How Government ‘spin’ backfired and blurred an important issue

‘Spin’ is one of the most unhelpful words when talking about issue and crisis management. 

It doesn’t accurately represent what we do; it seldom works in the long run; and has become an easy term of professional abuse by journalists and other critics.

But sometimes an egregious, supposedly clever use of words to spin the facts, breaks through into public consciousness and undermines the work of communication professionals.

Consider what just happened when the Australian Federal Government received a recommendation it didn’t want to implement.

In the wake of a Royal Commission into Robodebt – the automated welfare payment recovery process later declared illegal – the Government proudly announced it had “accepted fully or in principle” all 56 recommendations.

The Minister and his advisors were doubtless delighted when much of the news media dutifully reported the “all recommendations accepted” message. For example here, here, and here. 

Problem is the statement wasn’t really true. It appeared to be an exercise in political spin to obscure that the Royal Commission report had in fact listed 57 items, not 56 – the last being an unwelcome proposal to reform Freedom of Information Law to include Cabinet documents, which the government did not accept.

The Minister tried to assert this was a “closing observation” rather than a recommendation, and his office – in true bureaucratic fashion – attempted to pass the blame, arguing that this terminology matched that of the Commissioner herself.

Yet at least some of the media weren’t buying this explanation. For example, the ABC and Nine News highlighted the “missing” recommendation. And The Guardian online altered the headline for its report, pointing out it made the change to reflect the discrepancy created by the attempted cover-up.

So when is a recommendation not a recommendation?

The RMIT/ABC Fact Check newsletter Checkmate cited law reform expert Scott Prasser arguing the so-called “closing observation” used emphatic language that the contentious FOI proposal “SHOULD be implemented” rather than “MIGHT be considered”, and was therefore very clearly a recommendation.

Similarly, Michael Mintrom, a professor of public policy with Monash University, told Checkmate: “it strikes me that the 57th item is very much a recommendation, and I can’t see the rationale for not treating it as such.”

The apparent rationale was, of course, to allow the government to conveniently make the politically appealing – but misleading – assertion it had “fully accepted” the recommendations of the damning report, which heavily criticised the previous government. 

The issue here is not a semantic argument about the precise meaning of words. It’s about the Government attempting to spin an unwelcome proposal from its own Inquiry, which the government specifically opposed and had no intention of even considering. They could have used a more accommodating response, but chose instead what they presumably imagined was a clever strategy to blur the situation.

Needless to say, there is a long history of governments and others using the language of spin to promote a particular position. Look no further than the claim and counterclaim emerging from the Israel-Hamas war. Or Putin insisting the invasion of Ukraine is a “special military operation” and threatening to imprison anyone who dares to say otherwise. 

However, blatant spin should not be allowed to stand, because it contaminates debate, inhibits legitimate issue management, and undermines the work of honest communicators.

It’s an offence tersely described by American PR doyen Robert Dilenschneider: “Spin doctoring is to public relations what pornography is to art”. Well said, Mr Dilenschneider.

How ‘Just asking questions’ can blur truth and muddy key issues

The fog of war and propaganda on both sides has made it increasingly difficult to tell what is really happening in Israel’s conflict with Hamas. But one incident highlights how allegations, disinformation and misinformation can be spread under the guise of “Just asking questions”.

The day after Hamas stormed into Israel, killing and kidnapping hundreds of civilians and soldiers, a little-known pro-Israel media watchdog group named HonestReporting posted an online report under the heading: “Broken Borders: AP & Reuters Pictures of Hamas Atrocities Raise Ethical Questions”. 

The story raised a list of questions about how Palestinian photo-journalists were apparently on the spot for the attack, such as: Was it coordinated with Hamas? Is it conceivable to assume that ‘journalists’ just happened to appear early in the morning at the border without prior coordination with the terrorists? Were they part of the plan? 

The explosive report predictably generated massive news coverage around the world, with Reuters, CNN, The New York Times and AP all absolutely rejecting the allegation.

Somewhat less media attention was given to the fact that the following day, Gil Hoffman, executive director of HonestReporting, admitted the group had no evidence to back up their insinuation, and he was satisfied with subsequent explanations from several of these journalists that they did not know in advance. “They were legitimate questions to be asked,” Hoffman said. “Despite the name HonestReporting, we don’t claim to be a news organization.” 

