in tough times. And they are more willing to accept your actions and decisions when they know you are telling the truth. In 2019, we saw this proven time and again, and we expect the same for 2020 and beyond.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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