South Korean President Mired in Scandal

With a dismal 4% approval rating, South Korea President Park Geun-hy is facing possible impeachment. The country is outraged, and people are calling for her resignation. The trouble involves the president's long-time friend, Choi Soon-sil, who was just indicted for fraud and abuses of power.

The Washington Post describes Park's relationship with Choi:

A famously aloof person, Park is accused of relying on Choi for everything from policy advice to wardrobe choices, instead of seeking counsel from her aides. Choi, the daughter of a shamanistic cult leader, is accused of exploiting those ties to raise money and win favors for herself and her family.

Choi used her influence to get companies to "donate" $70 millions; business leaders felt if they didn't contribute, they would be subjected to audits or other actions taken by the government. The prosecution for Choi determined that Park was heavily involved.

According to The Washington Post, the protests are the largest the country has seen since 1987, when South Korea democratized.

Image source.

Discussion Starters:

• What parallels do you see between this story and recent company scandals?
• How should we decide when it's time for a country or a company president to resign? Is it Park's time?

JPMorgan Found Guilty of Hiring Chinese Execs' Children

JPMorgan Chase will pay settlements worth $264 million for hiring the children of Chinese executives in exchange for business. A three-year investigation found that the hires constitute bribery, and five more banks are under investigation.

An SEC press release describes the findings:

According to an SEC order issued today, investment bankers at JPMorgan's subsidiary in Asia created a client referral hiring program that bypassed the firm's normal hiring process and rewarded job candidates referred by client executives and influential government officials with well-paying, career-building JPMorgan employment.  During a seven-year period, JPMorgan hired approximately 100 interns and full-time employees at the request of foreign government officials, enabling the firm to win or retain business resulting in more than $100 million in revenues to JPMorgan.

"JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions on their own merit," said Andrew J. Ceresney, Director of the SEC Enforcement Division.  "JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative."

A company statement is nowhere to be found. The major news articles don't include a company quotation, and neither the Press Releases or News and Announcements sections of the JPMorgan website list a response. 

According to a statement by the U.S. Department of Justice, the company has taken some internal action:

JPMorgan APAC also took significant employment action against six employees who participated in the misconduct resulting in their departure from the bank, and it disciplined an additional 23 employees who, although not involved in the misconduct, failed to effectively detect the misconduct or supervise those engaged in it. 

Discussion Starters:

• How does this happen inside an organization? Consider who is involved in hiring decisions-sometimes a lot of people.
• Should JPMorgan make a statement about the settlement? Complete an audience analysis before you decide, and consider why the company leaders might choose to stay silent.

Marriott CEO's Letter to Trump

Marriott CEO Arne Sorenson is the latest company executive to write about the election results. In an open letter on LinkedIn, Sorenson offers some leadership advice.

The letter starts with Sorenson's views about government's role:

"The government has no business in our bedrooms – or our bathrooms. Everyone, no matter their sexual orientation or identity, has a right to live without interference in their private lives. Similarly, everyone, no matter their sexual orientation or identity, gender, race, religion disability or ethnicity should have an equal opportunity to get a job, start a business or be served by a business. Use your leadership to minimize divisiveness around these areas by letting people live their lives and by ensuring that they are treated equally in the public square."

Sorenson then focuses on three areas: "infrastructure, immigration reform and tax reform." As a hotel manager, Sorenson clearly is concerned about potential reductions in global travel and talent. He also encourages a more realistic approach for immigrants who are already in the U.S.  

Discussion Starters:

• Why do you think Sorenson chose an open letter on LinkedIn as the medium for his message? What are some alternatives?
• What principles of persuasion, discussed in Chapter 7 of the book, does Sorenson use? Try to find examples of logos, pathos, and ethos.
• How does Sorenson's role as the CEO of Marriott influence his positions? Which of his suggestions would benefit hotel companies?
• Should Trump respond? If so, how, and what should he say?

Grubhub CEO: Agree or Resign?

