Nestle Recalls Chocolate Powder

Nestle has voluntarily recalled its powder used to make hot chocolate because of a possible Salmonella risk. Although no illnesses have been reported, the company is taking precautions because its supplier of calcium carbonate, an ingredient in the mix, announced a recall.

On its website, Nestle posted this statement about the decision:

At the end of its recall notice posted on the FDA website, the company apologized:

"Nestlé is dedicated to the health and safety of its consumers. For these reasons, the company initiated this voluntary recall. We apologize to our consumers and sincerely regret any inconvenience created by this incident."

Discussion Starters:

• After reading the recall notice, would you avoid similar products, or are you convinced that this is an isolated event?
• As of this writing, Nestle hasn't posted anything on its Facebook page. Why do you think that is? Is that a good decision?

Raymour and Flanigan Updates Customers

Furniture store Raymour and Flanigan sent an email to update customers on how Hurricane Sandy is affecting operations. Appropriately, the email begins with empathy for those affected by the storm. 

 

But buried in the middle of the third paragraph is perhaps what many customers most want to know: "We will continue to do our best to respond to each and every inquiry and keep you informed." The company acknowledges, "We have received many calls, emails, and social media posts from our valued customers, inquiring about deliveries and when stores will be open again." Are many outstanding? Perhaps a separate email could be sent to people who are waiting for a response, (although the company does sound strapped for resources).

The company's Twitter feed seems disconnected from this email. Other than this one tweet, between October 29 and November 6, no other tweet mentions the storm or its impact on operations:

Discussion Starters:

• What similar emails did you receive from companies during the storm? How do they compare to Raymour and Flanigan's?
• What else, if anything, should Raymour and Flanigan tweet during this time?

Turnabout on NYC Marathon Decision

Hopeful NYC Marathon runners received the bad news: the 2012 Marathon has been cancelled. This reverses Mayor Bloomberg's decision announced during the week.

The initial decision to continue the marathon received harsh criticism, with New Yorkers concerned that resources needed to rebuild the city after Hurricane Sandy would be redirected to the event. Organizers of the marathon became increasingly concerned about divisiveness over the decision and announced a cancellation, after all.

George Hirsch, chairman of the board of Road Runners, which oversees the marathon said, "The marathon is about uniting the city. But all it was doing was dividing it. Is that what the New York City Marathon is all about? No, not at all."

In an email, the Road Runners organization explained the decision. The positioning is interesting and a topic of criticism on Twitter: organizers defend the initial decision and blame the media and controversy in forcing the decision:

It is with heavy hearts that we share the news that the 2012 ING New York City Marathon has been canceled.

The decision was made after it became increasingly apparent that the people of our city and the surrounding tri-state area were still struggling to recover from the damage wrought by the recent extreme weather conditions. That struggle, fueled by the resulting extensive and growing media coverage antagonistic to the marathon and its participants, created conditions that raised concern for the safety of both those working to produce the event and its participants. While holding the race would not have required diverting resources from the recovery effort, it became clear that the apparent widespread perception to the contrary had become the source of controversy and division. Neither NYRR nor the City could allow a controversy over the marathon to result in a dangerous situation or to distract attention from all the critically important work that is being done to help New York City recover from the storm. 

NYRR, in partnership with the Rudin Family and the ING Foundation, has established the "Race to Recover" Marathon Fund to aid New Yorkers impacted by the storm. Over $2.6 million has been raised, including a $1 million donation by NYRR. We are asking you to join us by making a $26.20 donation, or whatever you can afford, to help bring recovery and hope to those communities and families most affected. Proceeds will go to Hurricane Sandy Relief, administered by the Mayor's Fund to Advance New York City. You can also donate to the relief effort through NYRR's fundraising platform, CrowdRise, which includes the American Red Cross and other charities.

NYRR will redeploy the marathon resources and materials toward the recovery effort. We will share the details of this project as they are finalized in the days ahead.

We all recognize this has been a very challenging time in New York City that has impacted so many people, including you, our runners. Please know that this is one of the toughest decisions we have ever made, and that we deeply appreciate your support.

According to one New York Times article, the cancellation will cost the city an "immense" amount of money.

(Image source of the finish line before the marathon was cancelled, showing a fallen crane in the background.)

