Air France Grapples with Strike and CEO Resigns

Negotiations over pay aren't going well at Air France, and CEO Jean-Marc Janaillac has stepped down as a result. The last straw was a pay increase proposal that failed to win staff support. The company offered 7% increases over five years, but the union is holding out for 5.1% this year.

You may remember the last highly publicized conflict at Air France, in 2015, when employees angrily ripped clothing off two company executives after 3,000 layoffs were announced. Janaillac was appointed in 2016 to resolve the disputes, but they have continued, and investors have expressed their frustration: the stock is down 40% this year.

Air France says rising fuel prices and a strong euro will make the strikes more challenging for the airline, which managed to keep long-haul flights on schedule but cancelled about 20% of medium-haul and some short-haul flights because of staffing shortages.

In his resignation speech, Janaillac was emotional, clearly disappointed in the outcome. Unfortunately, his decision to step down didn't inspire investors, who responded by bringing the share price down another 14%.

French Prime Minister Bruno Le Maire refuses to bail out the company:

“If it doesn’t make the necessary efforts to be at the same competitive level of Lufthansa and other major airlines, it will disappear. I am not taking the money of the French and putting it in a company that isn’t at the required competitive level.”

Image source (cover).

Image source (above).

Discussion:

• How can the airline manage through the current crisis? What type of communication could be helpful at this point?
• Janaillac put his job on the line with the latest pay proposal. Did he do the right thing by resigning? Why or why not?
• Which leadership character dimensions are at play in this situation?

Layoffs at Qualcomm

A Business Insider headline puts the news and purpose right up front:

Qualcomm is reportedly laying off as many as 1,000 employees as part of a $1 billion cost savings plan

The decision comes after a hostile takeover bid from Broadcom, a competitor in Singapore. Qualcomm made a commitment to save costs to its shareholders and appears to be following through, despite that the failing takeover bid. 

A Bloomberg report reminds us that the company cut jobs in 2015, as well, in response to an activist investor's interests. A New York Times article calls Qualcomm "collateral damage" in "a looming trade war between the United States and China" that may impinge the company's growth.

The company declined to comment on news stories, and nothing related to layoffs is posted on its website.

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Discussion:

• Should Qualcomm executives be more forthright about the change? What, if anything, should they communicate to the public and how?
• How do you assess the admission that the layoffs are intended to ward off hostile takeovers and reduce costs? How do you think these reasons would be received by shareholders? the press? customers? employees?
• How are the news and the company's communication an issue of integrity for Qualcomm?

Passenger Dies on Southwest Flight

An engine exploded on a Southwest flight, which blew out a window and killed a passenger. The company has communicated about the tragedy consistently and in several forms.

On its website, Southwest posted several updates regarding the situation, starting with the initial event and ending with more information.

The second statement has the most detailed information and confirms the passenger's death:

Southwest Airlines Co. (NYSE: LUV) confirms an accident involving Southwest Airlines Flight 1380. The flight made an emergency diversion to Philadelphia International Airport (PHL) earlier today after the Crew reported issues with the number one engine which resulted in damage to the fuselage.

We are deeply saddened to confirm that there is one fatality resulting from this accident. The entire Southwest Airlines Family is devastated and extends its deepest, heartfelt sympathy to the Customers, employees, family members and loved ones affected by this tragic event. We have activated our emergency response team and are deploying every resource to support those affected by this tragedy. For a message from Gary Kelly, Southwest Chairman and Chief Executive Officer, please click here.

The aircraft involved today was a Boeing 737-700 (N772SW) and was enroute from New York LaGuardia (LGA) to Dallas Love Field (DAL). In total, the flight had 144 Customers and five Southwest Crewmembers onboard.  We extend our heartfelt appreciation to the Southwest Pilots and Flight Attendants who acted professionally and swiftly to take care of our Customers during the emergency diversion and landing.

Finally, Southwest Airlines officials are in direct contact with the National Transportation Safety Board (NTSB) and the Federal Aviation Administration (FAA) to support an immediate, coordinated response to this accident. Southwest is in the process of gathering additional information regarding flight 1380 and will fully cooperate in an investigative process.

Please join the Southwest Family in keeping all of those affected by today's tragedy in your thoughts.

CEO Gary Kelly conveyed his sympathy in a video posted on the Twitter and during a news conference. Both are obviously scripted, but perhaps this is appropriate given the timing and severity of the situation.

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Discussion:

• Assess Southwest's communications overall. What is they company doing well, and what could be improved?
• Now assess the news conference video, which is similar to the video message posted on Twitter. What delivery skills does the CEO demonstrate? What could be improved? Should he use a more natural style and "speak from the heart"? What are the potential downsides of this approach?
• How well does the company demonstrate compassion?

Howard University Reports on Misappropriated Funds

Howard University's investigation has concluded that $369,000 had been misappropriated by six employees who were terminated last year. A full report by the university identifies how they "double dipped" by receiving both tuition assistance and university grants between 2011 and 2016.

