Asian Counsel

 Who done it?

A crucial new imperative for Chinese lawyers.

By Richard S. Levick, Levick Strategic Communications

Chinese companies are facing a critical new challenge on two fronts. In the US, they are being confronted by an increasingly hostile media that now scrutinises their behaviour with an ever-more watchful eye. In turn, that media coverage influences the regulators, analysts, and in litigation, the juries that may often determine the success or failure of their best-laid business plans.

In China mean while, the media is picking up a few formidable cues from its American counterparts. MSNBC, CNN, Bloomberg and the BBC are now a permanent part of the local Chinese media landscape and Chinese journalists are increasingly asking the kind of difficult questions they never asked before. They are looking for heroes and villains to a greater extent than ever before. If something goes wrong, if a bad deed gets done, Chinese reporters, like their American counterparts, are now asking, ‘Who done it?’

Once upon a time, in-house counsel were exempt from the media furor that often engulfed their companies’ crises and law suits. Even in the US, where the media has historically been more intrusive and less forgiving than elsewhere in the world, these lawyers were only tangentially caught up in the public fray. Media skills were assets that they might or might not bring to the table.

In the past, companies sometimes shrewdly determined that their own inside legal team offered an ideal spokesperson in times of trouble. When, for example, the Bhopal disaster occurred, Union Carbide chose Joseph Geoghan, its chief legal officer, as spokesperson. Geoghan provided the best of two worlds. On the one hand, as a lawyer he could self-monitor his public statements for hidden minefields and potential liabilities. On the other hand, he wasn’t just a legal ‘mouthpiece,’ but a key member of corporate management.

Union Carbide could therefore protect itself in its public position while simultaneously demonstrating the kind of personalised concern and commitment credible only with the direct involvement of its own executives. With its chief legal officer out front, the company was being extra careful but it was not hiding.

Today, however, the media wolf is howling more insistently at the in-house door, increasingly so both in China and in the American marketplace, which is now so important to Chinese business interests. It’s no longer simply an option for corporate counsel to be able to speak for the company or play a key role in determining media strategy. Some in-house counsel, both in the US and globally, are themselves targets of media interest, especially when they’re personally investigated.

Yet the really decisive difference between the media role of in-house counsel then and now goes beyond such mere happenstance. It speaks to the very definition of in-house practice.

Defining the in-house charge

Post-Enron, every legal entanglement is a potential media disaster threatening corporate reputation and product or service brands. What ultimately defines the responsibility of corporate counsel if not reputation and brand protection? Ergo, media skills are potentially as important for an in-house legal manager as legal skills.

For lawyers, it’ s a tough admixture. Media and legal skills tend to be very different. The key to media skills is controlled disclosure, but the instincts of lawyers is to guard all words uttered, to utter them only if necessary, and to parse them so carefully that, from a media standpoint, their statements often wind up bowdlerised beyond any possible interest to readers or viewers.

Traditionally, the lawyer’s job ends when the client is vindicated. In the media, however, vindication can be irrelevant. A lawsuit fought to a successful but protracted conclusion can be as damaging as a defeat.

To begin to understand the specific skills now required of in-house counsel, let’s jump ahead into the heated centre of those very corporate scandals that changed forever how all lawyers must define their responsibilities as corporate communicators.

Lessons from Andersen

Lessons to be learned from the demise of Arthur Andersen abound for all lawyers – from Beijing to New York – charged with ensuring a bill of corporate good health. These lessons are all the more formidable to ponder when one realises that Andersen actually had, in general, a fairly sound approach to media management. A crisis team based in Chicago was in place before the crisis – a first critical best practice for any company. And lines of communication to Andersen’s adjunct teams in New York, London, and Hong Kong were open 24/7.

When disaster struck, a list of top-priority media outlets was immediately drawn up. Andersen’ s message points about ‘gross injustice’ were coherent and eminently quotable. The firm ran effective attack ads and enlisted unimpeachable supporters like former Federal Reserve Board chairman Paul Volker.

Indeed, the first lessons from Andersen for in-house counsel are all based on what the firm did do:

• make sure a team is in place at all times, long before disaster strikes;
• populate the team with in-house lawyers, communications professionals, and C-Suite managers; and
• have a template for a plan that includes key media outlets along with an articulated message – brief and coherent – to deliver to those outlets, or procedures to immediately create such a message(s).