Discussion Starters:

• What's your view of the email from Road Runners? How well does it explain the decision, and how convincing is the rationale?
• What this the best decision for NYC? Why or why not?

Another Premature News Report: Dow Chemical

For the second time in two weeks, bad news was inadvertently released ahead of schedule. Although Dow Chemical had planned to announce 2,400 employee layoffs and 20 plant closings on Thursday morning with its quarterly earnings statement, the news went out as a draft Tuesday night.

On Dow Chemical's earnings conference call, Doug May, VP of investor relations, explained the mishap in his introduction:

"Good morning, everyone, and welcome. Thank you for joining us on such short notice and being flexible with your schedules. As you know, we issued our earnings press release yesterday evening, October 23. This was earlier than usual due to an inadvertent and premature release of our restructuring announcement. Both the restructuring release and the earnings release went out on Business Wire and were posted on the Internet on dow.com."

In this case, the market reacted favorably to the restructuring. However, for Google, in a similar situation last week, the result wasn't nearly as positive.

Google's intent was to release its disappointing third-quarter results after the closing bell, but the draft statement slipped out on at 12:30 p.m. with the text "PENDING LARRY QUOTE." CEO Larry Page briefly said on the earnings call, "I'm sorry for the scramble earlier today."

Google blamed its finanial printer, RR Donnelly:

"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization. We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT."

Google shares lost about 9% before trading was halted.

Discussion Starters:

• Why is it important for companies to coordinate disappointing market news, such as layoffs and quarterly earnings?
• What controls should a company have in place to avoid this type of situation?

RealNetworks Posts Internal Layoff Email to Facebook

Why wait for employees to forward internal messages to the press? RealNetworks founder and interim chief executive Rob Glaser has posted a layoff email to employees on Facebook.

Dear RealNetworks Team,

I'm writing to provide an update on the progress we've made over the past 8 weeks and to provide some context and information regarding the layoffs that are taking place today.

When I came back in as Interim CEO on July 3rd, I said we would focus on 3 things:

Reviewing and assessing all of our businesses and new initiatives,

Coming up with a go-forward Strategy for RealNetworks that would set us up to grow and thrive, and

Putting together a plan to stop burning cash and to return the company to profitability.

I also said we would move fast, have a bias towards action, and would work hard to complete all 3 of these efforts within 2 months.
After a lot of hard work by many people across the company and around the world, today I report to you that we have indeed achieved the 3 objectives we set out to work on beginning 8 weeks ago.

Very soon I will have a lot more to say about our collective assessment of our businesses & new initiatives, and about our go forward strategy. Specifically, we have scheduled a series of company meetings – both in Seattle and at our main offices around the world – for on or around September 6th. After these meetings I believe that each of you in attendance will walk away with a clear understanding of our strategies and excitement regarding where we're going.

Today I will discuss our plans to return the company to profitability -- in a way that will set us up for future growth & success.

As we mentioned on our financial results call on August 8th, our senior team has put together a plan to cut at least $45 Million of annualized costs. This plan has several aspects to it; one of the main ones is to streamline our operations and to do things more efficiently.

Unfortunately, a major part of this streamlining entails reducing our workforce from approximately 1140 people to about 980 people. We are doing this in two phases. The first phase, which begins today, involves laying off approximately 80 people, who are being given notice today.

The second phase, which will take place over the next 3 to 7 months, involves approximately 80 more people, who are being notified today that there is a specific future date when their current assignment will be ending. We hope to redeploy a number of these people when their current assignments end, but as of today don't know how many we will find positions for. These people are working on projects that will merge duplicate systems or otherwise make us more efficient.

I want to express my deepest gratitude to the approximately 160 people affected by today's announcement, and also my remorse that we have had to take these steps. You have all made major contributions to RealNetworks. We are grateful for everything you have done for our company and our customers.

I also want to express my appreciation to the approximately 980 people who are not directly impacted by today's actions, and to acknowledge that many of you are indirectly affected, because of the impact on your colleagues and friends.

Permit me to close on a personal note. When I came back into Real after having been away from day-to-day operations for 2 ½ years, I thought there was a pretty high likelihood that there would be a day like today. I knew it would suck for everyone, and indeed it does.

But I promised myself that if we did have to do a significant layoff, I would do everything in my power to make sure that when we did it we also knew where we were going. I wanted to be able to look everyone in the eye and tell them that we have a plan to succeed that I believed in from the bottom of my heart.