In a cover letter to the report, President Wayne A.I. Frederick wrote, “Howard University is committed to uncovering any impropriety in the administration of university-provided financial aid and federal student aid, to remediating all problems identified during this investigation, and to maintaining a robust compliance program to prevent any inappropriate dealings in the administration of financial aid."

A Washington Post article reports that the university tried to avoid going public before the review was completed, but an article posted online made this impossible. Student protests, which went on for more than a week, also may have sped up the timing.

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Discussion:

• What business writing principles does the report demonstrate and fail to demonstrate? How could the report be improved?
• Assess the president's cover letter. Who are his primary and secondary audiences, and what are the communication objectives? How well does the letter achieve those objectives?
• What can the university do now to restore trust?
• How well does the university take responsibility for the situation?

Major Retailers Respond to Data Breach

Retailers Saks Fifth Avenue and Lord & Taylor experienced a data breach affecting about 5 million customers. Hackers JokerStash Syndicate (also known as Fin 7) stole and resold credit and debit card information retrieved during the sales process.

Both companies are owned by Hudson's Bay Co., and we see that their customer messages have been coordinated. On both retailers' websites, text appears at the top of the page in a yellow box. When you click on the "Important Message" link, you see two statements dated one day apart and a list of FAQs.

The second message is below:

April 2, 2018 Statement

Updated Statement

We recently became aware of a data security issue involving customer payment card data at certain Saks Fifth Avenue, Saks OFF 5TH, and Lord & Taylor stores in North America. We identified the issue, took steps to contain it, and believe it no longer poses a risk to customers shopping at our stores. While the investigation is ongoing, there is no indication that this affects our e-commerce or other digital platforms, Hudson's Bay, Home Outfitters, or HBC Europe. We deeply regret any inconvenience or concern this may cause.

We wanted to reach out to our customers quickly to assure them that they will not be liable for fraudulent charges that may result from this matter. Once we have more clarity around the facts, we will notify our customers quickly and will offer those impacted free identity protection services, including credit and web monitoring. We encourage our customers to review their account statements and contact their card issuers immediately if they identify activity or transactions they do not recognize.

We are working rapidly with leading data security investigators to get our customers the information they need, and our investigation is ongoing. We also are coordinating with law enforcement authorities and the payment card companies. For further information, please visit https://www.saksfifthavenue.com/security-information/notice.html, https://www.saksoff5th.com/security-information/notice.html, or https://www.lordandtaylor.com/security-information/notice.html. To speak with a dedicated call center representative, beginning April 4, 2018, you can call 1-855-270-9187, Monday - Saturday, 8 am - 8 pm CT.

Discussion:

• Read the statements on the retailers' websites. Identify the primary and secondary audiences and communication objectives.
• How well do the statements achieve their objectives? What else, if anything, should the companies communicate at this point?
• To what extent are the retailers holding themselves accountable for the breach?

Howard University Responding to Embezzlement

Six student employees were terminated by Howard University for embezzling financial aid funds. The students made up fake scholarships and found other ways to steal what could be more than $1 million.

On Twitter, the student association unleashed its frustration with the university's response. In a statement, President Wayne Frederick expressed empathy for this frustration and for other reactions:

Hearing about the mishandling of funds at the University can be difficult to process. I can also understand how upsetting it is to feel that the University has not communicated with you regarding this incident. The goal established at the onset of this investigation was to conduct it in a confidential manner that ensured a thorough examination of the issues without jeopardizing the integrity of the findings. However, that does not mitigate the sense of mistrust that many students and members of our community feel right now. We understand that and we hear you.

The statement also describes plans for investigating the charges and ends on a positive note.

Discussion:

• The above paragraph from the president's statement raises an interesting conundrum: how do leaders ensure both privacy and transparency? The same issue is relevant to investigating sexual harassment claims. What are your thoughts? How, if at all, is it possible to achieve both?
• Assess the president's statement. Who is the audience, and what are the communication objectives? How is the statement organized? How would you describe the writing style, tone, and so forth?
• How well does the president's statement demonstrate accountability? 

Uber Halts Self-Driving Cars Following Death

A self-driving Uber killed a pedestrian in Tempe, Arizona, and the company is trying to understand what happened. In the meantime, CEO Dara Khosrowshahi posted condolences on Twitter. An Uber spokesperson also made this statement:

“Our hearts go out to the victim’s family. We are fully cooperating with local authorities in their investigation of this incident.”

Apparently, a woman walked suddenly in front of the vehicle, and the local chief of police said, "It’s very clear it would have been difficult to avoid this collision in any kind of mode." A human backup driver, who was in the driver's seat without control over the car, confirmed the report. The first sign of trouble was the actual collision.

As a result of the accident, Uber announced it will stop all testing of autonomous cars. In California, autonomous Ubers were set to launch without human backups, but this may be delayed.

