American Enterprise Institute

June 4, 2007

[Edited transcript from audio tapes]

2:15 p.m.	Registration
2:30	Introduction:	Ted Frank, AEI
2:35	Presenter:	Eric Dezenhall, Dezenhall Resources
	Discussants:	Jon Entine, AEI
		Steven Hantler, DaimlerChrysler
		Nancy Murphy, Case Foundation
	Moderator:	Ted Frank, AEI
4:00	Adjournment

Proceedings:

THEODORE H. FRANK: Good afternoon. I’m Ted Frank, a resident fellow here at the American Enterprise Institute and director of the AEI Liability Project.

Very frequently, corporations find themselves the target of campaigns led by interest groups, of trial lawyers and special interests and the media, not always particularly concerned about the truth in targeting their target. Eric Dezenhall has made a career of responding to incidents like that, and he has written about it in a fascinating book called Damage Control, which raises other interesting questions such as: What is the best way to respond to these sorts of campaigns? What does a corporation do? What does a defendant do when they are faced with a litigation attack in public relations? And are issues a corporate social responsibility muddying the waters? Are corporations hurting themselves on these issues?

We have an excellent panel ready to discuss all the aspects of this. We are going to lead off with Eric Dezenhall, the reason for our panel and his book. Eric is the CEO and co-founder of Dezenhall Resources, which has been going here in DC for twenty years. He has worked at an international public relations agency and in a political consulting firm, and is a frequent guest commentator on national public affairs programs, and widely quoted in leading news publications. His first book, Nail ’Em!, confronting high profile attacks on celebrities in business, pioneered new techniques for understanding and defusing crises.
 
In addition to this, he is a novelist and, I guess, he has other novels there that he is going to show. I brought an older one. We will just turn it right over to Eric.

ERIC DEZENHALL: When you work very hard to write a book, it is always nice to have people who are willing to come out and listen to the thesis of it. I wanted to point out that my co-author, John Weber, is in the back of the room; and if you have any criticisms of the book, he wrote those sections that have anything substandard or controversial.

Several years ago, I was in a meeting with a client, a trade association, and we were talking about them being under fire. And the head of the association, when I was commenting on the NGOs (non-government organizations) - I’m going to be careful about my jargon - that were funding the attack against them, the CEO of the trade association said, “Who is funding these people?” And I said, “You are.” And there was stunned silence in the room because he could not quite believe what he was hearing because he looked into it, and he found that his member companies were, in fact, funding the people who are attacking them.

And the logic behind this, which is the logic that I hope to disabuse people of, is: If you pay them, they will go away. And I do not see a lot of evidence that that is true, and I’m in the crisis management business and the marketplace defense business. What I do for a living is, my clients are mostly corporations, occasionally public figures, who come to us when they are under attack. And they are either under attack because of a crisis such as a unique event or what we call a “marketplace assault,” which is sort of a chronic opposition. Environmentalists opposing oil companies are an example of a marketplace assault versus a crisis. And I’m going to use “crisis management” and “marketplace assault” interchangeably, which is not technically correct, but for the sake of simplicity I will do it.

I think that modern crisis management is anchored in a whiff of apology for capitalism. It is anchored in this belief that crisis management is a puzzle to be solved versus a storm to be navigated. And the answer to the crisis is always something very simple, like: apologize, show concern, give money to your attackers, introduce all-natural products, take responsibility, immediately recall the product, just like Tylenol did – and we are going to you in a minute about Tylenol.

The assumption with all of these is the assumption of corporate guilt – that the company did it and that the company deserves to be attacked. I do not deny for a minute, given what I have been doing for the last quarter-century, that companies can be guilty, okay? And the companies and industries have a continuum of guilt. They range from people who have been completely, wrongly accused – and I will give you an example in a moment of that – to industries that are rightly accused. And some of the people who were critical of my firm’s philosophy would like to say, “Oh, he does not believe that companies can do any wrong.”
That is not the point. The point is that companies and industries are not always wrong, yet the public relations industries’ approaches are very much anchored in this breast-beating notion of apology. That you are always supposed to impale yourself and somehow deny that you are a for-profit-corporation.

And this assumption of corporate guilt comes with a formula. Every attack on a business or an industry has three players: There is a victim, there is a villain, and there is a vindicator. The villain is always the corporation. The victim is always the general public or someone vulnerable. And the vindicator is either the media or somebody like Michael Jacobson of the Center for Science in the Public Interest, someone who comes forward and says, “The company is wrong, the company is evil.”

These attacks are packaged in this very specific way, and the only way to defuse them is if you shift the cast characters – and I will give you an example of that in a minute – but the important thing to remember is when Dateline NBC does an exposé involving the corporation, the company is always going to be the villain.

The thesis of the book, [which] is called, Damage Control: Why Everything You Know About Crisis Management Is Wrong, is that anti-corporate attacks are not communications problems, they are conflicts. And there is a difference between a communications problem and a conflict.
The communications problem is some sort of misunderstanding. It is as if Yasser Arafat and Ariel Sharon would get together one day and say, “Oh, you meant that West Bank. I did not know that. Now everything is fine because it was just a misunderstanding all along.” It is not a misunderstanding.

And what we are finding is, more often, attacks on corporations are fundamental conflicts. Somebody does not like you and they want something from you, they want money, they want to hurt you, and there are motivated adversaries in that process. And you cannot necessarily educate a motivated adversary. You can educate a public that that is neutral, but you are not going to convince a member of the John Birch Society to vote for Hillary Rodham Clinton; that is not going to happen. And corporations are not going to persuade their attackers. And you now have an industry of motivated adversaries. You now have the emergence of non-government organizations.

And one of the most controversial points I have made in the book that we have had debates on, is companies – to give you an example, the animal rights movement is funded to the tune of hundreds and hundreds of millions of dollars a year. Corporations spend only maybe five, ten million to fight the animal rights movement. So, while you might argue these corporations are better funded than the animal rights movement, that assumes that the pharmaceutical industry is spending the $300 billion a year in revenues on fighting the animal rights movement. They are not. They do not want to fight the animal rights movement. And so, what they do is set a few million dollars aside to fight them, but the NGOs that are set up exclusively to fight corporations on a lot of these things are really very, very well funded.

And I think that the notion of the conventional public relations industry takes the concept of apologia and distorts it. Originally, when Plato issued his apologia for Socrates, he was not saying he was sorry; he was issuing a passionate defense. And a lot of what we urge corporations to do, when we believe they have been wrongly accused, is issue a passionate defense. Not necessarily say, “We are sorry for being for-profit-companies.”

As a general philosophy, we believe, if you are guilty, repent; if you are innocent, attack. And when we have a client that has done something wrong, we urge them to clean up their act, and only then can they ask for forgiveness. Too many companies want forgiveness without the requisite improvement in behavior. Everybody wants to be loved; but you do not deserve to be loved if you do not clean up your act.

Where things get more controversial is our argument of “if you are innocent, attack.” Companies do not like to fight back. They are not set up to fight back. If you are a drug company, you are set up to make drugs. You are not set up to confront your critics; that is not what companies do.

I was in the room with the CEO of, arguably I would say, a Fortune 5 company - not 500; 5 - and somebody came in and said, “Jesse Jackson wants to talk to you; he has got some issue with you.” And the CEO of this company went like this [scribbles with his hand in the air] -- which basically meant write him a check. And he asked me what I thought. And I said, “Given that you are a $100 or $150 billion a year company, I am going to set how I feel about that aside and advice you as a business person. And my business advice is cut him a check for $100,000. You understand he will come back, and he will keep coming back; but it is prudent to cut that check.” And one of the things he was saying is, “We are just not set up to fight this guy. It is not what we do. We make ‘X.’” If I told you what “X” was, you would know who they are; and I’m not going to tell you.