The CEO of Grubhub had a tough message for employees who disagree with his anti-Trump sentiment: "you have no place here." After the election, Matt Maloney wrote an email about tolerance and inclusion. He expressed his disappointment in Trump's election, particularly his "demeaning, insulting and ridiculing minorities, immigrants and the physically/mentally disabled" and his "nationalist, anti-immigrant and hateful politics."

He went a step further at the end of the email:

"If you do not agree with this statement then please reply to this email with your resignation because you have no place here. We do not tolerate hateful attitudes on our team. I want to repeat what Hillary said this morning, that the new administration deserves our open minds and a chance to lead, but never stop believing that the fight for what's right is worth it."

Media reports and social media responses interpreted Maloney's message as a threat: anyone who voted for Trump should resign.

Maloney has responded that his email was misinterpreted:

"I want to clarify that I did not ask for anyone to resign if they voted for Trump. I would never make such a demand. To the contrary, the message of the email is that we do not tolerate discriminatory activity or hateful commentary in the workplace, and that we will stand up for our employees."

This distinction is important; otherwise, the company may be discriminating against people based on political views.

Discussion Starters:

• Read Maloney's full message to employees and his statement. How do you interpret his original message and the explanation?
• Should Maloney have sent the email to employees? What are the benefits and risks to the company and to him personally?
• Could Maloney have revised the email to avoid the controversy? How so?

Wells Fargo's New Commercial

Wells Fargo is trying to rebuild its image after facing the scandal that it opened accounts for people who didn't request them and weren't aware they had them. Until now, we heard little from the company, except an email to some customers and a full-page ad with plans that seemed quite basic.

A new, short commercial focuses on three points: fully refunding those impacted, proactively sending new account confirmations, and eliminating product sales goals. 

These actions are a bit more specific than what has been communicated in the past. However, a skeptic like me might say these steps are still the bare minimum that the company can do for customers. Also eliminating product sales goals, which arguably caused the trouble because they were overly aggressive, should have been done years ago, particularly now that we know employees had reported issues but were ignored or retaliated against.

Discussion Starters:

• Assess this commercial. Who are the primary and secondary audiences? What are the communication objectives? How well does the company achieve them?
• Consider the language choices. The three actions aren't quite parallel. What other changes could be made?
• What else should Wells Fargo do at this point to rebuild its image?

Christie Associates Found Guilty

Two former associates of NJ Governor Chris Christie were found guilty of causing traffic problems for political gain. In what has been called "Bridgegate," Bridget Anne Kelly and Bill Baroni conspired to close lanes on the George Washington Bridge in 2013 as retaliation against the mayor of Fort Lee. At the time, Kelly was Christie's deputy chief of staff, and Baroni was the deputy director of Port Authority. Previously, two other aides admitted guilt in relation to the scandal.

The most incriminating piece of evidence was an email exchange between Kelly and David Wildstein, who leaked the plan. The message is clear: "Time for some traffic problems in Fort Lee."

In a statement released after the verdicts, Christie says he's "saddened," but he continues to maintain his innocence.

Christie reiterated this point during an interview with CBS News.

But the verdict is bad news for Christie-and possibly for Donald Trump. On the stand during her trial, Kelly said that Christie knew about the plan, and text messages from another aide said he "flat out lied." Trump had named Christie to lead a transition team should he become president, and Christie is actively campaigning for Trump in these last days before the election.

Discussion Starters:

• Does this verdict hurt Christie's chance of maintaining his innocence? Why or why not?
• Assess his statement to the press. How effectively does he stay clear of the case and verdicts?
• What, if anything, should Trump do at this point? He didn't choose Christie as his vice presidential running mate, but he's clearly a Christie fan.

AT&T Defends Time Warner Deal

AT&T is planning to acquire Time Warner, and it's already facing skepticism. Critics say the deal will increase prices and reduce consumer choice. But AT&T CEO Randall Stephenson argues that they are trying to reduce prices, increase quality content, and increase innovation, for example, by creating new ad models. He promises to be a "head-to-head, nationwide competitor with the cable ecosystem."