But it demonstrated that “Just asking questions” can be very effective in driving high profile issues. AP stressed that while the HonestReporting post did not specifically make accusations against the media companies, freelance photographers that day “might have known”.

Others were less careful. For example, Sky News in Australia evidently thought “might have known” wasn’t good enough. Sky journalist Jack Houghton opined that: “For journalists with camera gear to find themselves embedded with a terror cell, they must have had advanced notice of the attack. You don’t just teleport into a situation like this. It would have taken sources, planning and time.”

Israeli Communications Minister Shlomo Karhi seemed to leave even less room for doubt when he wrote to The New York Times, charging that photographers and others at the paper had prior knowledge of the attack and urging the paper to investigate.

“It has come to our attention” he wrote, “that certain individuals within your organization, including photographers and others, had prior knowledge of these horrific actions, and may have maintained a troubling connection with the perpetrators.”

So much for “Just asking questions”!

Sadly, this technique has a long and less-than-honourable history. There is even a slang term for it – JAQing off – which the Urban Dictionary defines as “The act of asking leading questions to influence your audience, then hiding behind the defence that they’re ‘Just Asking Questions’, even when the underlying assumptions are completely insane.”

One man who perfected the technique was former Fox News host Tucker Carlson, who became synonymous with the phrase “I’m just asking questions here” before the network finally had enough and gave him his marching orders. 

It all became such a national joke that, shortly after a Carlson’s departure from Fox, late night chat show host Jimmy Kimmel delivered a monologue to satirise his style. “Does he have a collection of paintings that weren’t by Hitler? Is it possible they have pictures of him on a horse French-kissing Vladimir Putin? To quote Tucker, I’m not saying he did those things. I’m just asking questions.”

However, Carlson’s frequent praise for Putin and attacks on vaccination, were way beyond humour. While he has now largely exited mainstream media, the technique he championed continues to undermine truth and muddy important issues.

The reality is “Just asking questions” doesn’t necessarily mean those questions deserve to be answered. Instead, it has become a disinformation weapon sowing doubt. 

Should shareholder funds be spent on divisive social issues?

Companies have struggled for years with whether to speak out on controversial social and political issues.

This debate was reignited very publicly by high-profile companies taking a stance on the failed Referendum to create an indigenous Voice to the Australian Parliament.

While a conga-line of instant experts offered their opinions about the effectiveness or otherwise of the communication strategies of either side in the referendum, the more fundamental question is whether companies should take sides on such a highly divisive public issue.

Immediately after Australia voted No to the proposed amendment to the Constitution, there was a flood of comment about the appropriateness of some of the biggest listed companies donating as much as $2 million to support the unsuccessful Yes campaign.

For example, Hugh Morgan, former President of the Business Council of Australia, said the resounding public rejection of the referendum should force big company CEOs and boards to “reconsider intervening in social political issues and spending shareholder money on causes not widely supported”. 

“Given the mood of the community,” he said, “maybe this is a moment for the corporate sector to reflect and rethink.” 

Similarly, Kennards Self Storage CEO Sam Kennard said: “Directors of companies should not put shareholder money into pet political positions, and it could be a breach of a fiduciary duty because how is that in the best interests of shareholders?”

However a majority of ASX Top 20 companies publicly advocated for the Voice, and many made substantial donations. Australian Council of Superannuation Investors CEO Louise Davidson said they supported the Voice in the belief its success would lead to better dialogue between First Nations peoples and the business community, and would ultimately have supported long-term value creation in the companies.

By contrast, The Australian Shareholders’ Association, which represents smaller retail investors, took a neutral stance. CEO Rachel Waterhouse said companies could choose to take a stance on social issues “if it was consistent with their overall purpose and strategy”.

And that’s the essential test. Is corporate support for any high-profile issue – be it indigenous recognition or war in Palestine – just a band-wagon effect to be politically correct or does it represent true corporate values, purpose and strategy?

