Deutsche Bank on the Defense

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With stock at an all-time low and a German government raid last week, Deutsche Bank is trying to reassure customers and shareholders. Finance chief James von Moltke said on CNBC, “To date, we’re not aware of any wrongdoing on our part.” The investigation relates to the Panama Papers, which are documents made public in 2016 that revealed tax havens for individuals from more than 200 countries.

Throughout the CNBC interview, von Moltke tries to put the issue into perspective. He says the investigation involves a small, trust services business that the bank sold earlier this year. However, some of the money laundering accusations involve current managers. Still, von Moltke claims that new precautions are in place today.

Deutsche Bank stock fell further on the news, losing 51% of its value this year.

Discussion:

  • Assess the CFO’s video interview with CNBC. What persuasive communication strategies do you observe?

  • Which are his strongest and weakest arguments?

  • Also assess his delivery skills: tone, rapport, volume, pace, and so on.

Marriott Security Breach

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Personal information of more than 500,00 guests was stolen from the Starwood reservation system. Exposed data includes payment card information, and critics say the company could have avoided the breach years ago. In 2015, Starwood announced a small breach, which cybersecurity experts say should have inspired the company to do more at the time. Starwood argues it didn’t realize the risk, and Marriott leaders argue that they had not yet acquired Starwood. On Friday, Marriott shares were down 5.6%.

A notice at the top of the Marriott homepage reads, “For more information on the Starwood guest reservation database security incident, please click here.” Although the breach was from a Starwood database, the media is consistently reporting the news as “Marriott.” That link and a press release on the website both go to legal sounding statements, although they do provide FAQs at the bottom.

Lawsuits have already been filed against the company for failing to protect users’ data.

Discussion:

  • Is the company taking adequate responsibility for the breach? Explain your response.

  • How can Marriott respond to this crisis and protect the brand at this point?

  • How can the website information be improved? Consider the primary and second audiences, communication objectives, organization, writing style and so on.

Lettuce Recall Data

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An opinion piece in the Wall Street Journal highlights the value data for decision making. With the article title, “Lettuce Try Not to Panic,” Jim Prevor criticizes the Centers for Disease Control and Prevention’s (CDC) edict that “U.S. consumers not eat any romaine lettuce, and retailers and restaurants not serve or sell any”:

There are 43 people known to be infected with the outbreak strain of E. coli 0157:H7. The CDC interviewed 25 of them. Eighty-eight percent of those 25 people, as opposed to 47% of the general population, said they ate romaine lettuce in the week before they got sick.

From population data, the Prevor concludes that you have a 1 in 11 million chance of getting sick from Romain lettuce, and a 1 in 28 million chance of ending up in the hospital. The author makes the odds even more concrete:

If this outbreak were active every day, and you ate one salad a day, on average you would be hospitalized for E. coli once every 77,000 years.

Even these data, Prevor argues, are overstated for most of us. Children, older people, and people with compromised immune systems are far more likely to get sick than the average adult. As a result of the CDC warning, the author estimates “tens of millions of dollars in losses.”

On the CDC website, a “Food Safety Alert” details the investigation results and advice.

Lettuce image source.

Discussion:

  • What’s your view of the CDC’s recommendation: better safe than sorry or overblown?

  • How well does Prevor argue his point? What persuasive strategies does he use? Which are his strongest and weakest arguments? What may be missing from his argument?

  • Help an audience visualize some of the data in Prevor’s article. What charts or graphs would be useful to help consumers make an informed decision?

GM Lays Off 15,000 Employees

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General Motors will lay off about 15,000 employees and close five U.S. factories. About 2,250 employees accepted a voluntary buyout, which could include six months of pay. But that number wasn’t enough for GM to reach it goals.

About 8,000 salaried employees, or 15% of the workforce, will leave the company. Engineers and designers are hardest hit, and the company will hire more technology workers to focus on electric and hybrid vehicles. The move reflects shifts in consumer preferences against small cars, such as Cruze compact and Volt, in favor of SUVs and trucks. Gas prices are low, so people want larger, more convenient vehicles.