In a press release, Time Warner CEO Jeff Bewkes' quote starts with enthusiasm about shareholders: "This is a great day for Time Warner and its shareholders." He goes on to discuss innovation:

"This is a natural fit between two companies with great legacies of innovation that have shaped the modern media and communications landscape, and my senior management team and I are looking forward to working closely with Randall and our new colleagues as we begin to capture the tremendous opportunities this creates to make our content even more powerful, engaging and valuable for global audiences."

Whether the deal would stifle competition concerns both Republicans and Democrats. Donald Trump said, "As an example of the power structure I'm fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few." And Bernie Sanders tweeted, "The administration should kill the Time Warner/AT&T merger. This deal would mean higher prices and fewer choices for the American people."

Discussion Starters:

• How well did the AT&T CEO address concerns about the acquisition? What principles of persuasion did he use in the interview?
• Read Time Warner's press release. How consistently are the two companies speaking about the deal?
• What's your view? Do you think the acquisition would be bad for consumers as some people fear?

NFL's Image Problem

The NFL's image is further damaged by a New York Times article today titled, "N.F.L. Shows It Doesn't Really Care About Domestic Violence." The piece starts by highlighting declining viewership, for which the league blames the current election. Certainly, people are sensitized to sexual assault incidents, but the NFL isn't helping itself:

"Yet again, in the case of Giants kicker Josh Brown, the league has shown that it could not care less about women and really, really doesn't want to call out its players for doing bad things to them."

Tough words. But the Times explains that Brown "was charged with assaulting his wife" "more than two dozen times." After investigating the case for 10 months, the NFL decided to suspend Brown for only one game.

The Times also said the league blamed the victim: "Brown's wife had failed to cooperate, the league said, and that's why its investigators couldn't get to the bottom of what he had done."

People are voicing their dismay on Twitter, with the second tweet here retweeted almost 2,000 times.

Image source.

Discussion Starters:

• What's your view of the Times' headline: overstated, unfair, spot-on, or something else?
• To what extent do you think these assault issues are causing declining viewership?
• What should the NFL do to restore its image?

Communications About the Outage

The latest cyberattack left Netflix, Spotify, Amazon, Etsy, and other sites spinning and apparently deciding how much and what to communicate to users. Issues at Dyn, a host company, affected the others, and Dyn was communicating regularly during the outage.

Amazon, for example, seemed to communicate nothing at all in its press releases, on its blog or on its Twitter feed: all highlight company activities and products for Halloween.

Discussion Starters:

• Why would Amazon not communicate about the outage? Do you think this was a good decision? Consider the technology impact and responsibilities.
• Assess Dyn's communication. This isn't the traditional apology. How well does it work? Consider the audience and communication objectives in your response.

Samsung Trying to Control the Damage

Samsung is dealing with a tough situation: batteries in the Galaxy Note7 have been causing fires. Warnings to turn off Samsung phones are heard on many flights, including mine to Denver this weekend. As the BBC reports, "that sends out a negative message about your products beyond even your own customers."

The company handled the initial reports well but lost favor when its replacements overheated or burned. The BBC article explains the growing issue for Samsung:

"The trouble is that even one phone which catches fire makes for startling pictures and a whole heap of consumer anxiety. Samsung may soon have to decide whether to cut its losses and abandon the Note 7 before it does more damage to its brand."

The New York Times also reported on Samsung's poor crisis communication:

"But for people to see those words, they had to click a link at the top of Samsung's home page with the not-so-urgent label 'Updated Consumer Guidance for the Galaxy Note 7.' As of Tuesday afternoon, the instructions had not been posted to Samsung's Facebook page or the company's Twitter account.

"For some who work in crisis management, it was a baffling and overly passive way for the South Korean electronics giant to deal with a prominent problem that has worsened in the last month."

On its website, Samsung posted this message: 

Samsung Will Ask All Global Partners to Stop Sales and Exchanges of Galaxy Note7 While Further Investigation Takes Place

on October 11, 2016

 

We are working with relevant regulatory bodies to investigate the recently reported cases involving the Galaxy Note7. Because consumers' safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note7 while the investigation is taking place.