I feel like we are almost there. While we still have a few areas to work out, we have made great progress. I can honestly tell you today that we are at least 80% of the way to having such a plan for every major part of our company, and have line-of-sight on the final 20%.

This clarity on strategy, as you would expect, has significantly influenced how and where we are cutting costs, and where we are investing for the future. I look forward to discussing this further when we meet next week.

Rob

Glaser responded to a New York Times inquiry about his decision by saying that he will limit his Facebook posts to major company-wide messages. The few comments he's received on Facebook support his transparency.

Fortunately, the email also is well written and appropriate for a layoff message. And it's not the first. The New York Times reports that Glaser has been keeping employees informed throughout the process, so this email is no surprise.

Discussion Starters:

• How does Glaser balance emotional appeal and logical arguments in his email?
• How is the email structured? Does this work well for the message and audience?
• What do you think of Glaser's tone, particularly this line: "I knew it would suck for everyone, and indeed it does"?

Where's the Line Between Constructive Criticism and Meanness?

A negative New York Times book review has caused a fiery reaction on Twitter. William Giraldi's review of Inside and Signs and Wonders, two fiction stories by Alix Ohlin, includes these criticisms:

• "Alix Ohlin's sophomore effort yawningly announces itself as 'Inside,' a forgettable moniker that suggests everything and so means nothing."
• "Meet the four principal, cliché-­strangled Canadians whom Ohlin flies around like kites in a waning zephyr..."
• "Ohlin's language betrays an appalling lack of register - language that limps onto the page proudly indifferent to pitch or vigor."
• "William Gass once called this breed of abysmal writing 'the uselessly precise fact' - it's what you doodle when you need to fill a page but have nothing important to say. What then passes for wisdom in this novel? Nonsense clichés..."

Giraldi sums up his review: "Every mind lives or dies by its ideas; every book lives or dies by its language."

Although Giraldi got some support on Twitter, several tweeters found the review too harsh. 

 

Discussion Starters:

• Read the entire book review. What's your opinion of the author's approach and tone?
• Have you ever received feedback that you considered too harsh? What were the circumstances?

Lacoste Responds to False Coupon Code

Apparently, Lacoste had trouble with a fake coupon cope that was circulated online. Here's the CEO's email to one customer. What do you think of the response?

Dear Jason,

On July 12th, we became aware that an incredible LACOSTE discount code
was making the rounds in social media - a discount code that was not
authorized by LACOSTE. The code was deactivated by the company that
manages our website and fulfills our orders since they determined that the
discount code was procured by fraud, and they decided to cancel all
unshipped orders. You may receive an email notification to that effect
today, and we want to make sure you understand why.

Regardless of whether or not the code was authorized, the cancellation
of your order was not what we wanted, and we're very frustrated with the
situation - though not as much as you probably are.

Although we cannot undo the cancelled orders in our partner's system,
LACOSTE has every intention of honoring the single order you placed with
us. As a result, we would like to offer you a new (and fully
authorized!) $50 discount valid on any single order over $50. Below,
you'll see a unique code that's valid at http://shop.lacoste.com/ between
now and August 31st. Note that it can only be used once, so please
safeguard it.

Your unique code is: [omitted]

Thank you for your understanding and patience, and we apologize for any
inconvenience this has caused you. If you have any further questions or
concerns, please contact me directly at steve@lacoste-usa.com.

Best regards,

Steve Birkhold, President and CEO
LACOSTE USA

Discussion Starters:

• What principles of communicating bad news does Steve Birkhold use in his email?
• What is your assessment of the email? If you were the customer who received this, how would you feel?

AMD Reports Weak Revenue

As companies report their second-quarter earnings this week, chip maker Advanced Micro Devices (AMD) communicated its bad news: revenue is expected to drop by 11%. AMD's news release focuses on disappointing sales in China and Europe.

However, a writer for The Street criticizes AMD's analysis: "AMD blames its upcoming drop in revenue on just about everything out there, except its competition, Intel." While Dell and HP use AMD chips, Apple products switched to Intel a few years ago. AMD's news release is below:

"AMD (NYSE:AMD) today announced that revenue for the second quarter ended June 30, 2012 is expected to decrease approximately 11 percent sequentially.  The company previously forecasted second quarter 2012 revenue to increase 3 percent, plus or minus 3 percent sequentially.  The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company's Original Equipment Manufacturer (OEM) business.