But the other thesis in addition to “if you are guilty repent, if your innocent attack” is that happy public relations, happy PR, does not defuse attack. And too many people believe that engaging in positive PR defuses attacks on companies. And modern crisis management is anchored in two fairytales.

One of them is political. Somebody came out after Watergate and said, “You know, if Nixon had only “fessed up” and apologized, the whole thing would have gone away.” Never has there been a bigger load of crap in the world than that notion. If Nixon had “fessed up,” he would have been run out of town on a rail immediately, not that he had many good options. I think that he was toast the minute he did and got involved with the cover-up, just like I also believe Don Imus had no real options. But this idea that if you come clean and tell everything that correlates with forgiveness simply does not bear out.

The second myth that has governed corporate crisis management and corporate image reputation is the myth of the Tylenol Recall; that in 1982, seven people died after taking Tylenol that was tampered with cyanide. The myth is that Tylenol instantly recalled their product, and the crisis went away; it never happened. Tylenol did not instantly recall the product; it took eight days, which is a lifetime. And what really happened was stores began pulling Tylenol off the shelves. And when they were pulling it off the shelves, J&J went, “Oh my God! We have got a problem,” and then they recalled it.

What they did, though, afterwards was brilliant; which was J&J and a PR firm that had nothing to do with the recall went on a road show declaring that there was an instant recall. And what got into the bloodstream of business schools and the American corporate culture is that there was an instant recall. It is not true; but this is what is being taught in business schools. Why? Because it is orderly, it is nice and tidy. It gets back to my analogy about puzzles. If you instantly recall the product, the problem goes away. No evidence that this is true. And you ask any large manufacturer, some of which are in this room, how often they get allegations about tainted products, the answer is everyday. All these companies would be doing is recalling products.

The other thing is that Tylenol was a victim. And in most modern corporate attacks the company is accused of being the perpetrator. Nobody was accusing Tylenol of poisoning people. And in the modern attacks, that I deal with at my shop, the company is accused of being the perpetrator and it is much harder to get out of what we call a character crisis, where a company is seen as the perpetrator, than a sniper crisis, like Tylenol, which the company is seen as the victim.

The latest fashion in damage control is building bridges, building bridges with your enemy. Sometimes it is useful – and I’ll give you an example of what it is - but sometimes it is a racket, because the hostiles keep coming back for more. That is what Jesse Jackson does. That is how he makes his living. “Nice company you got there. I wouldn’t want to see nothing happen to it.” Write him a check, goes away for awhile; you get another knock on the door. The same is true with certain environmental groups. They do not go away.

You have a case like British Petroleum which my colleague Jon Entine wrote about, and I’ll only mention it briefly because this may be something he wants to reference. But British Petroleum took out an ad, “Beyond Petroleum,” for many years – it spent $300 million. Well, the idea is if we get people to like us and if we somehow deny that we are drilling for fossil fuel, people will feel we are an alternative energy company. Well, they spent all that money but they were still savaged by Greenpeace, which gave them an award for the “Best Impersonation of an Environmentalist.” The ad campaign did nothing when their pipeline rusted and imploded; it did nothing for their image when their plant in Texas blew up and killed fifteen people; and did nothing for their image when their CEO got caught in a sex scandal a few weeks ago and had to resign.

If you are seeking a better image for marketing purposes, I think PR campaigns and ad campaigns are perfect, but it is very difficult to tell the world that you are not an alternative energy company when you are. And it is not going to cause Green Peace and those who are your natural enemies to not become your natural enemies. Ford had the same problem. They undertook a massive environmental program. It backfired. It backfired because they were not really doing anything environmental.

Wal-Mart, on the other hand, is a great example of a company that – even though they are under siege for other areas – has made substantial progress in how they handle their environmental operations. It is really quite something. And they have been hailed, rightly, for making incredible innovations that served their business interests. I mean, it saves them money to be environmental. They are not just doing it for the PR value, but they have won on both accounts. They have won financially, and even people who hate Wal-Mart have stepped back and said, “Well, but in the environmental area, we cannot really attack them.” So that is an example of where something that falls under the banner of corporate social responsibility is genuinely a good thing because it is sincere.

One of the things that you have to watch out for in this day and age is the role that technology plays in attacking companies. Technology is like kerosene; it spreads the attack. Do not let anybody ever tell you that the internet and the media are an opportunity when it comes to crisis management. No, they are not. They are an opportunity in marketing. But the internet and the media have become phenomenal attack vehicles. Kentucky Fried Chicken, or I guess KFC as they are now called, got nailed [on] YouTube a few months ago with rats crawling around their stores and you click on YouTube and you see the rats crawling around. There is no way to make millions of people un-see YouTube; they have seen it.

You saw what happened to Michael Richards of Seinfeld fame when he got up at a comedy club and he made racist remarks. Yes, he apologized, but guess what? Every time you click on YouTube, you hear the epithets again. Same with that Alec Baldwin when he had his rant a couple of weeks ago, he too apologized – the right thing to do. The problem being, every time you click on YouTube or whatever the audio equivalent is, you hear him cursing out his daughter. So technology becomes a problem in there.

And another example where technology became a problem was several years ago. There was a rumor on the internet that feminine care products were injuring women. Well, one of the natural questions to ask is, “Are they? Where are the sick women?” To make a very long and complicated story short, the media were pressured to come up with the injured women. And, by the way, in 1980 there was something called “Toxic Shock,” where eight women died, which is very, very serious so you cannot be flip about these things. Well, the media, when pressed, could not find the injured women. What was found, however, was a blogger, an internet user, who was sending information to the media alleging there were injured women. And regional and local news outlets were running with stories about injured women a couple of years ago quite extensively when, in fact, it turned out that the person sending the e-mails and writing on the blogs was somebody who was affiliated with the manufacturer of an all-natural tampon company. This company could not compete with the big guns in the marketplace so they spread an internet rumor. And it was phenomenal because it bounced right up to the mainstream media.

And then I think of the example, [in February] I did an interview on CNBC and they asked me about JetBlue, the airline that had the problem – and the host asked me, “Why is JetBlue in such a mess?” And I said, “Because every hour you invite people on, and you ask them why JetBlue is in such a mess.” So the idea would be, “Well, if JetBlue had done the right thing, the crisis would go away.” No, the media have an active investment in keeping the [crisis] going. So, even though JetBlue did a very wrong thing by keeping people on the runway for 10 hours, let us not confuse the crisis with the crisis management. The crisis was bad. The crisis management was actually pretty good, but you had the media actively invested in keeping this going.

As I wind down, what do companies do? I think that you have to take a State Department and a Defense Department approach to your image. The State Department approach: let us talk about the good stuff; and I support that. But you also have to have a Defense Department approach of knocking down the bad stuff, and that is the part that companies are really uncomfortable doing because they do not want to look ungentle. Every company wants to look nice. The book I would love to write someday is “The Myth of Corporate Ruthlessness,” because where companies are ruthless is making money and squeezing money out of everything. Where they are wimps is in defending their reputations. Because there is nothing really in it for the individuals in the company to really want to defend their reputation. And companies that are overly gentle – we worked, John and I, twenty years ago, with Audi when they were accused of sudden acceleration and everything was “look nice, be gentle, look nice, be gentle.” Meanwhile, the mother, who lost her child to sudden acceleration, finally admitted that her foot was on the accelerator and she was, in essence, the unwitting perpetrator.

And there are people who fight back and win. Wendy’s fought back last year when somebody was accused of putting the finger in the chili. And they would only agree to go on camera and discuss the issue if the network or the cable station agreed not to show the finger. “We are not going to go on TV if you show the finger.” And it turned out, what the PR pundits were saying is “Recall the product, recall the chili.” And what Wendy’s was saying rightly was, “Why? There is nothing wrong with the chili. There is a criminal at work.” And ultimately they prevailed.