Although research consistently shows consumers wanting CEOs, companies and brands to be more active on social issues, taking a stance on a polarising topic has increasingly become a reputational and commercial risk. Look no further than Bud Light aligning itself with a transgender activist, then losing its place as America top-selling beer brand, and throwing the two executives who approved the promotion under the bus.

As a Wall Street Journal headline concluded in June: “Companies That Embraced Social Issues Have Second Thoughts: Executives are rethinking if and when to weigh in on potentially divisive issues, fearing backlash from all sides, and are developing crisis plans in case things go wrong.”

Yet taking a values-driven stand in the face of controversy can be a powerful corporate statement. 

At the AGM of Telstra, soon after the referendum loss, shareholders questioned why the telecom giant spent $1 million on advertising to support the Yes campaign. While criticism made for easy headlines, Chair John Mullen said support for the Voice was “in the best interests of the company, and therefore the best interests of our shareholders”.

He added the decision was made after consultation with the Indigenous community. Indeed, Telstra has a comprehensive Reconciliation Action Plan which includes a First Nations Expert Advisory Committee and a First Nations Employee Representative Group.

Many other organisations also have effective on the ground support and genuine financial commitment to indigenous advancement and employment. But for some it seems that support for Yes was little more than opportunistic virtue signalling.

Why you need to encourage dissenters and doubters

A scathing assessment of management failure at disgraced PwC exposed the company’s “whatever it takes” approach, which led to partners turning a blind eye to bad behaviour in pursuit of profit.

While that judgement dominated the headlines, of special interest to communicators and crisis managers was the reported unwillingness of executives to question a dominant CEO.

PwC-commissioned reviewer Ziggy Switkowski found that an “overly collegiate culture” – focused on fostering relationships between long-serving partners – stifled any form of criticism or reflection on the firm’s mistakes, or the risks it was taking.

“PwC Australia exhibits a ‘good news’ culture at the enterprise level where ‘good news gets communicated and bad news gets held back’,” the review said. “In practice, there is not a lot of constructive dissent, with relationships and loyalty being key to career progression.” 

Mr Switkowski found “a general hesitancy to delve into uncomfortable conversations, to learn from mistakes and to be prepared to hold others to account.”

Sadly, a lack of “constructive dissent” is by no means uncommon. The truth is too many companies, government departments and other organisations, have a culture where only good news flows upwards to the executive suite.

As Kurt Stocker, formerly at Northwestern University, Chicago, has written: “Keep in mind that top management, by definition, is the least informed group in the company when it comes to bad news. Nothing moves more slowly than bad news running up a hill, a very steep hill”. 

A chilling example of this problem was revealed some years ago following the disastrous explosion and refinery fire at BP Texas City, which killed 15 workers, injured 180 others and severely damaged the refinery. Researcher Andrew Hopkins found a culture at BP where many top people knew of safety and production problems at the refinery, but few would speak up. “Only good news flowed upward. No one dared say the wrong thing or challenge the boss.”

BP’s then CEO, Lord Brown (who soon lost his job in an unrelated scandal) eventually admitted the disaster was at least partly his fault. “I wish someone had challenged me and been brave enough to say, ‘We need to ask more disagreeable questions’.”

Another example of an autocratic CEO who wouldn’t listen was exposed in the notorious phone-hacking scandal in the UK. The British Parliamentary inquiry concluded Rupert Murdoch was not a fit person to lead a major corporation, and that he “turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications.”

The media mogul didn’t just plead ignorance, but went further, claiming that some of his own (unnamed) executives deliberately kept him in the dark.

Similarly, the former independent Directors of scandal-plagued Australian Crown Casino claimed they were unaware of the problems because they were “deprived of information from management”. 

Such cases are a stark reminder that wilful blindness – and its cousin, lack of constructive dissent – are a major risk when it comes to issue and crisis management. Indeed, blocking bad news or warnings for any reason can lead to disaster.

The need to listen to dissenting opinions in a crisis was neatly captured by an unnamed manager in a global study about the role of the CEO: “One of the most important things is having people around you who tell you how wrong you are.”

In the same vein, American academics Paul Nystrom and William Starbuck once argued that top managers should listen to and learn from “dissenters, doubters and bearers of warnings” to remind themselves that their own beliefs and perceptions may not be correct.