In a statement, GM outlined its plans for the future, and Chairman and CEO Mary Barra explained the decision:

“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future. We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

President Trump said he spoke with Barra and was “very tough.” He also said he’s “not happy” about the plant closings and is hoping for the company to rebuild in Ohio.

Discussion:

  • Evaluate GM’s statement. What business writing principles are followed, and what could be improved?

  • What else, if anything, should GM do to maintain brand image during the cuts? For example, Barra could agree to media interviews. Should she? Why or why not?

Nissan Chairman Is Arrested

Nissan’s chairman was arrested for financial misconduct, including under-reporting his income in securities fillings. Carlos Ghosn may have been engaging in improprieties for years.

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The news came as a surprise to many. Ghosn is a popular business figure, credited with turning around Nissan, Renault, and Mitsubishi by forming an alliance and directing cost-cutting and layoffs. According to a Wall Street Journal article, the shock is felt particularly at Renault; a union leader described the reaction as “a feeling of stupefaction and a lot of anger.”

The French government has a 15% state in Renault, so President Emmanuel Macron also weighed in: “As a shareholder, the French state will remain extremely vigilant regarding the stability of the alliance.” At this point, officials are still trying to sort out the news and determine leadership going forward.

Nissan CEO Hiroto Saikawa delivered a news statement, translated in English on Bloomberg. The company also issued this matter-of-fact statement.

Nissan image source. Ghosn image source.

Discussion:

  • Why would a successful business executive engage in financial misconduct? What leadership character dimensions are lacking?

  • How does financial impropriety go on for years in a situation like this? Who should be accountable for the misconduct?

  • Assess Saikawa’s news statement. What works well to improve brand image, and what could be improved?

Announcing a Restaurant Closing

Danny Meyer gives us a great model of how to write a bad-news message. In his announcement about closing the restaurant North End Grill, Meyer demonstrates communicating with humility and transparency.

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Meyer describes the pain involved in closing a restaurant, including the effect on employees. He admits to mistakes and relates this closing to Tabla, which closed four years ago. He didn’t need to remind us, but he does so humbly, and as a lesson to learn from failure.

Meyer’s message is encouragement for compassionate, transparent communication planning:

All too often in our industry, a padlock on the front door might be the very first notice employees, landlords, and suppliers receive that a restaurant will be closing. 

He also teaches us that leading requires courage:

[W]hen reality dictates closing, we have a choice: to do so in secrecy and shame, or instead, with dignity, integrity, and pride.

Restaurant image source. Meyer image source.

Discussion:

  • Analyze Meyer’s full statement: audience, objectives, writing style, organization, etc. What works well, and what could be improved?

  • In what ways does Meyer’s statement illustrate vulnerability as a leadership strength?

News Conference About Shooting

A former marine shot 12 people in a California bar, and local officials delivered a news conference. Ventura County Sheriff Geoff Dean spoke first (about 5:00 on the video) to explain officers’ response and what they knew at the time.

We see the sheriff get emotional when answering questions about his deputy, Sergeant Ron Helus, who also died.

The shooting was particularly painful for people at the bar who also survived the Las Vegas shooting about a year ago. One young man, Telemachus Orfanos, survived the earlier incident but not this one.

Image source.

Discussion:

  • Assess Sheriff Dean’s statement for content, organization, and delivery. What worked well, and what, if anything, could be improved?

  • Assess how well Sheriff Dean responded to media questions.

Controversy About Wildfires

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As wildfires rage in California, let’s look at controversy about the cause. So far, fires have taken 31 lives, and more than 200 people are missing. Governor Jerry Brown requested federal aid.