Same with the cell phone industry. They showed studies showing that the allegations that came out on Larry King in 1993 where one individual got on Larry King Live and said, “The reason why my wife died was she used her cell phone;” the next day the stock in cell phone companies dropped by $20 billion. They fought back. Merck is fighting back on Vioxx. General Motors, very famously, fought back when Dateline NBC blew up a pick-up truck in order to show that it was flammable. Well, guess what? You blow up a pick-up truck, it will probably be flammable. But it was unthought-of of before that time to fight back against the media. Martha Stewart never issued an apology. She came out and her target audiences were women consumers who felt she had been railroaded. An apology would have been a disaster for her. She fought back.

So, in summary, I think that companies need to ask: Which public does your company serves? Is it your goal in life to make Greenpeace happy? Is that why you are there? Is it your goal in life to make people who do not like you, like you? Is that possible? Is that doable? Second, when do you deploy a State Department approach versus a Defense Department approach? What do you have to gain? What do you have to lose? If you do a happy PR campaign featuring little girls with daisies in their hair, is that going to make people forget that you are an oil company? Think about that. If you sell a product that, I do not know, a fabric softener, maybe there is something to be said for doing ads with little girls with daisies in their hair.
I got into an argument where I had a company come to us a few years ago and said to me, we were recommended by a cosmetics company, and this oil company asked, “Can you do for us what you did for the make-up people?” And I said, “No.” And they said, “Why?” And I said, “You are an oil company, people hate you. We have to start with that benchmark.” “Well, we talked to another PR firm.” Yeah, you talked to another PR firm and the little girls with daisies and running through valleys. That is wonderful. But what we are going to tell you is, it is time. It is time to realize what is realistic and what is not.

And finally, the last point is, do not believe the Mother Goose story rhymes about public relations. What we talked about in this book is there is little evidence to believe that Mother Goose notions of crisis PR really work.

With that, I thank you for listening to my counter-intuitive message, and we will hear from other panelists.

MR. FRANK: Thank you, Eric. We are going to go straight down the wire here except skipping over me because I am just moderating.

Jon Entine is an adjunct fellow at AEI, a columnist for the British-based magazine Ethical Corporation and a writer-consultant in corporate responsibility working with numerous organizations including the Bill and Melinda Gates Foundation. He has written and edited four books, two for AEI press including, Let them Eat Precaution: How Politics is Undermining the Genetic Revolution in Agriculture, and Pension Fund Politics: the Dangers of Socially Responsible Investing.

JON ENTINE: Thank you very much. I have been a big fan of Eric for many years. I was a television producer for almost twenty years at ABC and NBC, at 20/20 and at Primetime, where I was part of the establishment that would go after corporations because, if corporations were inherently evil, as we all know, and any illusion that you might have that Eric is overstating the narrative that exists in the journalistic world about how these issues are framed is extremely naïve. It is a black hat - white hat world in at least the television journalism world, and you look for victims and you look for perpetrators, and the perpetrators are always the corporations. I am not saying it is not deserved in some circumstances, but it is extremely simplistic, and Eric was always a calming and thoughtful voice, and not one that I expected, [but one] that I grew to understand and appreciate as my career went on.

But because I am a journalist I take my inspiration from a journalistic perspective. One is Mark Twain, who said that, “The secret to success in life is honesty and fair dealing. If you can fake those, you have got it made.” You may think that I'm directing that at corporations; I am not. I am actually directing that as much to the critics of corporations, NGOs, as I am to the corporations themselves. And, in fact, I would like to move this discussion a little bit to overlap the issue of corporate social responsibility, which is an area that I’m much more familiar with than crisis management, though there is some overlap to CSR issues as Eric has brought to light.

But I wanted to very quickly sketch in almost a cartoon way, unfortunately, but necessary for this situation, the history of CSR, so you understand why we are at the juncture we are at and the way CSR is being used in both the proactive cause, marketing, public relations way, but also as an attack form against corporations who are not necessarily doing something that is at all untoward.

It arose in the Unites State out of a Quaker Initiative. It was somewhat anti-corporate for a hundred and fifty years, in many ways, a very religious sensibility based on a firm anti-war, peace concept on the idea of anyone involved in the defense industry was absolutely unacceptable even if that military equipment helped bring down Hitler during World War II. It is very pacifist, anti-war, very religiously oriented, very anti-alcohol, and that merged with the ‘60s social movement of social justice, but also the ‘60s movement of narcissism.

So, what you see in the late 1970s, early 80s, CSR began to coalesce around the concept of green products. So, you had a lot of entrepreneurial companies, the Ben & Jerry’s, the Body Shops and so forth. The anti-establishment entrepreneurs emerges favorites of the corporate social responsibility movement, which was not called that then because they would not dare to use the word “corporate.”

But there was also, as part of that, the issue of green marketing, cause-related marketing promoting for issues. NGOs during that point began to harden, I think, and became very adversarial to companies. And somehow, they gave a pass to smaller companies as if they were doing it a different way, they were more socially conscious, when, in fact, they were very aggressively capitalistic. Anita Roddick, who I have written about extensively, who is the head of Body Shop wrote in the end of her biography, “Remember, this is all about me.” That was the last line of her autobiography. That was very prescient and very honest because she was one of the most rapacious capitalists, and I say that with both admiration and disdain, that I have ever come across. Unlike most corporations, though, she was a hypocrite and a brazen liar, which ultimately got her into trouble later on in her career.

Now we are moving into what I call the casino-stage of corporate social responsibility. Everyone uses it; it is part of the cause marketing and public relations plan of every corporation. I very much ascribe to Milton Friedman’s idea that it is a necessary part of corporations to do business. We have a commoditized, brand-driven world. Many of the products that companies compete in are hardly differentiable at all. Reputation is the key way to do that, and corporate social responsibility is the dimension that you have to address.

So, there is no question from a positive point of view you are going to have to incorporate corporate social responsibility messages in it. Your company may actually be a company that does something a little better in terms of their employees, that does something better in terms of how they treat their vendors, whatever. That is a fine message to send. There is nothing to be apologetic about it. It enhances your brand reputation and that is great.

The problem is, is that we have critics out there, adversaries – and I think Eric deals with them all the time – who do not really care how you operate your company and whether you are good, whether you treat your so-called stakeholders well. They are fundamentally opposed to who and what you are by definition. They criticize you for your character and for your product. And I think that BP is a good example. There is nothing that BP could have done that would have allayed the concerns of their critics because, fundamentally, when Greenpeace says “We want to be at the table or on the board in dealing with your company,” as they have successfully been able to do particularly in Europe, you are essentially putting an implacable adversary who will work with you at their pleasure, at their behest, to advocate the issues that they believe in on their timing and will turn against you at a dime as the case may be.

And a very good example of that is Shell from the 1990s, when Shell had already in the early 1990s, had been well-known for its quite progressive environmental policies far ahead of many other environmental organizations, when it was going to sink the Brent Spar. If you are familiar with it, that was the first rig to be decommissioned in the North Sea. They spent an inordinate amount of money and an extraordinary amount of time, over four years, doing dozens and dozens of environmental surveys and analyses of what they were going to do to handle the Brent Spar. Should it be sunk in the deep sea? Should it be decommissioned on land? There were a number of other mid-range alternatives that could have been considered.

And the absolute consensus by almost every environmentalist, independent and Shell internally, was that the safest way to do that was to decommission that and to send it down to the bottom of the sea, in the same way that Greenpeace sent the Rainbow Warrior down to the deep sea, there was very little, if any, environmental impact. Greenpeace’s own environmental studies ended up agreeing with that, but Greenpeace was in a down-period for the NGO adversaries. They recognized they needed to earn money and raise their high profile. These are all the part of internal documents that later came out. I have written about this in an academic case study that is in a book I edited. And Greenpeace was very aware of it, and they took the tactical plan that they were going to oppose Shell. And if you know that they had a boat and they went out there, they put people on the rig, they had to set up a satellite operation. They sent stories about how disgusting it was that Shell was planning on deep-sixing this rig; and it ended up humiliating Shell.