Rightly or wrongly, in many organizations the role of dissenter – or devil’s advocate – falls to the communication professional. It’s a role which needs to be handled with care to avoid being labelled a troublemaker, or not a team player. But being able to disagree without being disagreeable is an essential part of helping decide what’s best for the organization.

How moral blindness breeds plummeting corporate reputation

Qantas. PwC. Rio Tinto. Optus. Telstra. Medibank. Facebook/Meta. Twitter/X. Any of the big banks.

The sound you can hear across the big end of town is the shredding of reputations in the wake of corporate crises, often triggered by moral blindness.

Releasing the latest Roy Morgan Trust Index, CEO Michelle Levine said Australians have never been more distrusting of business since their risk monitor began in 2017, and distrust of corporations had soared dramatically after COVID.

“Once the crisis had passed” she said, “they found the new freedoms they had enjoyed under the cover of COVID hard to relinquish, and a kind of Moral Blindness became endemic.”

Referring to the unprecedented decline in trust of Qantas she asserted there was moral blindness everywhere, from appalling call centre delays, cancelled flights and snail’s pace fare refunds, to former CEO Alan Joyce refusing to pay back any of the $2 billion in “corporate welfare”, despite the company surging back to billion-dollar profitability.

Of course, Qantas was not the only company to be accused of making unfair profits during a cost-of-living crisis. Supermarket giants Coles and Woolworths, for example, came under attack after announcing bumper annual profits of over $1 billion each at a time of food insecurity. 

While business experts explained that such profits were not extraordinary given the size of these companies, Amy Booth and Danny Carney from a Tasmanian consumer protest group seemed to be reflecting a wider opinion when they declared that people “understand they’re being screwed by the two big supermarkets.”

“They know it’s unfair that they make billions in profits while people steal or starve themselves to survive.”

Unsurprisingly, Coles and Woolworths made reassuring statements acknowledging that many people were doing it tough, and both pledged they were looking for ways to help reduce consumer costs.

However, the challenge for issue and crisis managers is not to try to reconcile polarised views about the competing demands of consumers and shareholders.

It’s to recognise that, irrespective of the facts, the opinion and experience of consumers, investors, the media, and other stakeholders is what determines trust and reputation. Brand is what you say about yourself, while reputation is what other people say about you. And corporate reputation overall is plummeting.

Two key reasons are a perceived decline in management behaviour, and a rise in moral blindness from a supposed growing corporate culture of money over community responsibility. Moreover, it doesn’t even matter if that’s not true.

Corporate culture is how organisations behave when people aren’t looking. But more and more people are now looking, and too often they are mightily impressed by what they see. Whether it’s Royal Commissions into the banking and casino industries; the latest news media exposé; or the rapidly increasing pace of legal action by various corporate cops against a growing list of business wrongdoers. Little wonder that reputation is increasingly at risk.

While experts argue about the exact numbers, most agree that reputation generally accounts for 50-60% of the share value of corporations, and much higher in many cases, depending on the industry. That is a massive amount of value at stake.

Take the case of BP in the UK which was already under pressure because of a massive boost to profits and executive bonuses on the back of rising petrol prices because of war in Ukraine. Then last month the CEO was sacked because of “workplace flings” and BP’s share value fell by $3.6 billion.

Managers and communicators need to fully understand that reputation is a core business asset – driven by what you do, not by what you say or what you promise – and there is very little chance it will improve while bad behaviour continues.

Global Boiling? Really? Words matter when you manage an issue

Naming an issue is a crucial strategic decision. But how you define the issue must be credible.

That was the problem when United Nations Secretary-General António Guterres boldly declared: “The era of global warming has ended; the era of global boiling has arrived”.

Writing on SBS, Noel Castree of University of Technology Sydney asked the obvious question; “Do phrases like this actually help drive us towards faster and more effective climate action? Or do they risk making us prone to climate doomism, and risk prompting a backlash?”

He argued that while Guterres chooses his words carefully, does he choose them wisely?

It’s probably too soon to tell whether “global boiling” will survive as a phrase. But we know for sure that it provided an easy line of attack for the usual conga-line of climate sceptics. 