In a tweet, President Trump blamed California for poor forest management. This drew a harsh response from the California Professional Firefighters association, which called the statement “dangerously wrong.” In a statement, the group defended state actions, firefighters, and victims:

“The president’s message attacking California and threatening to withhold aid to the victims of the cataclysmic fires is Ill-informed, ill-timed and demeaning to those who are suffering as well as the men and women on the front lines.”

Later, the president tweeted a more compassionate message:

More than 4,000 are fighting the Camp and Woolsey Fires in California that have burned over 170,000 acres. Our hearts are with those fighting the fires, the 52,000 who have evacuated, and the families of the 11 who have died. The destruction is catastrophic. God Bless them all.

Discussion:

  • Analyze the California Professional Firefighters statement: audience, objectives, writing style, organization, etc. How well does the group defend its position?

  • How well does the statement illustrate principles of persuasion: logical argument, emotional appeal, and credibility?

  • Which leadership character dimensions does this situation illustrate?

Timing Bad-News Messages

This week, we saw two examples of timing communications to improve image.

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President Trump waited until after the important mid-term elections to fire Attorney General Jeff Sessions. President Trump wasn’t happy with Sessions since he recused himself from the Russia election interference investigation back in 2017.

Although Sessions did technically “resign,” he did so at the President’s request. Sessions confirms this in his resignation letter, which begins, “At your request, I am submitting my resignation.”

Facebook capitalized on a busy news day to announce bad news: a report that the company didn’t do enough to stop anti-Rohingya propaganda on its platform. The site may have contributed to escalated violence in Myanmar. Skimm writers joked, “What to say when the midterms are dominating the headlines… Time to drop some bad news. Right, Facebook?”

FB image source.

Discussion:

  • Why didn’t President Trump fire Jeff Sessions after he recused himself? Why is the timing better now, more than a year later?

  • What other examples have you seen of companies taking advantage of news cycles?

  • The benefits of reporting bad news on a slow news day may be obvious. What are the risks?

GM Offers Employee Buyouts

To cut costs, General Motors is offering voluntary severance packages to 18,000 employees. The company is taking this path before mandatory layoffs, which could happen if not enough people leave voluntarily.

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To receive an offer, employees must have been with GM for at least 12 years and be on salary (not an hourly wage), which means more senior-level employees will be leaving. Typically, these employees are in managerial positions and are paid more highly, so the move means more savings.

The company is focusing on its most profitable regions and already cut salaried staff from about 90,000 to 77,000 after selling off its European divisions. At the same time, GM is staffing up technology functions to compete in the self-driving car market. Through its Cruise division, GM is planning to introduce a ride-sharing, autonomous vehicle in 2019.

Office image source. Cruise image source.

Discussion:

  • Why would a company choose a voluntary severance model instead of mandatory layoffs?

  • What factors should employees consider before deciding to take a package?

Tesla Investigated for Fraud

Tesla is facing a new challenge this week: a U.S. Federal Bureau of Investigation (FBI) criminal probe into whether the company misstated production data and therefore misled investors. The investigation will focus on Model 3 sedans.

A Wall Street Journal article explains part of the issue. CEO Elon Musk tweeted on July 2, 2017, “Looks like we can reach 20,000 Model 3 cars per month in Dec.“ But reports at the time showed a less optimistic picture. The result was only 2,700 cars produced for the entire year.

A spokesperson said the FBI document requests were voluntary and defended the company:

“When we started the Model 3 production ramp, we were transparent about how difficult it would be, openly explaining that we would only be able to go as fast as our least lucky or least successful supplier, and that we were entering ‘production hell.’ Ultimately, given difficulties that we did not foresee in this first-of-its-kind production ramp, it took us six months longer than we expected to meet our 5,000 unit per week guidance. Tesla’s philosophy has always been to set truthful targets –- not sandbagged targets that we would definitely exceed and not unrealistic targets that we could never meet. While Tesla gets criticized when it is delayed in reaching a goal, it should not be forgotten that Tesla has achieved many goals that were doubted by most. We are enormously proud of the efforts of the whole company in making it through this difficult ramp and getting us to volume production.”