In-house counsel can also go a little further than Andersen in making sure that outside counsel are on call to advise on media strategy. In fact, some in-house lawyers – notably Steven Hantler, assistant general counsel for government and regulation at DaimlerChrysler – now insist that outside litigators do more than pay lip service to media management, but have demonstrable skills in that area. It’s really a prerequisite for getting hired by Hantler.

For all their professionalism, Andersen’ s best-laid media plans came to naught. Alas, another lesson for in-house counsel is that no strategic communications can change the facts of life when the company is actually guilty of unforgivable transgressions, or when the public mood is so ugly that, no matter how well you present your case, no one is going to listen.

Balancing act

Yet Andersen also made basic errors in its media planning and thereby hang additional important lessons for in-house counsel. One such error speaks directly to the immense muddle that often happens when legal and communications professionals work together. Here, presumably, the legal people should have listened more carefully to the communications people, because at the end of the day Andersen relied much too heavily on an assertion of legal innocence.

With key clients such as Delta Airlines bolting the firm, Andersen’ s insistence on innocence was hollow. There are times when the best strategy is to acknowledge shortcomings, apologise, and hope to move on. The role of the in-house lawyer is essential here as such acknowledgements must be carefully worded to avoid opening up further cans of legal liability. For lawyers, this balancing act is the very crux of media management, especially when public sentiment affects the company’ s business as decisively as any courtroom decision.

By doting on its own innocence, Andersen failed to develop a great overarching message about itself that might actually have transcended the specifics of its apparent culpability. Not long after WorldCom, faced with an accounting disaster of its own, made sure to remind the public how crucial its services were to the social infrastructure, including telecommunications at the Pentagon (around a year after 9/11). Andersen, as one of only a few global accounting giants, could have and should have sent a similar message.

While the absence of such a message was poor, Andersen’s greatest strategic mistake was not having a visual image to counter the image that eventually dominated the story. That fatal image was of accountants shredding documents. Andersen’ s fate was probably sealed by that shredding image, just as Richard Nixon’s presidency ended with the same picture. Remember – few negative images are so powerful that they cannot be answered by positive ones.

No doubt, in-house counsel will understand the need for their direct involvement in the crafting of strategic message points, especially statements that acknowledge corporate shortcomings. But what do corporate counsel have to do with identifying and presenting visual images, or with any other such communications tactic, that seem exclusively the province of experienced communications professionals? The answer in two words: hanging chads.

During the great 2000 US election recount, George W Bush became president because the public was captivated by balloting images that trivialised the Democratic opposition. The advisors who so effectively guided Bush to victory were banking both on their own strong public statements and on advancing the one-sided war of images. Some of those advisors were litigators. Many of them were politicians. Most of them were lawyers.

The point is, during a media war, the expertise of counsel, in-house or outside, should focus on everything including the propagation of effective visual imagery. Not just message development, lawyers should also learn the fine points of message delivery. These include ‘flagging,’ which is the technique of emphasising whatever part of your statement you want to show up most conspicuously in the published article, as well as ‘bridging,’ which is the technique of returning to your main message no matter how persistently the reporter tries to lure you away.

Not just print media, in-house counsel should be trained to survive the electronic media as well especially TV, and familiarise themselves with all the tricks of that devious trade. They should learn the ground rules of media engagement, for instance what does ‘off the record’ really mean? And, they should learn about relationship-building, how being a relied-on source (and possibly a friend) for reporters can stand you and your company in good stead when journalists make judgment calls that can go either way.

There is no aspect of the campaign in which counsel should not be intimately involved – especially in-house counsel who are entrusted, not just with individual fragments of a legal/business strategy, but with ensuring the success of the entire venture. As we’ve seen so often in recent years, in crises or in litigation, such success is often synonymous with survival.  

How to spot the warning signs of a media crisis

It may be that your company is currently free of sufficiently high profile cases or allegations to attract vexatious media interest in the US, but in-house counsel must understand what the current environment demands. It demands that they must help their companies navigate the shoals before the case goes public. They must develop, in themselves and in their corporate spokespersons, the media skills that are necessary to protect the company’s reputation and its brand.

