(Le billet est en anglais.)
I was working closely with the CEO of a large public company facing a crisis a few years ago. The company was in the news for days and it is fair to say the management team, the board and many employees felt under siege. The company was being hauled onto the carpet for issues related to the disclosure of confidential customer information. Many on the team knew that the issue, while serious, was contained to a small number of cases and could easily be corrected. Unfortunately, their message wasn’t getting through and as such, the CEO and his management team planned a major news conference to apologize and present a forward-looking plan to resolve the issue once and for all.
The day prior to the announcement, I was with the CEO preparing him for the news conference. Late in the afternoon came word that the Board Chair would not be available to participate. This came as a shock to the team. The CEO and Board Chair had a positive relationship. On major issues they always stood together. Given their history, the CEO turned to me and murmured, “Something really important must have come up for him to miss this”. I suspected that there was more to the decision than a scheduling conflict. As it turned out, his decision was an intentional move to distance the Board from the CEO.
It was soon clear that the Board had their own crisis management plan to announce… the termination of the CEO. The Board eventually came to the conclusion that the public would never accept that the very same leader that was in place while the breaches took place, could also be leader responsible for regaining public confidence.
Most Boards tend to stand arm-in-arm with the management team and the CEO during a crisis, saying that management enjoys complete support from the Board of Directors. This approach is correct in many cases. It is the duty of the Board to be informed, to be engaged, to provide counsel to management and to monitor both the effectiveness of the crisis management team and the impact of the crisis on the corporation. It is critical that directors do not try to manage the crisis on their own, over-react or speak to the media.
Where classic crisis management theory is light, as it relates specifically to the Board’s role in more complex situations. The scenarios described below provide different perspectives on Board involvement and obligations. The first is when the crisis relates specifically to the CEO. We have seen this situation play out in recent years where the CEO is accused publically of something illegal or inappropriate. Most recently, this happened at Hewlett Packard. Where, once informed, the Board acted proactively and clearly with regard to what had happened and communicated subsequent decisions taken.
In cases such as these, the Board may have the luxury (although short-lived) of controlling the timing of public disclosure, it is imperative that decisions must be made quickly. Media will want to know the timing of events and how decisions were made. They will require statements, perhaps interviews and, most importantly, details on the plan going forward. Who is the new CEO or interim CEO? Have the authorities been informed? What is the impact on the organization? These questions must be addressed in hours, not days, between learning of the issue and issuing a statement. They always require significant legal, financial and public relations input. Anything less than perfect clarity can result in significant criticism of the Board’s management of the situation, and possible erosion of confidence.
Sometimes the situation is less clear. Insider trading by the CEO or president is generally an allegation made by regulatory bodies. This requires immediate Board attention and management. In this case, the regulatory body controls timing. While the Board must respond with some type of statement, it is often the case that it may choose to defer any decision regarding the future of the CEO pending an investigation. It is the Board’s responsibility to act fairly and makes decisions on the information available. At this time, however, the Board must decide and communicate the role of the CEO in the weeks or months going forward. Options include, but are not limited to, temporary paid leave or in some cases maintenance of the status quo.
The last example is one where the management team and CEO are managing a crisis, but it is inevitable that the shareholders, the public and the media are expecting “heads to roll”. These are difficult decisions. The Board, as it supports, provides counsel and monitors the management of a crisis in real time, may decide during or post-crisis, that to terminate senior management team members, including the CEO, is in the interest of shareholders and the reputation of the corporation. In this situation, the Board will then become the voice of the company and will be expected to share the plan for the short-term and long-term management of the company.
The following are a few crisis management considerations for Boards of Directors:
Give proactive crisis management responsibility to a Board committee, perhaps governance.
Crisis management is frequently left unassigned, leading to confusion regarding who on the Board is in charge or has the skills to successfully manage a crisis
The committee can explore preparedness issues prior to dealing with a crisis
Select a Board spokesperson. This is often the Chair, but not always.
This job requires a confident and articulate individual who is trained on the do’s and don’ts of media interviews
Consider options for an interim-CEO. Sometimes the crisis is the CEO and the appropriate step is to dismiss the CEO immediately.
BP and HP both terminated (or reassigned) their respective CEO’s due to crisis. Boards need to have a short list of those who could jump in at a moment’s notice
As Boards and companies may have separate legal counsel in special situations, identify public relations counsel, distinct from management’s counsel.
It can be or may become a conflict of interest to have the same firm or person providing counsel to the Board and management in a crisis
Understanding that the Boards of Directors view crisis through a different lens and have different choices and challenges is the first step in understanding its role in the crisis management process. Proactive steps, as outlined above, will go a long way in helping Boards act in the best interests of the company and its shareholders.