Image source.

Discussion:

  • What’s your view of Musk’s statement compared to the result: arrogance, entrepreneurial optimism, or something else?

  • How well does the Tesla spokesperson address the investigation? What else, if anything, should the company say at this point?

  • In what ways does the company demonstrate a lack of vulnerability in this situation?

Bad News at Verizon and Sears

Verizon and Sears employees are facing job loss in the coming months.

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Verizon is outsourcing some technology functions to Infosys, resulting in 2,500 jobs leaving the company.

At first, Verizon wasn’t planning to offer severance, but pressure from employees caused company leaders to change the approach. Timing was part of the problem: last month, 44,000 Verizon managers were offered a voluntary severance package to leave the company. Now, about 1,000 employees have a choice of whether to work for Infosys or accept severance pay.

Sears is declaring Chapter 11 bankruptcy after years of attempts to save the department store. The company has been steadily shedding stores. Only 700 are left, down from 1,000 in February, and more than 3,000 about a decade ago.

CNN reports that Sears has been warning investors that they may go out of business, and suppliers are requiring payment up front.

Sears image source.

Discussion:

  • What’s your view of Verizon’s severance plans: unfair, discriminatory, financially necessary, based on sound principles, or something else?

  • Sears investors and suppliers recognize the likely fate of Sears. How prepared do you think employees are? What could the company do to help employees at this point?


Crisis at Sloan Kettering

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Memorial Sloan Kettering (MSK) Cancer Center’s chief executive, Craig Thompson, has resigned from two boards, Merck and Charles River Laboratories, following investigations of conflicts of interest. Thompson issued a statement about his decision to resign:

“I have taken feedback from our staff and faculty seriously and intend to lead by example. I believe this is the right decision for Memorial Sloan Kettering and will allow me to redouble my focus on MSK priorities: quality patient care, faculty, scientists and staff.”

Sloan Kettering’s chief medical officer, Jose Baselga, was accused of not reporting millions of dollars he received from pharmaceutical companies for his research articles. Baselga previously resigned from Memorial Sloan Kettering as well as Bristol-Myers Squibb, where he served on the board. As one former patient wrote, failing to disclose payments gives “the appearance of influence is troubling. It highlights ineffective oversight, with the potential to cast a shadow on the center’s other excellent doctors.”

When the story first broke, Memorial Sloan Kettering leadership wrote a letter stating, “MSK and our faculty need to do a better job.”

Thompson photo source.

Discussion:

  • Analyze the MSK letter. Who is the audience, and what are the communication objectives? How do you assess the organization and writing style?

  • Should Thompson also resign his chief executive position at MSK? Why or why not?

  • How well does MSK leadership take responsibility for the problems? How is this an issue of integrity for MSK?


British Rail Company Apologies

Great Western Railway is tripping over itself apologizing for thousands of canceled and late trains. Apologies by British train organizations are so common that a web designer created a site, https://www.sorryfortheinconvenience.co.uk, to chronicle statements, now totaling more than 420,000.

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A look at the railway’s Twitter feed shows two failures but no apology. Maybe the organization is catching on: over-apologizing isn’t a good strategy. At some point, customers just want problems fixed.

Discussion:

  • How can a leader know when the organization is apologizing too much?

  • Take a look at the GWR Twitter feed. How would you advise the organization to improve its communications?

  • What leadership character dimensions is GWR demonstrating and failing to demonstrate with its apologies?

WhatsApp Message Causes Dramatic Infibeam Stock Price Drop

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Infibeam, an India e-commerce company, lost more than 70% of its stock value after a WhatsApp message questioned the company’s governance. The message was reported to be sent by an analyst at Equirus Securities months ago, but it only recently surfaced and went viral. Equirus denies involvement.

An India Times article explains the message:

“The note said the company gave an interest-free and unsecured loan to a subsidiary with negative net assets to be repaid over eight years. The note also mentioned that the company has re-classified its co-founder, who continues to hold a large chunk of shares, as non-promoter.”