We remain committed to working diligently with appropriate regulatory authorities to take all necessary steps to resolve the situation. Consumers with either an original Galaxy Note7 or replacement Galaxy Note7 device should power down and stop using the device and take advantage of the remedies available.

Discussion Starters:

• Look at Samsung's recent news statements about this situation. How well has the company handled communication on its website?
• How, if at all, do you see this issue potentially reflecting poorly on the mobile industry? What should other phone manufacturers do?

Nestle Recalls Ice Cream Cones

Nestle is recalling Drumstick ice cream cones because of Listeria concerns. The company posted a recall notice on its website:

After the introductory paragraph and explanation of product types recalled, the press release provides a Q&A. Questions include where Listeria was found (on equipment, not on the product itself), symptoms of Listeria, how the problem will be prevented in the future, etc.

The list includes two bold questions:

• "Why did it take so long for you to find this?"
• "This sounds like another Blue Bell situation with listeria in ice cream. Is your situation the same as theirs was?"

In response to the first question, the company wrote, "Unfortunately, an error occurred in logging receipt of the test result. We discovered the error during a subsequent review of records. As soon as we identified the error, we notified FDA and initiated the recall."

To the second question, the response is, "No. Each recall has its own unique facts. Except for the coincidence that our recall involved both ice cream and listeria, our situation is much different from Blue Bell's in a number of significant ways, including: (1) we have no listeria findings in the ice cream itself (just the equipment); (2) we have only one product line affected; (3) we have only one facility affected; and (4) we self-identified this event and took precautionary steps to recall product."

Discussion Starters:

• The two questions identified here are risky. Explain the risks and why the company may have chosen to include the questions.
• How do you assess the question about Blue Bell? How does the response help, instead of hurt, Nestle's image?

Iowa State President Used University Plan for Personal Trips

Iowa State President Steven Leath apologized to the university student government for using the school's airplane for personal reasons. Although university administrators said it wasn't true, an Associated Press investigation found that he used the plan to travel to his mountain home in North Carolina, take fundraising trips with a celebrity bowhunter, and send family to NCAA games. The plane was damaged during a landing, and Leath paid $15,000 to cover the expenses. Some reports say Leath traveled with his wife and others for personal reasons on the school's larger plane as well.

Leath told the student government, "I'll be different. We will be very mindful of what we do going forward. I've learned my lesson." The student newspaper also reported an interview with Leath: "I regret all of this," he said. "I don't like to bring any negative image to the university. The fact that there has been all kinds of articles written about this makes me sad."

The news got out when Leath's trips were inadvertently posted on the school's website. They have since been taken down. 

Image source.

Discussion Starters:

• Leath maintains that he didn't violate school policy. Read the school newspaper report and discuss your opinion.
• Leath did reimburse the university for some of the travel. What else, if anything, should Leath do?
• What should the university trustees do?

News Conferences About Hurricane Matthew

After wreaking havoc in Haiti and Cuba, Hurricane Matthew is making its mark on Florida, and politicians are encouraging people to leave the area. One day apart, Florida Governor Rick Scott and Florida Senator Marco Rubio were in front of the press.

Governor Scott emphasizes the potential loss of life and discourages people from focusing too much on the storm path. He wants people to evacuate: "We are preparing for the worst, hoping for the best, and not taking any chances." 

Senator Marco Rubio echos a similar theme: "Don't focus so much on the cone as you should on the fact that here, over the new few hours, the winds are going to pick up, the rain is going to come in, and you need to be prepared for what that means."

Discussion Starters:

• Why don't people leave when they're told to evacuate during a storm?
• How well are Scott and Rubio making their points? What else could convince people to leave a vulnerable area?

How Naked Is Naked Juice?

Is Naked juice really "healthy" and worth the money? A lawsuit filed by the Center for Science in the Public Interest says Pepsi is misleading consumers with some of its claims.

