When the regulators stab you in the back

February 7, 2007

I’m back from Mexico and found things pretty active while I was gone. Fortunately I unplugged pretty well, otherwise I would have gotten pulled into kind of a nasty one. I’m not going to be very specific here but this is a situation faced by a great many companies who are closely regulated by oversight organizations at the state, federal or local level. This could apply to financial regulators, utilities, industry for a variety of things including environmental, even tax issues.

In this situation the company was bending over backwards to address all the concerns that the regulatory agency was raising. They knew there was a problem and proactively discussed and brought all the relevant details to the agenct representatives attention. Everyone knew the seriousness. And the agency folks were highly complimentary about the company’s cooperativeness, transparency and proactive planning to address the concerns. But the governor needed to make some hay apparently. Or answer to critics about the toughness of the agency on industry.

So, while the nice talk continued in the conference room, the agency’s communication people went to work crafting a press release designed to make the company look like it wore horns and waved a forked tail. The old black hats white hats ploy was in full play and you know which color was on each side’s heads.  The word had come down apparently–make us look good by making them look really bad.

There was some cooperative work on the press release, a slight toning down of the hyper aggressive tone and implied name calling, but by the time it hit the media it was ugly. Of course, they buy into the “good guys-bad guys” story hook line and sinker. What is the company to do? Publicly call out the fact that they have been stabbed in the back by agency folks answering to a higher authority? There is nothing they can do except see all their hard work to be cooperative, to be proactive, to be responsible citizens go for nothing as it relates to their reputation.

Think this can’t happen to you? I’ve seen it over and over and over–with big companies and small companies. It is one of the most common reputation threats out there. And the threat is not you as a company making a mistake–but the politicians who control these agencies looking desperately for any opportunity to make themselves look good at your expense. After all, how can they be hurt in this environment by making some huge bank, powerful industry association, Fortune 100 industrial firm, large private utility or just about anybody big and powerful look bad?

I would love to hear from some of you experienced crisis managers out there discuss your approach to dealing with this. My sense is that it is one of the most common reputation hazards that we in crisis management have to deal with but one of the most intractable. Your thoughts?

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3 Responses to “When the regulators stab you in the back”

  1. Mark Harris Says:

    I have seen similar situations on a number of occasions when providing companies with counsel and advice during crises over the last 13 years. However, I am pleased to say that they have been in the minority rather than the majority.

    My experience has shown that those companies that have carried out a detailed vulnerability study of their operations and products or services, have analyzed the stakeholders (and understood the stakeholder’s agenda and “pain” threshold) and then actively engaged with those stakeholders in “peace time” will have a far better, and more supportive response from the regulators and other government bodies when they need it. The regulators, law enforcement or emergency response services, and other government or industry bodies do not like to be taken for granted and certainly do not respond well if the only communication they have received from you has been a Christmas Card or an invitation to the Summer Cocktail Party prior to getting your call for help!

    Companies should never plan or rehearse their responses in isolation; this will only lead to nasty surprises when things go wrong in real life. It is imperative they work with their regulators and other stakeholders. This then gives both the company and the regulator and others a real sense of confidence that matters will be managed in a responsible, safe manner with the interests of all the stakeholders foremost in the company’s response. More importantly, this confidence will also enable the regulator or government agency to actually persuade politicians to back off and get back in their boxes, or to actually support the response by endorsing the actions taken to date.

    I hope this has been useful. I could go on for hours on the subject with anecdotal evidence of the good and the bad, but sadly work calls.

  2. Jonathan Bernstein Says:

    You betcha, Gerald, I’ve sure seen this happen, and the only recourse is to ensure that YOUR stakeholders, internal and external, know the truth. We can and should not ever rely on the media to communicate our key messages, even when it isn’t being tricked into promoting an elected official’s agenda. Organizations need to be their own publishers, and the Internet provides MANY ways to do that, both by “push” like email and “pull” like websites, blogs, wikis, etc.

    Jonathan Bernstein
    President, Bernstein Crisis Management LLC
    Editor, “Crisis Manager” Newsletter

  3. gbaron Says:

    Thanks to both of you! Great comments. Jonathan, great to be reminded of this and a great reminder as to how easy it is to forget something so basic and important when you are in the middle of a media battle.
    Mark, you are absolutely right. In this case, the very positive and cooperative work done by the group involved with the regulators made a very significant difference in the final tone and content of the release. Unfortunately, not enough to change the headlines. But you are right about the need to make friends before something happens–especially within the agencies who may be forced into adversarial postures by the politicos above.


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