An Infibeam spokesperson responded to the controversy:

“The company has given interest-free unsecured loans to its wholly owned subsidiary NSI Infinium Global since inception. These loans are short-term loans which are repayable on demand and have been utilised by NSI solely for its business and operations. Further, there has been no change in the promoters from the list of promoters identified and disclosed by the company info in the offer documents for its IPO.”

Discussion:

  • How can people do a better job at distinguishing between real reports and rumors?

  • How well did Infibeam respond to the news? What effect do you expect on the company stock on Monday?




Facebook Breach Announced Today

Millions of Facebook users inadvertently gave hackers access to their accounts, and the company is trying to fix the problem. Hackers found a way in through the “View As” feature, which people use to see how their profile looks to others.

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The company learned of the issue this week and today held a conference call with reporters. To the extent to which Facebook could manage the story, it’s the perfect day for such a report, when the country is focused on whether lawmakers will support Brett Kavanaugh’s nomination to the Supreme Court despite allegations of sexual assault.

On the conference call, CEO Mark Zuckerberg stressed that fighting hackers is an ongoing concern:

"This is a really serious security issue. This underscores there are just constant attacks from people who are trying to take over accounts and steal information from our community. This is going to be an ongoing effort." 

Facebook’s VP of product development posted a “Security Update” statement on Facebook’s news site, including this reassurance:

“People’s privacy and security is incredibly important, and we’re sorry this happened. It’s why we’ve taken immediate action to secure these accounts and let users know what happened.”

Cover image source. Spotlight image source.

Discussion:

  • Do you agree that Facebook timed the announcement when a bigger story would likely overshadow the news? Or am I just cynical?

  • Assess the Security Update as a persuasive message. Describe the tone and organizational strategy. How well does the statement achieve its objectives?

  • How well does the company take responsibility for what happened?

JD.com CEO Arrested for Sexual Misconduct

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Richard Liu, founder and CEO of Chinese e-commerce company JD.com, was arrested in Minneapolis for sexual misconduct. Because of his high profile and billionaire status, Liu’s arrest was the most popular topic of conversation on social media in China last week.

Two people describe a case involving a student at the University of Minnesota, part of a joint doctoral program in business administration with Tsinghua University. Liu was released without bail and has returned to China. He denies any wrongdoing, and JD.com posted a statement in Chinese, translated by a student:

Sunday, Sep. 2, 2018

We have noticed that there are rumors and false accusations about Mr. Qiangdong Liu on Weibo (Chinese social media site, similar to Twitter) recently. We hereby declare as follows: Liu was falsely accused while in the US on a business trip, but the police investigators found no misconduct and that he would continue his journey as planned. The company will take necessary legal action against false reporting or rumors.

Monday, Sep. 3, 2018

So far as we know, Mr. Liu was arrested on Aug. 31, 2018 in Minneapolis for investigation. He was released from custody shortly. There was no accusation or bail required for the release. Mr. Liu has returned to China and will resume his business activities as originally planned.

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In addition to the stock price drop and embarrassment this causes Liu and JD.com, the company may have a governance problem. Liu is required to attend board meetings in person (although he may be able to join via video or telephone). Without him, as an 80% voting rights owner, the board may be unable to make decisions for the business.

A New York Times article focuses on China’s fascination with self-made billionaires as celebrities. Online discussions featured photos of Jack Ma laughing at Liu’s trouble.

Liu image source.

Discussion:

  • I don’t see a statement or press release from Liu or from the company in English. Should Liu or the company publish something at this point on the website? Why or why not?

  • What should the company do now to manage through this crisis?

  • How does the Chinese reaction compare to situations in the United States? Can you think of a similar situation when Americans were fascinated by a leader’s hardship?