They had to abandon the plan to deep-six the rig; there were fire-bombings of Shell stations all through Europe; their stock dropped about 10 to 15 percent and did not quite recover for quite some time. There was a major management shakeup, and within eight weeks of that, Greenpeace was already backpedaling and acknowledging that they had misled environmentalists about the potential problems there could be with oil on the rig. And their own environmental assessments came out later on indicating that, by far, the most damaging thing to the environment was to decommission that on land.

The environment lost, the public lost because they were so easily manipulable, and the narrative was set by Greenpeace, not by Shell. They portrayed Shell as the enemy of the environment. It did not matter that the environment, in essence, lost because of the perspective that Greenpeace embraced. There was a media backlash about two months after the incident by the British Broadcasting Company and others who recognized they had been misled because the information that Greenpeace had put out about how much oil was on the rig was absolutely inaccurate; but by that point, the damage was done. It had an enormous impact on the future of Shell and on the future of the environmental movement.

And I think we have to keep in mind that, yes, if you are dealing with a PR campaign, if you are dealing with the CSR, you absolutely want to incorporate dimensions of it in who and what you are as a company. It helps to brand you; it gives you a price tax, so to speak, on consumers; it identifies your company; but it does open up other problems when you have a product that is essentially something that NGOs will target regardless of what kind of good corporate citizen you are.

And unfortunately, the world that Eric operates in, and I think is reflected in his book, is that there are dozens and dozens of stories out there where NGOs now want to be players. They say that they want to participate in decision-making process; they want a dialogue. This has been very popular in Europe. The UN encourages these kinds of things. Dialoguing with stakeholders can be dangerous to your health. It is very problematic. It should be done very cautiously, and it should not be accepted as part of the PR maxim, which I think it is now, that you always dialogue with your enemies even if they are posing as your friends. It is the fox in the henhouse. And I’m not a blind free market advocate. I do believe that some of these issues that the NGOs are supporting are absolutely essential to a good society.

That said, I think you have to be extremely cautious and recognize that there are enemies out there and that their goals are ideological and political. And no amount of warm and fuzzy activities on your part will change that basic dynamic. Thank you.

MR. FRANK: Our next speaker is on the other side of the social responsibility coin. Nancy Murphy is currently with the Case Foundation but prior to that, led the Corporate Responsibility practice for APCO Worldwide’s Washington, D.C., office. Her previous experience includes serving as a program officer with the federal agency Corporation for National Service, as director of policy for the Minnesota-based National Youth Leadership Council, and as manager of youth volunteerism development for a volunteer center in Columbus, Ohio. Nancy Murphy.

NANCY MURPHY: So, I think this is a little bit like the Sesame Street-thing, you know, which one of these does not belong? That would be me. I think I do not really quite fit in with the rest of the panel, but I’ll try to explain why I think I’m here and what perspective I bring.

So, in my current role with the Case Foundation, this would be probably not so relevant although as the family foundation for Steve Case and his wife Jean, some would say that Steve Case is certainly no stranger to crisis and to controversy.

But the ten years I spent at APCO working with companies on their corporate responsibility programs and practices, I think, is the perspective that I’m bringing to this conversation. So with that in mind, I just have a couple of points of reaction, I guess, to the previous speakers.

The first is that CSR is different from CSR messaging. So, I think we need to distinguish between corporate responsibility – behaving responsibly as a corporation – and the PR and the messages that you put out about what you are doing or what you are not doing but you might aspire to do. So I think that where companies get into trouble is not when they are trying to do the right thing and they are telling people about it, it is when their PR gets out ahead of their reality. So if you are going to put out messages, like BP did about their environmentalism, make sure that what you are really doing as an environmentally responsible company is not so far behind the messages you are putting out there.

I think there is also a lot of discussion about whether certain kinds of companies in certain industries can act responsibly no matter what. So, some people would believe that an oil company, in and of itself, because of its business, is inherently irresponsible. You know, I would argue, I hope, that person does not drive a car, does not use any fuel. I think there are some ways where oil companies can act responsibly. But tobacco companies have faced the same kind of thing. Is it inherently impossible for a tobacco company to behave responsibly? Certainly, people who work for Philip Morris would tell you, “No, it is not impossible.” But there are others who simply believe that it is not true.

Which brings me to my second point: Not all NGOs are the same. And this used to frustrate me deeply with arguments I used to have with some of my colleagues at APCO, some of the cynical folks who believe that all NGOs were activist NGOs. And how many people in the room think that Greenpeace is the same as their local boys and girls clubs? Anybody? No, of course not. You have activists, you have advocates, and then you have actors or people who are implementing programs and trying to change their communities.

And I think companies do themselves a huge disservice to try to paint all NGOs with the same brush. I would strongly suggest you do not try to have a stakeholder dialogue with people who are adamantly opposed to what you are trying to do. But there are organizations who will share the same vision for positive change that a company will share and will honestly want to work with that company to make the change. And those are the people you want to have the conversations with.

I also think this stakeholder dialogue can be a little misleading. I always encouraged companies to think about, okay, well, if this organization is coming to and saying they want to be a part of your stakeholder dialogue, what is the stake that they hold in your company? Are they really a stakeholder? How do they define it? How do you define it? Not everyone who wants to chat with you about something is a true stakeholder in your business. So, really try to come to some agreement about what is the stake that they hold.

On the Jesse Jackson example, and this sort of builds on the different kinds of NGOs, there is a difference between extortion and partnership building. And I do not want to say Jesse Jackson is an extortionist, but if you listen to the example we heard – you know, I would always encourage companies to think about, you can write the check, but is that going to encourage the organization to come back and just expect a bigger check the next time?

Or, if you are really interested in building bridges, what are the right kinds of organization to do that with, and how much weight do you expect that relationship to carry? So, if it is a very small project your doing with an organization in one part of the United States and you have a crisis in Europe, are you really expecting that partner to carry the weight of goodwill to help you solve that crisis? That is a little out of balance, so be realistic about that.

I also was quite struck by the comments that technology is kerosene. Technology is not the kerosene; people are the kerosene. You know, the cell phone does not upload the video from the – you know, Kramer – I cannot remember his real name –onto the internet itself and spread it around. That is a person doing that. And I think one of the things that is easy for us to do sometimes is to take people, to take human beings out of the equation. Companies are not entities that exist in and of themselves; they are made up of people. NGOs, the same kind of thing, they are made up of people.

Technology is not what causes the problem, we have always had people who wanted to spread rumors or spread bad stories, the telephone tree, all kinds of other things; it is just now people are able to do that much faster and with a much broader reach because of the technology. But I think if we really look at the human element in all of these that causes us to think differently about how we approach these conflicts or communications problems.

And then, lastly, one of the interesting things that has come out of this whole CSR movement over the past four or five years is a little bit of a backlash, but I think it is an interesting thing for a conversation. I would be curious on what people in the room think about this – is the whole call for NGO responsibility. If companies are being asked to disclose their philanthropic investments so the people can see if companies are buying off their enemies or whatever, are NGOs required to disclose all of their funders? If companies have to be open and honest about their business practices, sometimes to the point of disclosing proprietary competitive information, are NGOs equally open about their tactics and what campaigns they might be propagating with an underlying motive that is not exactly clear?

So, I think, again, if we think about all of these organizations as being made up of people, if we are expecting people in one kind of organization to behave a certain way, should we not expect that of all people in all organizations?

MR. FRANK: Thank you. Our final speaker today exemplifies the nature of the passionate defense that Eric Dezenhall is talking about. When it comes to a $20 million verdict against Chrysler for a drunk-driving accident that gets blamed on the auto manufacturer, I just know I can expect to see a comprehensive and extensive rebuttal from Steve Hantler. Among his many hats, just like everyone else on this panel apparently, he is with a foundation, the Bernie Marcus Foundation. He is with the American Justice Partnership, and he is a senior fellow at Pacific Research Institute, and he is the assistant general counsel for DaimlerChrysler. Mr. Hantler.