For example Terry McCrann of the Herald Sun, with typical restraint and subtlety, called the UN boss “this Portuguese prat” and described the term “global boiling” as laughable, asking ironically “Just a tad hyperbolic? Just a smidgeon of hysteria there?”

Meanwhile his Murdoch media stablemate, Adam Creighton at The Australian, said the term was stupid, absurb and hysterical.

Of course, using inventive language to reframe an issue is nothing new. Like those pesky industrial development applications where a waste incinerator becomes a “thermal oxidation unit”; a toxic rubbish dump becomes a “secure landfill”; and a new prison becomes a “correctional facility”.

Similarly, the fast food industry like to frame obesity as a “personal responsibility issue”; the big oil companies try to replace “drilling for oil” with “exploring for energy”; and activists successfully renamed pro-abortion as pro-choice and anti-abortion as pro-life.

Or consider the famous case of consultant Frank Fahrenkopf who was commissioned to clean up the dubious image of the Las Vegas casino industry. He advocated replacing the word “gambling” with the more family-friendly “gaming,” which is the language now frequently reflected all around the English-speaking world with, for example, Gaming Commissions and Gaming Licences.

However, the language to describe changes to the global climate is arguably a much more significant challenge. Back in 2002, in a once-secret memo to the George Bush White House, Republican strategist Frank Luntz proposed to promote the term climate change as being “less frightening” than global warming. He wrote at the time: “While global warming has catastrophic connotations attached to it, climate change suggests a more controllable and less emotional challenge”.

Although Luntz himself now professes to no longer being a climate sceptic, his proposed “climate change” language became widely accepted around the world for many years until scientists, activists and journalists began to help alternative options to prevail. For example, in 2019 the Guardian updated its style guide to propose “climate emergency, climate crisis or climate breakdown” instead of “climate change,” and favoured innovative “global heating” over conventional “global warming.”

But journalists too can fall into the trap of exaggeration. Like a recent syndicated opinion piece on Bloomberg News which opened with the clearly hyperbolic words: “As red-hot oceans amplify deadly heat waves . . .”

Exaggerations and over-statements may be less damaging than deliberate disinformation and outright lies. Yet they can undermine credibility and needlessly provide ammunition for the “other side” (like the unfortunate reference to “red-hot oceans”).

While such language may provoke discussion and generate media coverage, for an issue as important as the global climate there surely is already no shortage of media attention. 

As Noel Castree concluded on SBS: “Climate change, global warming, global heating, the climate crisis, global boiling – whatever the phrase, it is now undeniable that it’s upon us.”

How a big brand can be a reputational liability.

Combine a high-profile brand and lazy journalism and the result can be disproportionate reputational damage to a global product.

When WHO recently declared aspartame to be a possible human carcinogen, thousands of products which use the artificial sweetener were potentially affected – including chewing gum and jellies and syrups and tabletop sugar substitutes like Equal – yet much of the media coverage around the world focussed heavily on just one product, Diet Coke (with Diet Pepsi running a close second).

For crisis managers everywhere it’s just the latest example of reputational danger when headline writers pick what they think will attract eyeballs, and illustration sub-editors go for whatever is the easiest picture available in online image libraries. 

Communication experts call it “Media Amplification of Risk”, and a selection of news reports on the WHO announcement – not to mention dozens of TV stories – demonstrate its impact.

New York Post: “Diet Coke sweetener Aspartame is ‘possible carcinogen’.” Illustration showed bottles of Coca-Cola and Diet Coke. 

Wall Street Journal: “Is Aspartame Bad for Your Health? What to Know About Diet Coke’s Key Ingredient.” illustration showed a can of Diet Coke.

Daily Mail: “Aspartame explained: From how much is in Diet Coke to cancer links and list of products containing the sweetener.” A graphic showed 25 packs of brands containing aspartame, with Diet Coke about 20 times bigger than the rest.

Forbes: “What to know about aspartame: The sugar substitute in Diet Coke declared as a possible cancer risk by WHO”.  Illustration shows carry-packs of Diet Coke.

Aspartame sweetener in soft drinks has often been in the headlines, and both Coca-Cola and PepsiCo were reportedly crisis-ready with prepared statements. 