Jack Ma Will Leave Alibaba

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Founder and Executive Chairman of Alibaba, China's largest e-commerce company, will step down, a process started five years ago when he transitioned out of the CEO role. Jack Ma is a powerful figure because of his billionaire success and his leadership reputation. Duncan Clark, author of Alibaba: The House that Jack Built, describes Ma as "an iconic figure" and "the most recognizable symbol of the China internet explosion and more broadly the China consumer boom."

Although the news had hit major media outlets, the Alibaba Group website doesn't yet have a posted press release. A Financial Times article includes this quote from Ma via The South China Morning Post: “I sat down with our senior executives 10 years ago, and asked what Alibaba would do without me. I’m very proud that Alibaba now has the structure, corporate culture, governance and system for grooming talent that allows me to step away without causing disruption.”

The move comes as Chinese tech stocks fall out of favor, partly because of regulatory and trade concerns. The Wall Street Journal reports that Ma will pursue philanthropic interests.

Image source.

Discussion:

  • What impact do you think Ma's decision will have on the Alibaba Group?
  • Should the company have a press release posted on its website? What would be the value?
  • Draft a press release announcing the decision.

President Trump Criticizes Google

In two tweets, President Trump criticized Google and other technology companies of "suppressing voices of Conservatives and hiding information and news that is good." Calling the situation "very serious" and "very dangerous," he claims that "fake" liberal news is elevated in search engines, while "fair" Republican/Conservative perspectives are suppressed.

The president's evidence is based on searching for "Trump News," which he claims resulted in 96% of stories from "National Left-Wing Media." The data came from Lou Dobbs' reporting on Fox Business Network about an "unscientific study" by PJ Media, a conservative organization.

It's also unclear which news organizations Fox and President Trump put in the "left-wing" category. A Wall Street Journal article explains that the president considers even mainstream media outlets to be "fake news," so what he calls unfair representation may not align with a "statistically neutral news aggregator." 

Yet the article acknowledged that the search engine algorithm for Google News is "opaque." In addition, Facebook was questioned during Congressional Hearings about suppressing conservative views, and several technology companies did recently close accounts belonging to Alex Jones and InfoWars, a conservative organization, for violating terms of agreement. Social media sites (except Twitter, which has retained Jones's account) provide reasons for closing Jones's account such as his claiming that the shooting at Sandy Hooks Elementary School in 2013 was a hoax.

A spokesperson for Google denies biased search results:

"We continually work to improve Google Search and we never rank search results to manipulate political sentiment."

Discussion:

  • Try to find evidence on both sides of this argument: that Google News is unbiased against President Trump and that his claims are unfounded.
  • What's your view about Google Search results? How might your own political perspective factor into your view?
  • How can you ensure that you're getting the most balanced news possible? (Hint: Don't rely on your Facebook feed.)

Ohio Football Coach: Another Case of Deleted Messages

Ohio State football coach Urban Meyer will forgo pay and the ability to coach three games because of his failure to appropriately handle a staff member's misconduct. A New York Times article chronicles issues with Zach Smith's behavior, including paying $600 at a strip club during a recruiting event, a domestic violence charge, and an affair with a staff member.

During a press conference, Meyer apologized, saying, "I should have done more, and I am sorry for that," and "I followed my heart and not my head."

The Times article also describes a conversation between Meyer and Smith about deleting text messages. I should count the number of stories on this blog since 2010 illustrating that deleting texts and emails fail to get the desired result. These messages are almost always recoverable, and the act of deletion makes the accused look even more guilty. 

In addition, in this situation, Ohio State officials at first failed to produce messages requested by the school newspaper. Worse, several staff knew about the request, but no one even approached Coach Meyer to retrieve them.

Image source.

Discussion:

  • Once again, where are the many places deleted messages may be stored? How else can they be retrieved?
  • What's your view of the strip club visits? Could Meyer reasonably argue that this is just part of the recruiting process? After all, no students were invited—only university and high school coaches. 
  • Assess the press conference. How well did university officials, including Meyer, respond to reporters' questions? Did the team appropriately take accountability?