"The company expects second quarter gross margin to be approximately in line with prior guidance. Operating expenses for the second quarter are expected to improve and to be approximately 8 percent less than prior guidance of approximately $605 million, a result of tightly controlled expenses in the quarter.

"AMD will report second quarter 2012 results after market close on Thursday, July 19, 2012.  AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) that day to discuss second quarter financial results and to provide information regarding expected third quarter results.  AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page at http://www.amd.com.  The webcast will be available for 10 days after the conference call."

Discussion Starters:

• Find two or three other sources that explain why AMD's earnings report is disappointing. What's your view of the reasons for declining revenue?
• If you agree with The Street's assessment, should AMD have been more forthcoming? What are the arguments for and against a more straightforward discussion of the Apple and Intel relationship?

Best Buy CEO Resigns

In the midst of an internal investigation about "personal conduct," Best Buy CEO Brian Dunn has resigned. The news was unexpected, although Best Buy has experienced declining sales, attributed to the access people now have to visit stores, compare prices, and then buy elsewhere. Two weeks ago, Dunn announced plans to close 50 stores and cut 400 staff.

A 28-year employee of Best Buy, Dunn was selected as CEO in 2009. Some said Dunn was a poor choice given the company's challenges: he has sales experience but lacks the knowledge and expertise to fix the deeper problems.

The conduct issue remains a mystery, and because Dunn resigned in the middle of it, we may never know the outcome.

In a news release about new leadership, Best Buy assured the public that the decision wasn't business-related:

"The board of directors of Best Buy Co., Inc. (NYSE:BBY) today announced that Brian Dunn has resigned as chief executive officer and director. There were no disagreements between Mr. Dunn and the company on any matter relating to operations, financial controls, policies or procedures. There was mutual agreement that it was time for new leadership to address the challenges that face the company."

At the same time, the company did acknowledge the investigation in a statement to the press:

"Certain issues were brought to the board's attention regarding Dunn's personal conduct, unrelated to the company's operations or financial controls, and an audit committee investigation was initiated. Prior to the completion of the investigation, Mr. Dunn chose to resign."

Focusing on business continuity, Best Buy's news release named an interim CEO:

"Director G. Mike Mikan has been named interim CEO to lead the company while a search for a new CEO is underway. Richard Schulze, the founder of Best Buy, continues to serve as chairman."

Read an update about the potential misconduct issue.

Discussion Starters:

• Analyze Best Buy's news release as a bad-news message. What principles does the release follow, and what principles does it not use? What is the rationale for these decisions?
• Evaluate the quotes in the news release by Dunn and Mikan. Do you find these reassuring?

New Yahoo CEO's Layoff Email

When Scott Thompson took the job as Yahoo's chief executive in January, he likely knew he had difficult work ahead of him. To compete for shrinking advertising revenue against Google and Facebook, Thompson has announced a refocus on Yahoo's core media and communications, platforms, and data.

With this new focus, Yahoo will lay off about 2,000 employees, roughly 14% of the company. Thompson's email to employees explains the decision and then gives the bad news:

 

Business communication students may find it interesting to compare Thompson's memo with  Yahoo layoff memos from the two previous CEOs:

• Jerry Yang, Yahoo's founder and CEO from January 1994 to January 2009: October 2008 and December 2008 memos

• Carol Bartz, CEO from January 2009 to September 2011: December 2010 memo

Discussion Starters:

• Thompson's email mentions "dignity and respect" twice. Does this represent a clever strategy, strong reinforcement, sloppy editing, or something else? How do you think employees might react to this phrase?
• Compare the CEOs' emails. Consider audience focus, tone, organization, writing style, and editing.
• Considering the different circumstances around each layoff, which memo do you think is most effective and why? 
• If you were consulting with a CEO prior to announcing layoffs, what principles would you advise that he or she use in writing an email to employees?