Coca-Cola’s website said: “We are not planning to change our recipes containing this ingredient. The Coca-Cola Company has been a leader in providing consumers with a wide variety of beverage choices … we will continue to focus on this mission.”

PepsiCo’s Chief Financial Officer Hugh F. Johnston said he did not anticipate a huge consumer response to the reports, and the company had no plans to change the product portfolio relative to aspartame. “It is probably in a few products, but it’s not a huge part.” Johnston said, adding that the company could easily shift to using other kinds of sweeteners “if the need ever arises”.

However, it is worth noting that Pepsi briefly removed aspartame in 2015, then switched back when consumers rejected the new taste.

Although aspartame’s safety has long been under discussion, most regulatory agencies across the world, including Australian and European regulators, have deemed the sweetener safe at levels of human intake. Yet science and logic are little protection for major brands, whose profile alone makes them particularly vulnerable.

Of course, there have been other instances when a broad issue has engulfed an organisation simply because of its high profile. Like when “Google tax” became lazy political and media shorthand for new multinational anti-tax avoidance measures. Or when Chinese citizens, angry after pro-Tibet protesters attacked the Olympic Torch relay in Paris on its way to the 2008 Beijing games, wanted to target a French company in China and launched a boycott and street demonstrations against the supermarket giant Carrefour. 

Similarly, the high-profile Danish dairy conglomerate Arla faced a devastating boycott across the Middle East because a Danish newspaper published offensive cartoons portraying the prophet Muhammad.

While multinational companies with high-profile consumer brands are especially at risk, such cases reinforce that all organisations need a well-prepared crisis management plan. Meanwhile, the question is whether WHO’s new cancer classification of aspartame will have any appreciable impact on consumption of the world’s biggest soft-drinks.

Can scare tactics succeed when you manage an issue?

The issue strategy by the Pharmacy Guild of Australia to oppose making medicines cheaper may have been doomed from the start. And it tested whether a scare campaign can be effective.

Starting in about two weeks, more than 300 medications will progressively move from 30-day to 60-day prescriptions. The change will reportedly halve the cost of many drugs for chronic conditions, saving patients an estimated $180 a year on each medicine, and reduce their need to visit overburdened GPs.  

The Australian government said six million people would save more than $1.6 billion over the next four years because they’d be able to collect two months’ worth of medicine for the price of a single prescription. Over the same period, the change will save the government $1.2 billion in prescribing fees paid to pharmacists.

Seems like a pretty attractive policy, which unsurprisingly generated enthusiastic support from doctors’ groups, the Heart Foundation and the Consumer Health Forum.

However, the Pharmacy Guild – the lobby group for community pharmacists and a major donor to political parties – launched a full-scale issue offensive to block the change, portraying it as an existential threat to its members. A well-funded and co-ordinated issue campaign included radio and TV interviews and advertising in newspapers, billboards, TV, radio and social media, targeted at regional areas and marginal electorates. 

The Guild also encouraged individual pharmacies to generate their own local media coverage (here and here) to further raise concern with the public.

Underpinning this issue management effort was a slate of carefully honed messages of alarm. The Guild said the change will cost over $170,000 per pharmacy and claimed up to 600 community pharmacies will close, with a further 900 under financial stress. As a result, they claimed, 20,000 jobs are at risk (about 10,000 full time equivalents) “predominantly women working part time”.

They also argued that the pharmacies which remain open would reduce their hours, such as weekend trading, and reduce their services. Furthermore, they said the change would cause medicines shortages and “lead to hoarding and increase the risk of overdoses including among children and seniors”.

However, Federal Health Minister Mark Butler called the Guild’s claims “grossly irresponsible”. While the Guild asserted there are already shortages for up to 40% of the 325 eligible medicines, Mr Butler said only seven were experiencing supply shortages, not because of the dispensing period but through the global pharmaceutical supply chain. He labelled the Guild’s strategy “the latest scare campaign from the pharmacy lobby group about the government’s cheaper medicine policy”, and later said: “Not only is it self-serving and cynical, it’s also complete rubbish”.

Similarly, Dr Nicole Higgins, President of the Royal Australian College of General Practitioners, described the Guild’s approach as “fear mongering, akin to daylight savings and saying that our curtains will fade because there’ll be more sunlight – it’s a complete furphy.” 

