How and Why Scandals Follow Companies – and What to Do about It

May 19th, 2011

Today’s sex scandal news is not about DSK, but rather Munich Re, a German insurance conglomerate that’s got quite a bit on its hands… or wrists?  Turns out that company executives in 2007 hosted an orgy at a Budapest bath house where prostitutes wore color-coded bracelets indicating their availability for sex favors.

The company’s statement, four years later, rightly takes a stern tone and emphasizes that the party was “a serious violation” of company rules and “would not happen again” – definitely a smart crisis PR move.  But one of the more amazing aspects of this event is that it was documented in a company newsletter … in 2007!  So what does this mean in the crisis management context?

Bad news will almost always leak.  Accounting no-no’s, insider trading, sweetheart deals, civil rights violations – no matter how old or in the past these events may seem in a company’s history, if they haven’t come to light they will.  The question is whether the company is prepared to handle the fallout.

It’s all about the present momentMunich Re’s statement cited above also explains that the executives who organized the event are no longer with the company.  That’s definitely a good point to emphasize, but the problem is that with big faceless corporations, the public perceives the brand as the key actor and not individual executives.  Even though a few bad actors are gone, the stink of the scandal will often remain.

Have your holding statement ready.  We’ve written extensively about the need for prior crisis management planning, and how holding statements are a critical factor.  If the event was chronicled in 2007, then Munich Re leadership presumably knew about it and thus had ample time to plan for negative media attention.

The best crisis management is often about prior planning, at least when your company has the luxury of time, so map the steps out before the spotlight’s on you.

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