GPSolo Magazine - March 2005

Business and Commercial Law

Hard Tale Of A Soft Drink: Dealing With A Corporate Crisis (It’s The Real Thing)

It started on June 8, 1999, at a school in Bornem, Belgium, when children complained of feeling sick after reportedly having drunk Coca-Cola. The news spread quickly throughout the community. Two days later, the crisis resurfaced when children in Brugge reported feeling ill after drinking Coca-Cola. Over the next few days, the crisis exploded, as children at other schools throughout Belgium made similar complaints. The Belgian government instructed Coca-Cola to withdraw all of its products from the market and prohibited any distribution of Coca-Cola products until government approval was obtained.

Coca-Cola was out of the Belgium market and was receiving inquiries from government regulators in all European countries and numerous countries worldwide. The situation became the most serious in Coca-Cola’s more than 100 years. While some of the product had a slight off odor, repeated tests found nothing that could explain the outbreaks of illness. In fact, many of the students who reported being ill never even drank a Coca-Cola product. Instead, a number of external factors combined to create the environment for a “mass sociogenic illness.”

Perhaps the most significant of these factors was that Belgium was in the middle of a food crisis; key components of its food supply had been contaminated with dioxin, a known carcinogen. At the time of the Bornem incident, the government had recently ordered most meat, eggs, and milk taken off store shelves because of the contamination, but the government had not gone public with the information. When word got out, the public was outraged, and the controlling government was voted out of office just five days after the first child went home sick.

Fortunately, the Coca-Cola story had a happy ending. The key was a crisis management system. How well a company handles a crisis when it occurs depends on one absolutely critical factor—preparation. Preparation is to crisis management what location is to real estate. In the process of dealing with this crisis, Coca-Cola learned even more about what to do and what not to do in the future.

As vice president and general manager of Coca-Cola Enterprises, West Central Region, I offer the following thoughts on our experience:

Stealing time. Efficient use of time is absolutely critical. The best way to maximize time in a crisis is to prepare ahead of time. How much preparation is needed will depend upon such factors as the company’s size, financial situation, industry, and location. I would suggest, though, that companies make their decisions with consideration of the effect that a serious crisis could have on their businesses.

The methods are as diverse as the companies using them. Many “desktop” exercises, which posit a set of facts and require individuals to demonstrate their crisis readiness by responding to specific questions, are excellent. Because desktop exercises can be purchased, they are relatively quick and easy to administer. Targeted group discussions, during which relevant employees suggest and critique various approaches to crisis management, are essential.

While these and other methods can be productive, the more realistic the exercise, the more effective it will be. For example, in addition to giving employees a fact situation in advance of meeting, we sometimes provide the exercise unexpectedly to the employees to handle immediately—or even better, do not reveal that the exercise is an exercise, and thus require the employees to respond to a quasi-realistic situation.

Managing time is critical to effective crisis management, and preparation—particularly realistic preparation—is the most effective way to steal time when crisis strikes.

The C team. It is essential to have a set procedure in place and to have practiced it. Designate the individuals who will comprise the crisis management team. There should be a small core team—ours is made up of legal, public affairs, operations, and one management person. That team must meet regularly—I suggest at least once a quarter. Specific rules and accountabilities must be debated and agreed down to the smallest detail, with full contingency plans around the clock.

You should have a list of people, with 24/7 contact information, from which a crisis management team can be quickly assembled. The list also may designate different people or groups of people by location, although I would suggest that local management not be routinely appointed to the crisis management team, as they may be too close to the issues. Also, local management must run the business while the crisis runs its course.

Counsel’s role. Counsel who are able to balance the company’s legal needs with the company’s public relations, business operations, and other needs, which may be more crucial in crisis situations, are vital to success. The parameters of the lawyers’ role can be described negatively: Don’t be overly lawyerly. The reality is that crisis situations are almost always public relations dogs with legal tails, not vice versa. Although lawyers should identify legal issues and provide options for resolving them, in a crisis situation lawyers must be flexible. They need to be advisers to the company.

This may mean taking a course of action different from what traditional “sound” legal analysis would advise in a vacuum. In the Belgium crisis, for example, we decided to assume the risks of disclosing more information than we were required or normally would have preferred to disclose because it helped our public and governmental relations efforts. I strongly encourage general counsel to participate in media training and preparation. Get your message to the public before someone else does it for you.

Be consistent. While getting your message to the public is a must, providing more than one message is a “must not.” The company’s crisis management team must speak to the public through one voice, which is one reason a small core team is so important. Failure on this front can lead to the dissemination of inaccurate or inconsistent information, which in turn will diminish the company’s credibility.

Speaking through one voice is particularly important for large companies involved in complex crises. That is so because the company may have many people in many different locations working on different aspects of the crisis at the same time. And you must speak to multiple audiences, too. Whatever the situation, companies need to stress on the front end the importance of speaking through one voice, because addressing communication problems on the back end may be too late.

Ask for help. In any crisis, there will be key players outside the company who can help resolve the crisis successfully. Potential helpers may include government officials, members of the media, executives from similarly situated companies, information technology personnel, medical personnel, lawyers, insurance agents or brokers, and construction personnel. Although the circumstances will dictate which of these helpers should be called, the team must have identified, contacted, and engaged the right people prior to the event. Advanced planning and relationship building are crucial.

Crisis will strike every company eventually. When it does, the company must manage it, and the extent of the company’s crisis preparation will determine the success or failure of its efforts.

John R. Parker Jr. is vice president and general manager of Coca-Cola Enterprises, West Central Region. He can be reached at johnparker@na.cokecce.com.

For More Information about the Business Law Section

- This article is an abridged and edited version of one that originally appeared on page 10 of Business Law Today, July/August 2004 (13:6).

- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.

- Website: www.abanet.org/buslaw/.

- Periodicals: Business Law Today, bimonthly magazine; The Business Lawyer, quarterly law journal.

- Books and Other Recent Publications: Corporate Director’s Guidebook, 4th ed.; The Portable UCC, 4th ed.; The Portable Bankruptcy Code & Rules, 2004 ed.; Fund Director’s Guidebook, 2d ed.; Guidebook for the Directors of Nonprofit Corporations, 2d ed.; Managing Closely Held Corporations: A Legal Guidebook; Prototype Limited Liability Partnership Agreement; Model Asset Purchase Agreement with Commentary; Model Business Corporation Act, 2002 .

 

 

 

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