Tag Archives: stock

CEO For An Hour Prompts PR Crisis

Corporate mergers are never pretty.

But the surprise ouster of the CEO several hours into the completed Duke Energy- Progress Energy mega-merger has all the signs of a particularly awful deal. Even as news spread of the completed $32 billion merger, creating the nation’s largest electric utility, a corporate takeover in the corner office was underway.

The deal originally called for Bill Johnson, the head of Progress to become the CEO of the merged companies, but shortly after the deal closed, Johnson took the job then promptly stepped down “by mutual agreement,” according to a press release. Johnson had held the title for several hours before being relieved, prompting “CEO for a day” headlines.

Taking over was James Rogers, the former CEO of Duke Energy, who most people assumed would step down once the merger became official. Corporate coups are not unusual, but one so quickly after a deal closes certainly raises eyebrows.

The fallout has been immediate. All of the good will built up over the past 18 months to convince shareholders and regulators that this was a good deal is gone. Several regulators are already launching investigations into the shuffle.

“This is the most blatant example of corporate deceit that I have witnessed during a long career on Wall Street,” John H. Mullin III, the former lead director of Progress Energy, said in a pointed letter to The New York Times.

Analysts are looking at cutting ratings of Duke, a sure sign that stockholders should be worried. On Friday, the traditionally steady stock dropped 3.5 percent, and S&P proclaimed, “The sudden shift in management raises concerns about effective corporate governance, successful handling of the anticipated merger integration and the ongoing effective management of pending challenges that face the combined entity.”

Compounding the news is the deafening silence by the newly merged company. The New York Times reported that Duke’s spokesperson is refusing to comment on the board’s change of heart, and no one is available for interviews.

From a crisis communication perspective, bunker mode may be the smartest tactic since even the best crisis plan would not have predicted this scenario.

The rough week does have a chance to get better, with Rogers expected to speak to employees about the merger on Tuesday. Instead of focusing on looking forward, employees will likely want some answers about what happened and if it is an indication of the what’s to come.

It is a good opportunity to offer some insight into the post-merger coup, take some lumps and focus on the future.

(This post also appears on Ragan’s PR Daily.)

It’s not their fault, but companies still have to apologize for massive data breach

It was the data breach heard around the world.

Millions of people’s email information was stolen in a massive security breach after hackers made their way into email marketing firm Epsilon Data Management’s systems. They only got names and email addresses – but just enough information to use to trick people with “phishing emails.”

It has been a test in reputation management for some of the biggest and most public companies, including Best Buy, Citi Bank, Verizon and Target. While they didn’t really do anything wrong, they are still faced with answering to their customers. Passing the buck doesn’t really work in this instance, after all, they hired the company that lost the information.

The swank Ritz-Carlton Hotel Company sent an email to its customers informing them of the breach, saying very contritely: “We take your privacy very seriously. The Ritz-Carlton has a long-standing commitment to protecting the privacy of the personal information that our guests entrust to us. We regret this has taken place and apologize for any inconvenience.”
They also created a FAQ page to further address concerns by their customers. Aside from the FAQ, most of the companies used a similarly worded response.

For Epsilon’s part, it offered an apology from its president Bryan J. Kennedy: “We apologize for the inconvenience that this matter has caused consumers and for the potential unsolicited emails that may occur as a result of this incident. We are taking immediate action to develop corrective measures intended to restore client confidence in our business and in turn regain their customers’ confidence.”

Even Epsilon’s parent company, Alliance Data, offered a statement from its CEO Ed Hefferman: “We fully recognize the impact this has had on our clients and their customers, and on behalf of the entire Alliance Data organization, we sincerely apologize.”

Epsilon’s first release came out last Friday, and was a paltry 61 words, saying a “subset” of customers’ data was exposed. Thankfully, a more complete release came out on Wednesday that was about 550 words and fortunately did not use the term “subset.”

Waiting didn’t seem to hurt ADS’s stock price. On Friday, it closed almost unchanged from a week ago, after slipping about $5 when the media caught wind of the story on Monday.

Unlike the Ritz, it did not include a FAQ, although that would have been helpful. And given the massive number of people affected, a separate web page addressing the issue would have made sense.
In this instance, the more information the better, with regard to repairing or preserving reputations.

~ Gil Rudawsky