Accounting Study: Be Careful with Video for Bad News

A new study found a discrepancy in how managers perceived a CEO who announced financial restatements via video compared to text. After viewing messages in each medium, managers were asked to rate the trustworthiness of a CEO who announced changes. Published in the March/April issue of The Accounting Review,  the study suggests that companies needing to issue restatements should do so via video only if they take responsibility for the bad news. The authors explain:

"Announcing a restatement online via video is likely to benefit firms only when top management apologizes for the restatement and accepts responsibility by making an internal attribution for the error. When management apologizes but denies responsibility by making an external attribution, announcing a restatement online via video is likely to have unintended negative effects on investors."

The messages varied by only one sentence in the middle of the statement:

• "We are fully responsible for this error because we relied on the advice of our internal lease accounting expert when preparing our financial statements." OR
• "We are not responsible for this error because we relied on the advice of external lease accounting experts when preparing our financial statements."

According to the study, using video is risky, but there is an upside. Managers who watched the video gave the CEO a trustworthiness rating of 6.15 out of 7 for the first statement and a mere 4.0 for the second. Managers who read text of the statements gave similar ratings for both: 4.75 and 4.55, respectively.

This study had a professional actor play the role of the CEO. For real situations, corporate communicators likely will consider many other factors before choosing video or text, including how well the CEO will come across to an audience of investors.

For more detail, see the study, "Using Online Video to Announce a Restatement: Influences on Investment Decisions and the Mediating Role of Trust."

Discussion Starters: 

• What do you think accounts for the discrepancy between a video and text?
• What would you advise a CEO to do when he or she has to issue a restatement because of an internal error? Should he or she risk creating a video? What would factor into your decision?
• If a company has to issue a restatement because of an external error, should the CEO take responsibility as if it were an internal error in hopes of garnering more investor support? (Careful!)

Vassar Posts Acceptance Letter for Rejected Applicants

When 122 early-decision applicants logged onto Vassar's system to check their application status, they saw the good news: that they were accepted. But 76 were not. A test letter that a college spokesperson called a "system error" was mistakenly posted. Fortunately, even more of the 254 early-decision applicants hadn't seen the letter before the problem was caught.

On the website College Confidential, students posted their frustration:

• "Is it possible to be admitted and then 2 hrs later have admission revoked???"
• "It did the same for me: accepted at 4, reject at 5. I don't understand..."

Vassar sent an email to students to apologize for the error:

Catharine Hill, president of Vassar, also apologized:

"We are terribly sorry about the confusion and disappointment the erroneous information posted online caused the students. Our admissions process is a careful deliberation over several months, so it is so unfortunate to have this communication error happen at the end of that process for some of our early decision candidates."

 Discussion Starters:

• The mistake is far too common, with the University of Delaware and other schools making similar errors. How do you think this could happen, and how could it be avoided?
• Assess Vassar's apology letter. If you were a student affected by the mistake, would the email reassure you, or would you find it "lame," as one student said?
• Rewrite the apology email in your own words. How could you improve it?

Company Communications about the Costa Concordia Cruise Disaster

Here's a compilation of communications about the Costa Concordia cruise disaster so far:

• January 17: Statement from CEO of Carnival Corporation, parent company of Costa Cruises.

• January 16: Press conference with CEO of Costa Cruises. Transcript here. Watch the introduction:

• January 14 and 15: Statements from Costa Cruises (on its website).

• January 13: Audio of Italian coastguard telling the captain to "Get [back] on board" (with English subtitles). Transcript here. Audio from BBC with English dubbing:

• January 13: On-board announcement indicating "an electrical fault, which is currently under control" (video shot by a passenger).

Discussion Starters:

• How do you assess the timeline of the Costa and Carnival statements? What could have caused the delay in Carnival's statement? 
• Analyze each communication after January 13. What is most and least effective about each?
• What else, if anything, do you believe Costa or Carnival should communicate at this point? What should the companies prepare to communicate next?

Sears Communicates Store Closings

Perhaps a New York Times article says it best: "Sears has been limping along for years." But after a disappointing holiday sales season, the company has decided to close 120 Kmart and Sears stores.

In its press release, titled " Sears Holdings Provides Update," the company provides its quarter-to-date performance and the rationale for the store closings and other actions:

"Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce on-going expenses, adjust our asset base, and accelerate the transformation of our business model. These actions will better enable us to focus our investments on serving our customers and members through integrated retail -- at the store, online and in the home."

The press release uses the indirect organizational plan but does use bullets to highlight important changes. The full release also was hard to find. I expected to see this with the list of store closings at www.searsmedia.com, which was referred to in several articles. As of this writing, the release was posted only on www.searsholdings.com, and which stores are closing remains a mystery. This change will bring many layoffs, so we'll continue to see the communications unfold.