At the political level, a delegation of 80 community pharmacists and industry representatives – wearing their professional white coats for maximum visibility – descended on Canberra to lobby politicians. The Guild itself calls it “white-coat advocacy“. But a last-minute attempt by the Parliamentary Opposition to block the change in the Senate just weeks before implementation was voted down and the change scheduled to commence as planned. Cross-bench MP Jacqui Lambie accused the Guild of over-reach. “I’m beginning to worry,” she said, “whether this is more a scare campaign now, and actually putting their hand out for more money.” 

With this political rebuff, the question has to be asked whether the Pharmacy Guild’s issue management strategy ever had any realistic chance of success (other than to impress its members and maybe squeeze out additional taxpayer-funded dollars). Moreover, whether a political scare campaign makes sense for any industry, let alone one where so much of its revenue is provided and heavily protected by government.

As columnist Myriam Robin concluded in the Australian Financial Review: “Forget the overwrought scaremongering about medicine shortages and rising hospital admissions; this is a fight more commercial than medical.” 

Should the CEO be ousted because of a corporate crisis?

As British banking sinks into the quicksand of a new scandal, an important question has emerged for organisations everywhere: Should the CEO be sacrificed in the wake of a reputational crisis?

The drama began when political gadfly Nigel Farage – former head of the UK Independence Party – announced that his bank (later identified as Coutts private bank) planned to close his account. He asserted it was because of his outspoken right-wing views.

In response, the BBC reported in July that he had been dropped, not because of his polarising politics, but because he had not maintained an adequate balance in the exclusive 330-year-old bank.

However, it wasn’t true. Farage then released a 40-page document he had obtained from the bank which showed their risk committee concluded he was “a disingenuous grifter” whose incendiary statements were inconsistent with the bank’s values. That there were “significant reputational risks” in being associated with him.

In a bombshell move, Dame Alison Rose, CEO of NatWest, which owns Coutts, confessed she had leaked the false story to the BBC. NatWest Chairman Howard Davies initially said the Board stood behind their CEO. But within hours Ms Rose resigned after pressure from the British Government, which is the bank’s largest shareholder since a taxpayer-funded £45 billion bailout in 2008.
 
Dame Alison admitted to a “serious error of judgement” and apologised for the “deeply inappropriate language” in the report on Farage. With the bank’s share value dropping by £840 million, Peter Flavel, CEO of Coutts, also fell on his sword the next day. The Australian-born banker accepted he held “ultimate responsibility” for the handling of the politician’s accounts.

British politicians lined up to say Ms Rose had done the right thing to resign as boss of the state-backed bank, although Bill Winters, CEO of rival Standard Chartered bank observed: “That’s a pretty heavy price to pay for what would appear to be an error of judgement.”

However his was a lonely voice. Prime Minister Rishi Sunak declared it “wasn’t right for people to be deprived of basic services like banking because of their views”. He said it wasn’t about any one individual, but about values such as free speech, freedom from discrimination and privacy of financial information.

Yet, his role in the affair was pretty clear, and reminiscent of former Australian Prime Minister Scott Morrison, whose intervention ensured the departure of Christine Holgate, CEO of state-owned Australia Post, over a management award controversy (She later received a $1million settlement).

Debanking of individuals and small businesses is nothing new, with 8,500 complaints to Britain’s Banking Ombudsman in the last five years (and the same issue causing controversy in Australia). Accordingly, Mr Flavel’s resignation seems less clear cut. Unlike his boss at NatWest, he had not personally transgressed, which reinforces the question whether the CEO should be sacrificed.  

When individual responsibility is identified, the answer is fairly obvious, like the eight PwC Australia partners, including the CEO, recently sacked after a tax leak scandal.  

So, what’s the proper response to broader corporate failings? A report in Fortune earlier this year concluded: “Powerful executives are often fired after a scandal to please investors, and it can backfire”. The new study into how the market responds to a company’s handling of misconduct found that consistency through a storm, rather than firing executives, was the key to reducing share price volatility, while mixed messages scared off investors.