STEVEN HANTLER: Thank you, Ted. I want to thank the American Enterprise Institute for sponsoring this panel today to talk about what I think is a very important issue. When Ted first asked me if I would be able to speak today, he told me that you all had two things in common: One, that you were all interested in crisis communication. Second, and I think even more important coming from Detroit, you were all interested in buying a new car or truck.

[Laughter]

And Ted told me that I have fifteen minutes to talk to you about DaimlerChrysler, soon to be the Chrysler Corporation’s new current truck lineup. And I will just talk about the –- no, I’m not joking.

[Laughter]

The Sebring convertible, you ought to try the new hardtop convertible as well as our seven-passenger Jeep Commander.

Now, let me talk about the issue at hand, and I would like to focus on one of the attack groups; and that is America’s trial lawyers. Have you ever wondered why so many large, well-run companies get creamed in huge lawsuits that turn into large verdicts, media circuses, government agency investigations, and just put all sorts of pressure on the companies? I mean, after all, these companies are led by very able CEOs and very able general counsel who could afford to retain the best lawyers out there to defend the company.

I think the reason is, and I have studied these guys at trial bar for a long time, is that their playbook is far different than corporate America’s playbook, the typical company’s playbook in litigation. Essentially, they are playing an elaborate game of three-dimensional chess to our game of checkers. And I will tell you, in a few minutes, what I mean by that. Let met first share with you what the trial bar’s game plan is, and that is the first step in understanding how to defeat them.

A lot of folks in business speak very pejoratively of America’s trial bar – they are greedy personal injury lawyers, they are lazy, they are bottom-feeders. Well, maybe some are, but the ones I have met are some of the ablest, brightest lawyers in the country. They are certainly some of the best trial lawyers in the country, capable of selling a story to a jury as opposed to just presenting evidence that many corporate lawyers or corporate defense lawyers do.

But what these plaintiff’s law firms are doing right now – as we speak, there are dozens around the country, if not hundreds, where they have folks in their offices researching every companies’ filings with the SEC, press statements, recall notices, anything in writing or statements of CEOs they have captured on tape, has said, for one purpose, to try to find that billion dollar mistake, what can be turned into a class action. After they find this alleged billion dollar mistake, page two is the test marketing of this. The plaintiff’s lawyers test it on jury focus groups, and they also test it on the media to see if the story will sell. And if it sells, especially with the media, they then go to step three or page three.

And that is briefing governmental agencies, especially those agencies that regulate the company under attack or soon to be under attack, and also brief state attorneys general, especially those who are aspiring governors and want to make a name for themselves. What they hope to get through the state attorneys general or government agencies are agencies’ subpoenas to obtain information from that company that the plaintiff’s lawyers could not get until the lawsuit begins. They want a little free discovery.

Page four is they file the lawsuit in very hostile jurisdictions that the American Tort Reform Association calls “judicial hell holes.” Now, if you have not seen the latest report of the American Tort Reform Association, about judicial hell holes, I encourage you to visit their website. And these are jurisdictions where noted plaintiff’s attorney, Dickie Scruggs, had said – and mind you, he is a plaintiff’s lawyer – in these jurisdictions, which he calls “magic jurisdictions,” he says, “Defendant simply cannot get a fair trial in those jurisdictions,” and that is why the plaintiff’s lawyers want to file them.

And step five, of course, is to hold a press conference to announce the filing of a lawsuit, and to have the victims available for the media to interview. In fact, some of them have already met the media and the media has already got them on tape or film in the can that they immediately put on air the day the lawsuit is filed. And essentially, what the trial lawyers have done in their Old West parlance is that they have created an old-fashioned “necktie party,” where they have got all the stakeholders who can harm that company aligned for the day that they spring the lawsuit in the press conference.

Some folks think that the goal of this is to condition the jury pool, so when that lawsuit is tried, jurors will have heard about the lawsuit, and they will want to vote against the company. I think that is a secondary or tertiary reason. The primary reason that the trial lawyers want to do this – oh, I forgot one important step. The trial bar also briefs Wall Street analysts on their litigation portfolio against the company soon to be under attack. And the reason is that plaintiff’s trial lawyers are some of the most savvy entrepreneurs in this country. Lawsuits are their inventory. And for those of you in business know, you increase your revenue and profits the faster you turn your inventory. Plaintiffs’ lawyers do not want to try these lawsuits; they want them settled quickly for a premium so they can file the next one. They have got to turn that inventory.

And the way they turn the inventories is they put so much pressure on a company. And Eric spoke about share value; that is how they attack a company. When Dickie Scruggs held a press conference several years ago about his lawsuit portfolio against the HMO industry, in a single day, that industry saw a $10 billion to $12 billion drop in share value. We have seen other companies where share value drops; at one point, Merck’s share value dropped by $40 billion. And the reason for that is the beleaguered CEO of a company will get calls from the analyst reviewing his or her companies in their industry and say, “You have got to put that matter behind you.”

The CEO then goes to the General Counsel, “What do we do?” “Well, we can make this meritless matter go away for $200 million, and we will get our $8 billion to $10 billion back in share value.” “Do it, settle it.” And that literally happens because the plaintiff’s lawyers know the thing that gets the CEO’s attention, more than anything, is share value. And once there is a threat or attack on share value and it succeeds, that CEO wants that lawsuit to go away.

So these are very skilled entrepreneurs, and many of them now – not many, several of them – have TV studios in their law firms because they know about the importance of the media. And long ago, the trial bar is a bend in the line between trying a case in court and trying a case in the court of public opinion, because they want to overwhelm that company to create the perfect storm of stakeholder disharmony to drive that company to the settlement table.

Let me show if I can work the technology to something that we have done Daimler Chrysler.
About ten years ago, we formed a litigation communications function, which is among my responsibilities. Two people on our public relations department report to me on litigation communications. You will rarely, if ever, hear my company say, “No comment;” that is a sure-fire loser. A study was taken, I think it was AcuPOLL Precision Research, years ago surveying Americans. And just with a prompt of, “When you hear a company say ‘no comment’ in response to a litigation, do you think the company is guilty?” Sixty-two percent yeah, sure guilty. And then 48 percent of those surveyed said they were less likely to buy a company’s product when the company was accused of wrong doing – not found if they committed any wrongs. So, we think most general counsels of major companies think it is the lowest risk response to say “no comment.” We think at Daimler Chrysler that is one of the highest risk responses. “No comment” is a serious mistake.

Now, let me show you why we have come to that conclusion.

We conducted, years ago – we had to make a case actually to our Chief Executive at that time, that we need to do litigation communication, we need to go out there. In fact, now, when I’m visiting the city, I’ll visit people in town, here, or Business Week or CNBC or others. We want to develop relationships with the media because we want to get our story out -- half my time? Okay then I will still have time to talk about the new Jeep Wrangler.

[Laughter]

Steven B. Hantler: That is a 4-door vehicle -- fantastic. It is selling like hotcakes. I have never known how well hotcakes sell, but I assume hotcakes sell well.

We surveyed several years ago, actually, 1,500 Americans to test their attitudes to different corporate responses to litigation. And we did this again to make the case to our CEO; we got to go out there, we just cannot be silent. We obtained baseline data, and then we segregated the Americans into two groups; some who heard the standard “no comment,” and some who heard very robust answers. And what steers the baseline data - presumption of guilt. We all know that, and we ask the question just to prompt this. “Are corporations generally guilty or innocent?” We did not say liable or not liable. We used the criminal terms, guilty or innocent. That is only a question. Of all the respondents, 68 percent said guilty or sometimes guilty, 20 percent said company is innocent. So, we knew we start with an uphill battle.