Discussion Starter and Assignment Idea:

• Analyze the company's press release. Outline the release to show the sequence of main points. What works well about the organization, and what is lacking?
• Imagine that you're the VP, communication, for Sears. Write an email to employees explaining the news. What, if anything, would you say about layoffs at this point?

American Airlines Communicates Bankruptcy to Employees

AMR Corporation, American Airlines' parent company, has filed for Chapter 11 bankruptcy protection. In a press release, the company assured investors and passengers that "American Airlines and American Eagle are operating normal flight schedules today, and their reservations, customer service, AAdvantage program, Admirals Clubs and all other operations are conducting business as usual." The company also sent an email to AAdvantage club members about their miles.

As part of the change, Gerard Arpey, chairman and chief executive officer of AMR Corporation and American Airlines, announced his retirement. He will be succeeded by Thomas W. Horton, who will continue to also serve as president.

In a memo, Tom Horton tried to reassure employees:

I realize this news might be difficult to absorb; change is never easy. We will do our very best to keep you informed, understanding that there will be many questions we are not able to answer right away. I can certainly tell you that we expect to continue to provide employee wages, healthcare coverage, vacation, and other benefits, without interruption.

A New York Times article (and other sources) indicates that a major impetus for the bankruptcy filing is the airline's high labor costs:

One of AMR's chief goals in bankruptcy will be to lower its labor costs.

The company had been in contract talks with its unions until the negotiations stalled earlier this month when the pilots' union refused to send a proposal to its members for a vote. Because federal bankruptcy rules allow companies to reject contracts, AMR may take a harder negotiating stance with its unions.

"Achieving the competitive cost structure we need remains a key imperative in this process," Mr. Horton said, "and as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels."

Of course, the company memo to employees makes no mention of these difficulties. 

Discussion Starters:

• Read the entire memo from Tom Horton. If you were part of American Airlines' management team, how do you think you might react? If you were part of the unionized staff, how might you react?
• What can American Airlines do to keep employees continuously informed? What internal communication strategies and tools will be important for the company to use at this time and going forward?

Layoffs at Nokia

Nokia Siemens is laying off 17,000 employees - 23% of its workforce. In a press release headline, Nokia explains the company's focus: 

Nokia Siemens Networks puts mobile broadband and services at the heart of its strategy; initiates restructuring to maintain long-term competitiveness and improve profitability

The press release further explains Nokia's restructuring plans:

Nokia Siemens Networks plans to reduce its global workforce by approximately 17,000 by the end of 2013. These planned reductions are expected to be driven by aligning the company's workforce with its new strategy as well as through a range of productivity and efficiency measures. These planned measures are expected to include elimination of the company's matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of Motorola's wireless assets, efficiencies in service operations, and company-wide process simplification.

Discussion Starters and Assignment Ideas:

• What examples of euphemisms, business slang, and jargon do you see in the press release excerpt?
• How many nominalizations do you find in the press release? Rewrite the press release excerpt, changing all of the nominalizations to verbs or adjectives.
• Is the language in the press release appropriate for the audience? Who is the audience? 
• Rewrite the press release for employees. How would you change the word choices for an internal audience who is affected by the news? Would you address the speculation that Nokia is getting ready for a sale?

McDonald's and Target's (Former) Egg Supplier Caught on Video

The Food and Drug Administration gave Sparboe Farms poor reviews at five locations. This news and an undercover video by an animal-rights group inspired McDonald's and Target to drop the egg supplier. The graphic video [watch at your own risk] shows chickens terribly mistreated and living in unsanitary conditions.

In the first two paragraphs, McDonald's statement explains the decision and reassures customers:

McDonald's expects all of our suppliers to meet our stringent requirements for delivering high quality food prepared in a humane and responsible manner.  Based upon recent information, we have informed our direct supplier, Cargill, that we are no longer accepting eggs from its supplier, Sparboe.  This decision is based on McDonald's and Cargill's concern regarding the management of Sparboe's facilities.

This is not a food safety issue for our menu items.  We can assure our customers that eggs in our entire supply chain meet McDonald's high standards for quality and safety. 