That means thinking crisis when there is none – an even more important skill when it comes to media relations, since there isn’t always time to set up a response to press inquiries on the eve of a scandal or lawsuit. What then are the early warning signs of a media crisis, and where do you look for them?

What is the industry environment?

Other cases of a crisis nature in your industry are being covered in the media. A reporter in an industry trade publication has started to ask about facts related to what now looks to be a trend story.

Certain industries are more vulnerable to such trend stories. Is the industry bleeding, like telecom? The perception is that, as profits diminish, everyone is a suspect because everyone is desperate. Is the industry rife with new public offerings, with capital sources either so abundant or so at a premium that entrepreneurs are perceived to be cutting corners? Is the industry such a repository of public trust that one betrayal of that trust – by say Arthur Andersen – guarantees media interest in other global accounting firms?

Regulatory environment

An agency has indicated they want to watch a particular issue more closely, or political pressure is building to find a whipping boy. Watch every signal their office sends. In the US, monitor state attorney generals in all states where your company has a major presence. They are political animals and your back may be a good stepladder to power, especially since it’s a foreign back.

Xenophobic? The media? You bet. When BP Petroleum closed offices in Cleveland, even the commercials on local radio stations featured unsympathetic characters with British accents. China, by sheer dint of its size and potential competitive advantage, threatens many Americans. The media knows that and responds in kind to that constituency. So do the regulators.

Stock performance. Your company’s numbers have been down for two consecutive quarters. Coverage of the corporate stock decline is painful enough, but reporters will jump at any suggestion that shareholder pressures are forcing inappropriate or illegal responses. At the very least, they will be inspired by the down numbers to sniff around for other negatives. Since you need to prepare a media response that includes positive messages about the stock declines, include as part of that preparation some discussion of what those other negatives might be, and how you should respond. Bad performance news is always reason for any company to go on full media alert.

Stockholder actions

Any action by shareholders legitimises media interest in every aspect of the company’s life. Remember too, lawsuits that name directors and officers often lead to personal interest in the directors and officers themselves. The media plan must anticipate full background checks by reporters. Read the D&O resumes very carefully. Were any of them ever short sellers? Have any of them ever been sued before? How did they get their current jobs, and why? Prepare to defend them as if they were suspects in a crime.

Dangerous practices

Enron got into a lot of trouble with off-balance sheet assets. Crooked financiers in the 1980s were associated with junk bonds. In fact, off-balance sheet assets and junk bonds are both perfectly legitimate, but if Enron misuses its instruments, or the notorious arbitrageurs of the 1980s misused theirs, your company can expect to be called by a suspicious reporter and asked to explain what’s up. In the US, that likelihood again increases if you are not a US-based company.

Hostile takeovers

As we learned in the 1980s, hostile takeovers open vast frontiers of self-interest. There are a zillion reasons for all sorts of people on both sides of the takeover to say all sorts of things to the media. During a hostile situation, your crisis team needs to monitor every relevant syllable uttered in public, and anticipate those that are about to be uttered.

Past escapes

The Catholic Church incited keen media interest a decade ago with sexual misconduct charges that soon departed the front page after a leading Church official was exonerated. But what could possibly have led to the conclusion that the issue itself would not someday resurface? Corporations with less painful liabilities should never forget a single past brush with scandal, or fail to prepare for the media’s unwanted return to an unpleasant subject.

Whistleblowers

What internal dynamics might lead to a public crisis? Have there been widespread layoffs? Is the company known for tough, unreasonable managers? Does employee dissatisfaction hang palpably like a shroud in your office? Such an environment can foster ‘whistleblowers,’ hostile employees who will talk to the press, as well as to the government, just a little more readily, and a little more enthusiastically, than in a less strained culture.

Faulty products

Engines do explode. Asbestos does kill. Any genuine product liability should be treated, for media purposes, as if lawsuits have already been filed and reporter inquiries phoned in. The problem may go away quietly, assuming a responsible corporate initiative. But don’t assume it will, and prepare as if it won’t.

Other crises come from nowhere, often involving say a hostile reporter who’s picked up on something that, from your perspective, is trivial. Here too, a permanent media team can at least hypothesise possible exposure – if, for example, a reporter who was hostile to you when he was writing for a local newspaper suddenly gets a job at The New York Times.