Then what we did, again, to all respondents – we gave them a plaintiff’s case. It was actually a lawsuit against my company, but we changed it to a hair dryer case. What we had there was a child died, was electrocuted in the bathtub. And the facts we gave them that there was a faulty waterproof cover. The company concealed the test results. The company could have strengthened the cover. The company ignored the warning from a company official, and the company later changed the cover on later models. And most of our lawsuits, we will get those kinds of allegations. “Oh you knew about it. You did nothing; you could have strengthened it.” So these are typical allegations we will get in the case.

After giving these allegations and nothing else from the defense side, 78 percent said the company is guilty, 16 percent said innocent. What was interesting, we then asked the 78 percent why the company was guilty. 33 percent said the company knew about it, 14 percent said the company did not fix the problem. The most interesting number is the 13 percent, [which said that] the company did it for cost savings which will increase the profit. That is not one of the prompts we gave them. They came up with that on their own.

And the reason they came up with it is another publication I encourage you to read is Trial Lawyers, Inc. by the Manhattan Institute. For 40 years Ralph Nader and Joan Claybrook have been – they are the presidents of public relations of Trial Lawyers Inc. Actually, on page 22 a nice picture of Ralph Nader and Joan Claybrook. They have been out talking to the public for 40 years saying, “Companies put profits ahead of safety and the only way to get companies to act in the public interest is to hit them with large damage awards.” The public has heard that for forty years. If you are in any one of the trials around the country with the plaintiff lawyers are making those same arguments pounding on the rail, you can literally see the juries heads nod in recognition; that is familiar, Ralph Nader told me that. So that clearly is from Ralph Nader. And you see the other reasons.

Now what we wanted to show our CEO is, does litigation communications work? The first case we took was this General Motors case in California where General Motors was hit for $4.9 billion; it was reduced, and I think it is still pending on appeal. The facts of the case were an older GM product, I think it was twenty years old at that time, was stopped at a traffic light and it was rear-ended by a drunk driver traveling at 70 miles an hour. Five people were tragically burned in that vehicle, and that vehicle met all Federal Safety Vehicle Standards when General Motors released it. And today.

The one additional prompt we gave them was as the plaintiff’s lawyer said, “The carmaker knew the fuel tank was prone to damage and collision and concealed risk.” Untrue, but that was what the plaintiff’s lawyers told the jury. And we told one group that the company did not respond for a repeated request for comment; 66 percent found the company guilty, 10 percent innocent. If you are a defense lawyer, “God love that 10 percent.” The other half, the company called the accident a tragedy, denied flaws in the design, saying that a drunk driver caused the 70-mile per hour impact and explosion. The numbers start to change a little bit, 27 percent think the company is innocent, 45 percent guilty. We played a little bit with the words.
One prompt is the company maintains that they have no evidence of fuel system danger. That is not a real strong response, but 27 percent to 40 percent – and the strongest response was this, and this goes again to – Eric, when you talk about the attack-mode. We attacked the plaintiff’s lawyers from this response. The public does not like plaintiff’s lawyers. The company called the suit “an outrageous case of plaintiff’s lawyers using a tragedy to collect legal fees. No fuel tank could withstand the impact for a drunk driver with 70 miles per hour” – [the results] flipped, 45 percent innocent, and 28 percent guilty.

Now, I have another slide showing the same thing; I’m not going to bother to go to that. I would like to leave more time for questions. But let me also say something we do at Daimler Chrysler; and we encourage more companies to do this. We are out there talking to the media. I do not think I have ever denied a request from the media to talk about one of our lawsuits or other companies’ lawsuits. In fact, I have been asked to speak about some of Wal-Mart’s lawsuits, I have spoken about them. We get out there; we talk to the media; we establish relationships. We want the media giving us an opportunity to respond.

One other thing we do, which I would encourage more companies to do, is sue plaintiffs’ lawyers. When we have been wronged – favorite cases what I call the “Texas 3,” where three lawyers in Texas committed fraud, attempted to bribe witnesses, and perjury. You name it, they did it. Luckily, we uncovered it. Someone in their office sent us an internal memo for that firm. They are lying and they trying to cheat you. I brought it to the judge’s attention. After a long battle, the judge dismissed the lawsuit, awarded us nearly a million dollars in fees, and dismissed the case with prejudice.

Many companies would have stopped there; we did not. We visited the US Attorney’s Office. We wanted to get those three lawyers indicted. We also filed a lawsuit for fraud against those three lawyers. I went down to Texas, we filed the lawsuit, we also filed the bar grievance, I held a press conference there, and I have gone back another time because, believe it or not, the Texas Court of Appeals, Supreme Court, and Lower Court found that these lawyers have participated in the scheme to defraud my company out of $2 billion, attempted to bribe witnesses, harassed witnesses, destroyed evidence – one fled to Mexico, so he is not practicing law anymore. Two of the three lawyers are still practicing law today in the very same courtroom in which they perpetrated and participated in the scheme. They did not miss a single day of practice of law.

The Texas Bar gave them a probated sentence; it means it will be good for two years then you will be okay; and fined them $2,500.

Well, I went to Texas and held another press conference, and we issued a press release - I cannot recall which at this point – and we started to attack the Texas Bar saying that it is the function of the Bar to protect the public from lawyers like this, not to protect lawyers like this from public accountability.

So, I agree fully with you, Eric. You used the word – some companies are “wimps,” I think you were being very generous. Too many companies are cowards, and you have got to go and you have got to fight.

Now, a lot of times in litigation, we will have defense lawyers say to us, “Well we cannot make that motion. We cannot raise it with the judge; the judge will get angry.” We released those lawyers and hired new ones because when the judge is deciding every single motion against us and we are getting home-towned, our view is what bad things can the judge do to us if he gets angry? So, you got to fight back sometimes even against judges.

And I have gone to West Virginia, and I have called out the Supreme Court there, and we have cases in front of them. But I have called them out in meetings that were covered by the press. Also, it was suggested to me by another corporation – “Steve, you are out there, you talked to the media, we saw you on TV, and you have railed against the Trial Bar,” and I do not. They are great entrepreneurs. “Are you not afraid your company is going to be a target? You have this big target on your back.”

Absolutely not; our companies developed a reputation that we will fight meritless lawsuits. And remember this: plaintiff’s lawyers are some of the best and most savvy entrepreneurs in the world. Those men and women in the plaintiffs’ bar will not file a meritless lawsuit if they know the company will not cave. We have to let them know, filing a meritless lawsuit against my company is an exceptionally poor investment. We do not see very many meritless lawsuits anymore. Now if it is filed in a judicial hell hole – well, then maybe will see it there. So, I could not agree more. You have got to fight back when you have got the right opportunity to fight back.

So, Jeep Grand Cherokee, Dodge Charger, Avenger – great vehicles, buy some.

MR. FRANK: Thanks Steve. The mention of the HMO litigation has a personal resonance for me because I spent just a little bit of time litigating that as a defense attorney for one of the insurance companies sued. My client was one of the ones who settled. I thought it was just a completely meritless lawsuit, and the others fought and instead of being out several hundred million dollars they were vindicated when the court threw the case out. So, there is an interesting contrast there.

Let me give the panel almost a couple of minutes to respond. Eric, do you have any comments on what we have heard?

MR. DEZENHALL: Just a few notes that I took – Steve, your list of the process that trial lawyers go through – the little saying that we have is their strategy is, “Vilify, politicize, sue,” and that is parallel to what you said. And I think one of the things that the trial lawyers –- we have folks on our staff who have spent decades working in the news media for shows like Dateline; and one of the things that they will tell you is that in the ‘90s, about 80 percent of the shows that they did were brought to them by plaintiff’s lawyers. That is where they got their things.