On the packaging, Pepsi promotes the juice as having "no added sugar" and repeats words like kale, when the truth tells a different story. A 15-ounce bottle of Naked contains eight teaspoons of sugar; compare that to a 16-ounce soda, which has about 12 teaspoons. The company's Kale Blazer certainly emphasizes kale on its label, but the primary ingredients are apple and orange juice, cheap products that don't justify the price consumers pay, according to the lawsuit. 

In addition to these misleading statements, the CSPI is faulting Pepsi for not labeling the drinks, "not a low-calorie food," which is required by the FDA when consumers could think otherwise.

Pepsi has responded to the lawsuit:

"Any sugar present in Naked Juice products comes from the fruits and/or vegetables contained within and the sugar content is clearly reflected on label for all consumers to see. Every bottle of Naked Juice clearly identifies the fruit and vegetables that are within."

This isn't Naked's first challenge. In 2013, Pepsi paid $9 million for calling the product "all natural." 

Discussion Starters:

• Do you agree more with the lawsuit or with Pepsi's response?
• What's the difference between sugar from fruit and added sugar? How much does this distinction matter?
• If the lawsuit is successful, how should Pepsi change the labels on its Naked products?

More Trouble for Wells Fargo

In what The Wall Street Journal called "another round of blistering criticism," Wells Fargo CEO John Stumpf faced the House Financial Services Committee on Thursday. If Elizabeth Warren didn't challenge Stumpf enough last week during the Senate Banking Committee Hearing, Chairman Jeb Hensarling stated early on, in his opening statement, "Fraud is fraud. Theft is theft."

He also said, "All culpable individuals must be held accountable." Earlier in the week, Stumpf was criticized for firing low-level employees but retaining managers. For the first time, Stumpf said that "10% or more" of the 5,300 employees fired were branch managers, but that didn't seem to soothe the committee members. Others expressed enthusiasm for the $41 million clawback (money recovered from Stumpf's compensation), said he should be fired, and encouraged the break-up of Wells Fargo.

Jeff Sonnenfeld, A Yale University School of Management professor, called Stumpf "completely unprepared" and called the scene "political theater."

To make matters worse for Wells Fargo, the bank will pay $24 million in settlements for "allegedly improper repossessions of cars belonging to members of the U.S. military."

Discussion Starters:

• How well did Hensarling introduce the hearings? Did you find him too harsh, right on target, or something else?
• Sonnenfeld also says Stumpf wasn't prepared for questions. Do you agree with his assessment?
• What were Stumpf's strongest and weakest points?

Italy Can't Seem To Get "Fertility Day" Ads Right

Italy has stepped into another quagmire of controversy with its second "Fertility Day" ad. To encourage births, the first ad showed a woman with a timer, implying that her child-bearing days are numbered. The caption read, "Beauty has no age. But fertility does." People took offense: some felt it was insulting to people who had trouble conceiving; others felt it encouraged people to procreate regardless of their situation (e.g., no partner or job). The latter may particularly sting because Italy was a high youth unemployment rate: 35%.

The newest ad is deemed racist. Two white couples are featured at the top of a brochure photo, looking happy and healthy. Below this picture is a group of people, including a Black person, smoking marijuana.

Oddly, the bottom photo is similar to one used by Maricopa County Attorney's Office to discourage heroin use in Arizona.

Contrasting people of different races is never a good idea. In a public service announcement earlier this year, the American Red Cross was similarly criticized for showing White people behaving well and people as color behaving badly around a swimming pool.

At first, the Italian health ministry denied the criticism: "The photos represent a homogeneity of people, as is the multi-ethnic society in which we live. Racism is in the eye of the beholder." But the group has since come around: the pamphlet has been removed, as had the first ad.

Italy has the lowest birth rate in the EU, so having a campaign is understandable, but the approach isn't working.

Discussion Starters:

• What's your view of the ad? Do you find it offensive? Can you see how others might?
• Compose a different ad that might help Italy meet its fertility goals.