Target explains its decision in this way:

Target is committed to delivering outstanding quality and uncompromising safety with every owned-brand food product. We expect and rely on our vendors to operate facilities that meet industry standards and regulatory requirements.

Having been made aware of the unacceptable conditions in the company's egg laying facilities, effective immediately, Target will discontinue its business relationship with Sparboe Farms. We are currently in the process of notifying our teams to remove the product from store shelves.

Sparboe Farms developed a website and video by the company president to convey its own position:

Discussion Starters:

• Compare Target's and McDonald's full statements. What differences do you notice, and which does a better job?

• Analyze Sparboe Farm's response. Review the website, president's video, letter, and other messages. In what ways is each effective and ineffective in rebuilding Sparboe's image?

Penn State Flubs Response to Child Abuse Accusations

Former Penn State Defensive Coach Jerry Sandusky has been arrested for abusing eight minors. Apparently, Athletic Director Tim Curley and VP for Finance and Business Gary Schultz were told about one incident but kept silent. They have since been charged with perjury.

The president of Penn State, Graham Spanier, issued a statement backing Curley and Schultz:

The allegations about a former coach are troubling, and it is appropriate that they be investigated thoroughly. Protecting children requires the utmost vigilance.

With regard to the other presentments, I wish to say that Tim Curley and Gary Schultz have my unconditional support. I have known and worked daily with Tim and Gary for more than 16 years. I have complete confidence in how they have handled the allegations about a former University employee.

Tim Curley and Gary Schultz operate at the highest levels of honesty, integrity and compassion. I am confident the record will show that these charges are groundless and that they conducted themselves professionally and appropriately.

The president has been harshly criticized for his response. One media expert offered this alternative for the university's response:

I am horrified to learn about the sexual abuse of eight minors. As a parent, I understand just how sacred a responsibility we all have to keep children safe. We will cooperate fully with the investigation and do everything possible to make sure this never happens again.

As for Mr. Curley and Mr. Schultz, I would ask everyone to wait until the facts of the case have fully emerged before forming a judgment.

This statement more appropriately acknowledges the victims without aligning the university with Curley and Schultz. Since the president issued the statement, Curley has been placed on administrative leave, and Schultz has stepped down and retired from the university.

The Board of Trustees of Penn State University are also planning for the dismissal of Joe Paterno, the current football coach, who, according to a New York Times article, "has more victories than any other coach at college football's top level and who made Penn State a prestigious national brand."

 Discussion Starters:

• How do you assess the proposed rewrite of the president's statement? What are the improvements -- and what are the risks -- of such a statement?
• Do you agree with the university's decisions to 1) place Curley on administrative leave, 2) accept the resignation/retirement of Schultz, and 3) plan the exit of Paterno? Why or why not?

Two More UBS Executives Resign

Not surprisingly, the two co-global heads of UBS's Equities division have resigned. These resignations follow a trading scandal that cost the Swiss bank $2.3 billion and the CEO's resignation on September 25.

An email to employees from interim CEO Sergio Ermotti uses a sharper tone than emails from the previous CEO:

"We have to be straight with ourselves. In no circumstances should something like this ever occur. The fact that it did is evidence of a failure to exercise appropriate controls. Our internal investigation indicates that risk and operational systems did detect unauthorized or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced."

Discussion Starters:

• Ermotti's email uses an indirect organizational plan. Do you think this is appropriate in this case? Why or why not?
• Compare Ermotti's email to that of Carsten Kengeter, the head of the UBS investment bank. What differences do you notice, and how would you explain them?   Download UBS emails.

UBS CEO Resigns

Following the scandal that caused Swiss bank UBS $2.3 billion, CEO Oswald J. Grübel has resigned. In a memo to employees, Grübel says, "I did not take the step of resigning lightly."

In the memo, Grübel includes a pep talk for employees:

"As I've always emphasized, a lot of work remains to be done here. So don't let recent events distract you from your work. Continue giving your all and keep your focus on your clients. I am certain that UBS can carve out a strong place for itself within the fundamentally changing financial industry."

This memo follows a previous communication to employees, in which Grübel explained the incident and wrote, "Ultimately, the buck stops with me."

Discussion Starters:

• Who are Grübel's primary and secondary audiences for this memo?
• What would you identify as Grübel's goals of this message?
• In your opinion, to what extent did he achieve these goals?