Second, Nancy made a few comments, I think that it is important to differentiate between people you can do business with and people you cannot. I mean, the cases my firm gets are already trauma surgery cases. So by the time somebody calls us, it is not like we even have the option to say, “Well, maybe we can sit down and negotiate with someone.” By the time it gets to us, it is pretty serious, but I think that Nancy’s point is well-taken, that you should just not assume that every group is an attack group.

MR. FRANK: Should they be calling you sooner?

MR. DEZENHALL: Well, that is the interesting point. One of the biggest questions I get is, do most of the people come to you before a difficult situation or do they come to you when it is too late? The answer is, when it is too late. And here is why. Most of our clients are for-profit companies. To go into their boss and say, “We need some money to help avoid this situation,” it is very difficult for somebody to justify what they get for spending money with us, because it is not like advertising where you spend the advertising and you could say, “Well, we got sales or we did not get sales.” Or with weird folks, consultants like us, it is very difficult to say whether you got anything.

Now I can tell you right now, we have had experiences where someone has spent $150,000 with us and saved a $2 billion operation. We have also had situations where people had spent hundreds of thousands of dollars with folks like us and still lost. So, we are just not in that area of business where you can demonstrate immediate-type value.

The other thing that I would point out is the reason why companies are beginning to take positions, like Steve is talking about, is because the stakes have gotten too high. It used to be when the media did a bad story on you, you just let it pass. It used to be when you could just settle a lawsuit and it went away. The problem is whether it is a lawsuit or an NGO attack or a media exposé, real marketplace damage is being done. And it does not pay to just rollover anymore, and this is why – I mean, we had a client recently where a pharmaceutical that somebody decided – sometimes reporters develop an evangelical belief in their target’s evil; and we could not, for the life of us, get this newspaper to balance its coverage. And the net result was an exposé on our client that was not only devastating but wrong. And only after it ran could we push back; and the reporter ended up getting fired. It was one of the first times in my career where I ever saw that happen. But the reason why they did it is because 25 years ago, when I got into this, it probably was a prudent decision to let it go, but not anymore.

My final comment would be about kerosene. Maybe it is true, maybe people are kerosene. My experience, though, is technology, whether it is caused by people or caused by the nature of technology, technology has become a weapon. And it has become a weapon that is harder and harder to deal with. And I have seen some very silly PR firms with these programs of “Here is how we respond to blogs. It is ‘blog-begone.’” And the reality is it is a lot easier to light a fire than it is to put one out. Because when we are hired to put one out, even if we succeed, the damage and the blog negativity is still out there and there is not a way to make it go away.
And so, while Nancy and I could perhaps quibble about whether people or technology is the kerosene, I would say that technology has made my world a far more difficult place because our capacity to diagnose it exceeds our ability to treat it.

MR. ENTINE: Yeah, I have one comment; I will try to keep it brief. This is about Steve’s suggestion that you have to respond aggressively. There is a lot of nuance, obviously, to that. I’m sure he understands that, because it is very complicated. I mean, sometimes if you are hit directly, if you are the object of an unfair criticism in the cases that he elucidated on, you have no choice but to respond back. But sometimes you are just a chip in a game, and that really complicates the situation for corporations. I’ll just give you an example.

I mean, we know years ago when there was an attack on Starbucks because of its fair trade coffee policies. Starbucks was not the biggest company in that arena, but it was obviously one where they gained a lot of traction in that. Nike was attacked on the issue of international labor. Again, because of the role that Nike played, not because it was even a low flyer in terms of the way it had done things; even at that time Nike was a high flyer.

And on an issue that I’m looking at today, the vinyl industry, which is under a lot of criticisms for everything from medical tubing that it uses to vinyl siding, to vinyl in your car. They are under huge attack for so-called “out-gassing fumes” that supposedly are toxic and could conceivably cause all kinds of chemical damage. There is very little evidence to suggest at the level that they are suggesting; that is for sure. But the NGO industry that really is critical of that, recognizes that it has to pick targets on this to make it work. So what do they do? They would go after, let’s say, Wal-Mart, and say, “Wal-Mart, we do not want you to have any packaging that includes vinyl products, PVCs.” To Wal-Mart this is a non-issue. They will cave publicly, allow themselves to be used by the anti-vinyl industry as saying, “Oh, Wal-Mart is giving up its use of vinyl packaging.” Other companies do it as well, Costco and so forth.

No company draws the line; but in the end, ultimately, the implications of this will be when we get down to things like medical tubing where it is absolutely necessary, we are going to have a real crisis. It is going to really endanger products that are necessary and need to be done. So, put yourself in a company in that sense. Should it stand out there and actually take or draw a line and then stand on something that has no financial benefit for them? Any public relations consultant would say, “Give in, the losses so much exceed the benefits for you.” Or should you draw a line in the sand and actually try to be the good corporation doing the right thing –defending against anti-science attacks where you are going to end up paying a higher price in the marketplaces than any benefits that is worth it?

I mean, Target, actually, right now is trying to defend itself and is refusing to capitulate in the way that Wal-Mart and some others have done for no benefit that I could see to the corporation other than it feels like it has to be a good corporate citizen. But you can see the very prickly issues that companies face because, again, if it is a fire or storm, if it is a trauma, that is one thing. But lots of times it is not a trauma; it is a nick and it is a bleed. And ultimately, that bleeding may come back to haunt you if you do not stanch it. On the other hand, you can understand why companies capitulate and play the “corporate social responsibility” game just to get gadflies off your neck. But overall, I think the economy and many people end up hurting because of that.

MR. FRANK: Well, let’s take questions from the floor.

TERRENCE SCANLON: I’m Terrence Scanlon, Capital Research Center. I just want to get the panel’s general opinion. We think that corporate America has been really anemic in fighting for tort reform. You are talking about these jurisdictions where it is almost impossible to win cases. If more effort, more money is given to candidates who are for tort reform, would we not have much less of the problems you are articulating here today? Thank you.

MR. HANTLER: […] The short answer is, yes. The trial bar has invested hundreds of millions of dollars in electing candidates to state and federal office that have a very activist agenda when it comes to lawsuits. And business has not raised enough money to support candidates who believe in the rule of law. That is not the only solution, but that is something that my first dollars would go into this.

I’ll just give one plug. If you are interested in tort reform, I actually started a group with my former Governor, John Engler of Michigan, and Bernie Marcus who is the co-founder of the Home Depot. It is called the American Justice Partnership, and our website is www.americanjusticepartnership.org. Bernie is over at the Home Depot. He is interested in tort reform or liability reform because he generally believes, if he had to start the Home Depot, instead of in 1978 but in today’s litigation and regulatory environment, the company would look far different than it does today if, in fact, he can even succeed. Bernie is worried about the next generation of entrepreneurs that is why he and I partnered the last ten years on this.

MR. FRANK: Other questions?

STEVEN BERCHEM: Steve Berchem with the American Staffing Association. There was a slight mention of labor, but that is one actor that none of you really commented on. I would be interested in your views about organized labor particularly siding up with Wal-Mart on healthcare reform and other groups forming around that issue as well.

MR. DEZENHALL: Yeah, this is an issue we are seeing increasingly. A lot of people do not realize that this whole insurrection against Wal-Mart is designed and implemented exclusively by the labor movement, and it is really an effort to unionize them and bring them to the table. And what is interesting, what the labor movement is very good at, is packaging. They are very good at providing a resonant narrative; and they have these full-time attack machines that are extremely effective at winning over media and researching vulnerabilities.

And I do not know what else to say, other than that we have found them to be extremely formidable and sophisticated, and they are very good at hiding behind other movements. I mean, if you look at the anti-Wal-Mart movement, some of it is about wages but some of it, for a while, was environmental. They are very good about getting in bed with other – it is sort of like an octopus that has eight legs, but one head. They are very well-funded.