Moreover, does sacking the CEO – or allowing them to resign with a handsome payout – deliver any meaningful result? While it might “avoid distraction” – as companies under pressure love to say – does it lead to any real change in culture or reputation?

In the case of Coutts debanking Nigel Farage, Rupert Younger of Oxford University’s Said Business School, warned that organisations have to ensure their own risk committees don’t overreach and get involved in inappropriate areas. “It’s classic when you have a committee that decides it needs to become relevant, and it starts to flex its muscles in ways it shouldn’t,” he said. “In this case they created a reputation crisis that didn’t exist in the first place.” 

Footnote: Coutts reportedly later offered to reinstate Farage’s accounts.

The high cost of corporate wrongdoing – and who really pays the bill?

When companies are forced to pay out millions – or even billions – for doing the wrong thing, it briefly makes headlines then generally vanishes from view. But in the end, it’s typically shareholders and consumers who bear the cost.

A few executives may lose their job – often leaving with a hefty payout – and the individuals who were responsible don’t get charged with a crime and don’t go to prison.

Most often it’s long-suffering investors who lose when shares tumble and insurance premiums skyrocket, or consumers who pick up the bill through increased prices.

When these reputational crises strike, companies too often fall back on a litany of cliché responses – it was just a few bad apples; this was not a systemic problem; we couldn’t have seen this coming; we will investigate and tighten up our processes; this is not who we are; we promise to do better in future.

But there seems to be little long-lasting effect on company behaviour, and the headlines keep coming. 

Take the case of Crown Resorts, which has just been ordered to pay $AUD450 million for failing to prevent money laundering and criminal activity at its casinos, and was recently fined $AUD20 million for breaching tax obligations. Within the last year the company – now owned by private equity giant Blackstone – was also fined $AUD80 million for a bank card scam: $AUD120 million for failing to encourage responsible gambling; and $AUD30 million for allowing gamblers to wager with uncleared bank cheques.

Sadly, they are not alone. Within just the last three months:

• Meta was hit with a record €1.2 billion ($AUD2 billion) privacy fine for transferring European users’ personal information across the Atlantic.
• Commonwealth Bank was fined $AUD3.55 million for sending 65 million spam emails. 
• Microsoft was fined £16 million ($AUD30 million) for illegally collecting data from children’s Xbox accounts. 
• Deutsche Bank agreed to pay $US75 million ($AUD112 million) and JP Morgan $US290 million ($AUD430 million) to settle lawsuits accusing them of helping facilitate Jeffrey Epstein’s sex crimes.
• Amazon paid £20 million ($AUD38 million) to settle allegations that it violated children’s privacy rights with its Alexa voice assistant. 
• Wells Fargo Bank paid $US1 billion ($AUD1.5 billion) to settle accusations of defrauding shareholders.
• Fox paid $US787.5m ($AUD1.2 billion) to settle a defamation case brought by Dominion Voting Systems, and still faces a similar defamation action by voting machine maker Smartmatic.

Meantime, some shareholders are striking back. In the wake of the Dominion settlement, Fox shareholders have launched two separate law suits claiming the company turned a blind eye its news channel telling lies about the 2020 election.

This follows past shareholder derivative claims against News Corp (in a previous incarnation), which led to a $US90 million ($AUD135 million) settlement in 2017 over the board’s handling of sexual harassment at Fox News, and a $US139 million ($AUD208 million) settlement by the board in 2013 over a phone hacking scandal at London tabloids. It was reported both were funded by insurance policies.

When numbers get this big it’s almost like Monopoly money. Yet these are the true costs either of failed risk assessment or deliberately ignoring known risks until you get caught.

Some of these massive corporates are regarded as “too big to fail” and the reputational damage may be superficial. But that’s no lesson for the rest of the business world, where such wrongdoing would more likely trigger a genuine crisis.

In fact a survey by CS&A and PR News found that more than half of the senior and middle managers who responded chose “ethics and compliance” as the most likely crisis to affect their industry, ahead of major accidents, product/service quality issues, mismanagement, cyber-attacks and other crisis risks.

That’s the real lesson for communicators and crisis managers everywhere. Corporate wrongdoing is a major crisis risk and potentially a massive reputational and financial cost.