Offensive 9/11 Mattress Company Ad

What were they thinking? Miracle Mattress in San Antonio, TX, produced a commercial advertising twin mattress prices for 9/11. At the end of the ad, two employees fall into "towers" of mattresses, and the lead actor says, "We'll never forget."

Understandably, people were outraged. This reminds me of the golf club that used a similar promotion in 2013. Also, this year, Coca-Cola took down a display of soda cartons at a Florida Walmart.

The company owner posted an apology and announced the store's closing on Facebook. He said elsewhere that he was unaware of the ad created by his employees.

Discussion Starters:

• How are these promotions different from, for example, Memorial Day sales?
• Assess the owner's apology. What principles of persuasion does he use? What recommendations do you have for improving the message?
• In this post, the owner didn't mention that he was unaware of the ad, as he did in other sources. What's your view of this choice?

Wells Fargo Reaches Settlement Agreement

Wells Fargo is taking action after the discovery that bank employees opened millions of fake checking and credit card accounts. Employees opened accounts in unsuspecting customers' names so they could earn credit for the sale. The bank benefited from fees people paid on accounts they never used.

In addition to paying a $100 million settlement fee to the Consumer Financial Protection Bureau, the bank has fired 5,300 employees over the past few years.

The company issued two major communications related to the situation: 

• A press release
• An email to employees

In addition, Jim Cramer interviewed CEO John Stumpf on Mad Money:

Image source.

Discussion Starters:

• Compare the two Wells Fargo statements. How well does the company tailor these messages to primary and secondary audiences?
• How can customers miss paying fees? What is their responsibility, and what is the company's? Consider visual displays of bank statements in your response.
• How well does Stumpf respond to Jim Cramer's questions? Which are his strongest and weakest arguments?

Wells Fargo Apologizes for Ads Targeting Teens

Wells Fargo made the news twice this week. In addition to a big settlement for creating fake accounts, the company has apologized for an ad targeting teens.

Several actors and other artists have expressed their disappointment in the company's promoting science over the arts. The Irregular Times was one of many critics of the company's campaign:

Wells Fargo will teach teens that the path to financial prosperity just so happens to come through the financial services offered by Wells Fargo itself. That's no coincidence. Teen Financial Education Day is really just a sales gimmick, at which Wells Fargo will teach the children of working Americans that they can't have the privilege of careers in the arts.

Wells Fargo posted an apology on Twitter.

Discussion Starters:

• A Forbes article reminds us that science isn't something you just do; it's good to have "talent and ability" for the field. How do you see this factoring into the ad's logical failure?
• The Forbes writer also insults the "marketing guru" who developed the ad campaign. What's your view? Should the company have known better, or is this a good attempt to advertise to teens, even if the results were appreciated?

JetBlue Temporarily Loses a Child

A woman paid $100 for JetBlue to safely escort her five-year-old son from the Dominican Republic to JFK airport in NYC. But her boy was sent to Boston, in exchange for another boy who landed in JFK., according to The New York Times. JetBlue issued a statement:

"On August 17, two unaccompanied children of the same age traveling separately from Santiago, Dominican Republic - one to New York JFK and one to Boston - each boarded a flight to the incorrect destination. Upon learning of the error, our teams in JFK and Boston immediately took steps to assist the children in reaching their correct destinations. While the children were always under the care and supervision of JetBlue crew members, we realize this situation was distressing for their families."

The JetBlue representative also said, "We are also reviewing the incident with our leadership and Santiago airport team to prevent similar situations from occurring in the future." The company refunded the child's ticket and gave the family $2100 is vouchers for future flights.

On a webpage, Families in Flight, JetBlue gives parents tips for traveling with children, including a page with pick-up and drop-off requirements for "kids flying solo."

Image source.

Discussion Starters:

• How did JetBlue handle the situation? Consider the statement and compensation. Should the company have said or done something differently?
• Since this writing, we haven't heard anything about the other boy, which may start a new round of news stories. What, if anything, should JetBlue say at that time? The company should be preparing for it.