And the other thing they are very good at, is positioning any corporate defense as being immoral. Whenever a company attempts to defend itself, that self-defense is immoral. I keep thinking – this is slightly off your point – but when George Soros funds a study to conclude that Product X causes cancer, the New York Times will print that study verbatim and affectionately. If a firm like ours, however, hires a toxicologist for $2,000 to refute the study, the New York Times will put an investigative team on us for having hired a toxicologist to speak for it. The unions are very good at using the technique of positioning any corporate self-defense mechanism as being de facto immoral. And unfortunately, too many corporations accept the premise.

MR. FRANK: Other union thoughts?

MR. ENTINE: Yeah, I have one, which is actually a little bit different. This goes back to Nancy’s point, I think, about being really careful about how broadly we paint terms. I know that Eric sees things very refined and in nuance – say, in unions and so forth – because I was involved in looking into a story and writing about Chiquita, which actually has really turned a lot of its practices in Latin America and elsewhere over the past decade and a half.

And one of the ways it has done that is it is partnering very, very closely with the international labor unions. It helps in setting standards in Colombia, but the government was absolutely ineffectual in establishing in Latin America. And they literally would not have brought some of the reforms which have benefited some of the workers there without very, very close cooperation with the unions.

And very recently, when Chiquita was forced to pay a fine for supposedly paying extortion money to the right-wing guerillas in Colombia, it was the International Union which came to their defense and said, “Look, if they have not done this, we would have not survived; the company would have had to shutdown there -- every company does it, every European company does it” -- and brought a dose of realism.
 
So I agree that, especially in the United States, I think there has been a very antagonistic relationship historically in recent years between unions and companies. It can take different forms in different industries. And again, Nancy, really, I think, has experience in dealing with a broad range of NGOs that bring a lot more sophistication to the table then sometimes we caricature what their responsibility says.

JODY CLARKE: I am Jody Clarke with the Competitive Enterprise Institute. At CEI, if you are familiar with Fred Smith, our President, we focus a lot on the need for businesses to legitimize themselves, instead of always apologizing. We completely agree about that. It seems like that is more of long-term approach than, say, crisis communications, but it seems like it could be a part of it. I'm just wondering what your thoughts about that are.

One thing I want to mention is the American Plastics Council in the ‘90s; they did a great job labor like the vinyl industry under heavy attack and really responded well and really legitimized their industry and warded off in some unwarranted regulation.

MR. DEZENHALL: Well, we were involved with that campaign. And I can talk about it because it is in the public domain. If it were not, I could not talk about it. But I think that the plastics industry –what they recognized was that the public wanted permission to continue using plastics. And what was happening, the news media had such a visceral dislike of plastics. I mean, they were reporting things like – UPI reported that over 50 percent of land fields were polystyrene, when the number was really 1 percent.

On Halloween in 1990, there was a McDonald’s restaurant that was destroyed by environmental activists; and the next day McDonald’s dropped polystyrene in favor of paper. And what they said was, “Even though paper is less environmentally friendly, our consumers just do not feel good about plastic.” And the reason for that campaign was the media could not be used as an interlocutor because they were just so much so against plastic.

So, the industry took to the airwaves and unrepentantly defended its products, and it frustrated the environmental attackers because they lost the battle because what they had been doing is going to the Today Show where, by the way, Bryant Gumbel had a debate between my client, a 60-year-old polystyrene manufacturer, and two 8-year-old brownies. Guess who won? The brownies. And you cannot win in a setting like that. So that is why they took to airwaves, and they decided to not be apologetic.

The other thing they had to do, though, in terms of a responsibility angle, before they ran that ad campaign they had to get their recycling rates up. Because the public was unwilling to listen to the plastics industry until they believed that the industry was doing more about plastics recycling, which they had not been. And once they had been, and showed a more impressive, tangible – sort of like my Wal-Mart example – once they showed they were really doing something, the public was receptive to that message. But that ad campaign was four, five years in the making before it was ripe to do it.

Too many industries, by the way, want to take out “feel good” campaigns before they have done anything responsible. And those just do not work because it inevitably ticks somebody off who has – I mean, as pro-industry as I am, the British Petroleum campaign drove me crazy because 99.9 percent of what they do is drill for fossil fuels, and they are talking about being an alternative energy company. And a guy like me – look, I think I'm pretty good, but I cannot sell that.

MS. MURPHY: Well, I guess, I would just add that in addition to being genuine, I think – maybe I am still too idealistic, but part of the challenge is the lack of civility in all these discussions. I mean, if you listened to the four or five of us up here today, we are complaining about the way that certain groups are portraying industry or companies or capitalism, but we are portraying those groups equally negatively. So I think there is a case to be made for legitimizing the private sector and legitimizing industry, but not at the expense of creating more villains on the other side. I mean, I think there is a way to do it that says there is a valid reason for the private sector to exist and there is way that we can do business without saying unions are evil or NGOs are evil or whatever.

[…]

MR. HANTLER: Actually, I am not painting negatively – I have spoken of them with some admiration. I admire how they have been able to gain the legal system to their advantage; how they have executed this well-thought-of plan. I do not call them “bottom feeders.”  I think they are some of the best and brightest lawyers in the country. So I do take exception; I do not paint them negatively. I speak in very positive terms about them because that is how good they are, and we should not underestimate them.

MR. ENTINE: I’ll just have one comment as well. I think, and again, Eric talks a lot about this in his book, which I highly recommend. Do not leave without buying a copy --

MR. DEZENHALL: Bless your heart, Jon.

[Laughter]

MR. ENTINE: -- so I got a nickel for every one; so it is worth it – is the importance to this – this sounds very tactical like I am pumping for public relations, but he uses the term “narrative” a lot. I mean, we think in narratives, humans think in stories, and that is very important. Critics– I mean wise critics, ones who are well-meaning to try to bring attention to their issues – know how to frame issues very well. I think corporations who feel like they have been unfairly attacked, their industries have taken a while to learn that message and how to package that.

I think of the issue of genetically modified organisms. He talks about it as well. I wrote a book, which I think is the classic way how to repackage that story. So we understand both the benefits and the negatives of it; but I’ll tell you the title in a second because that will give it away. Every scientist I know, and 90 percent are political liberals, and every single one of them is supporting, within boundaries and limitations and qualifications, genetically modified organisms. It can be harnessed and done in a very progressive way. And to think about it in a kind of knee-jerk way that some critics have done, is they have lost the narrative. When I wrote my book a few years ago for AEI, it is called Let Them Eat Precaution and it has a picture of starving Africans on the cover – I recognize it is just as manipulative and narrative-driven as the critics of it, but I was making a statement. You have to have a dialogue on this, and you cannot have a dialogue until you have a narrative equally as compelling as your critics; and that is what you have to keep in mind.

You cannot win arguments with facts; you cannot win with science; you cannot win with balance all the time. You have to win with a story, and it sounds simplistic and it sounds – it almost turns my stomach to have to say this, I wish we were more rational creatures than that, but we are not. I am sorry?

MR. DEZENHALL: The only rain I would like to bring to this parade would be to acknowledge something that John and I talked about in the book, which is we talked about how Crisis Management Team should never be headed by PR people. And the reason why is, there is something in the DNA of PR people that has a difficult time acknowledging the existence of adversaries. And even though, I understand and agree with Nancy’s framework that there is a tendency to vilify and polarize – in the cases we get, in my little tiny part of the universe, sometimes in life there are adversaries.

And our experience has been that in the PR world, the acknowledgement of the existence of adversaries is so fundamentally distressing that it is better to have business chiefs in charge of the crisis management problem, because if you are McDonald’s, you know that Burger King really is out to get you. And I think that while we should be open-minded and not assume everybody is an adversary, when it comes to high stakes communications, sometimes there really is somebody out to get you.

MR. FRANK: And with that, we will call it a panel.

This Transcript was created by Ace Typists and edited by AEI Research Assistant Philip Wallach.