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Discussion:

• Assess the company's response to the news. We don't see an apology, per se. Should we?
• How can the company rebuild trust in self-driving cars after this incident?

Facebook Under Scrutiny

Questions about Facebook's role in user privacy are getting increasingly serious, and shareholders are getting worried. Company shares fell 7% after the news that third-parties used FB users' personal information without permission.

Analysts say we know that Facebook monetizes users' data, but the number of people affected (50 million) and the extent of the violation is dramatic. One concern is how much additional regulation the company will face in the future. Already, the Federal Trade Commission (FTC) is investigating whether Facebook violated a 2011 settlement in which the company promised to get users' consent before changing certain privacy settings.

We have no comment yet from Mark Zuckerberg or Sheryl Sanberg, and critics say they need to be out in front of this.

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Discussion:

• A Bloomberg reporter called the company "tone deaf," but others say it's an impossible situation to fully address at this point. What's your view?
• What, if anything, should company leaders say? What could explain their silence?
• In what ways is this situation an issue of integrity for the company?

Toys R Us Closes

https://www.toysrusinc.com/restructuring

Toys R Us will close its remaining 735 U.S. stores and will lay off about 33,000 employees around the country. The company tried to survive after a bankruptcy filing in 2017, but the retailer can't compete with large stores, such as Walmart, and online sellers, such as Amazon.

Critics say Toys R Us failed to generate excitement, as one analyst describes in The Washington Post article:

“The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way. Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales.”

A professor of brand management echoed this theme:

“We know that customers are willing to pay more for an enjoyable experience — just look at the lines at Starbucks every day — but Toys R Us has failed to give us anything special or unique. You can find more zest for life in a Walgreens.”

New York Senator Chuck Schumer is asking for the Federal Trade Commission (FTC) to ensure that customers aren't left "holding the bag" if they can't cash in or buy products with gift cards, particularly those recently received in December for Christmas.

Toys R Us has only a short statement on its website announcing the liquidation.

Discussion:

• Should the company leaders say more about the decision? What else, if anything, could be included in the statement?
• In addition to legal responsibilities, do company leaders have ethical responsibilities to make good on outstanding gift cards? Why or why not?
• In what ways has the company failed to learn from failure?

A Dog Dies on a United Flight

United Airlines, again, has apologized for a problem on a flight. A flight attendant told a family to place their dog, in a carrying case, in the overhead compartment. The dog didn't survive the trip.

The flight attendant's instruction is curious because the airline's policy states that pets are to be stored under a seat:

"A pet traveling in cabin must be carried in an approved hard-sided or soft-sided kennel. The kennel must fit completely under the seat in front of the customer and remain there at all times."

In a statement, a United spokesperson apologized:

“This was a tragic accident that should never have occurred, as pets should never be placed in the overhead bin. We assume full responsibility for this tragedy and express our deepest condolences to the family and are committed to supporting them.”

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Discussion:

• United's statement doesn't mention the flight attendant's role. Why do you think this isn't included? Should the statement be revised?
• What action, if any, should United take against the flight attendant if she did, as passengers report, instruct the family to put the dog in the overhead compartment?

Fired by Tweet

According to an NBC report, Secretary of State Rex Tillerson learned he was fired when President Trump posted a tweet. The President did call Tillerson in for a face-to-face meeting, but this happened "several hours after the president had publicly announced Tillerson's firing on Twitter." The White House claims that Tillerson was put on notice that his time was coming to an end, but Tillerson says he was shocked at the news.

The relationship had been rocky. The two disagreed over policy issues, such as the Russian's government's involvement in U.S. elections and negotiations with North Korea. In July of last year, Tillerson referred to President Trump as a "moron."

Of his termination, Tillerson said,

"What is most important is to ensure an orderly and smooth transition during a time that the country continues to face significant policy and national security challenges."

Discussion:

• What is the best way to deliver bad news?
• We have heard of many business situations in which employees are fired by text message. How does this situation compare?
• In what ways is this situation a matter of leadership character, for example, compassion or integrity?

Is Blankfein Leaving Goldman?

It's big news on Wall Street: the 12-year CEO of Goldman Sachs is leaving the company. But Lloyd Blankfein and other Goldman executives say they were surprised to read the Wall  Street Journal report. 

CNBC's Jim  Cramer said the news made sense because Goldman has two co-presidents who are vying for the position: "Blankfein is deeply committed to letting a newer generation" lead.

Blankfein tackled some tough times at the investment bank. The firm managed well through the Great Recession despite criticism for misleading customers, for which Goldman paid $550 million to the SEC as a settlement. In 2009, Blankfein faced criticism when he, perhaps jokingly, told a reporter Goldman was "just doing God's work." He was positioning the firm as having a "social purpose." Finally, in 2012, a Goldman executive wrote a scathing report about the company in a New York Times opinion piece, "Why I Am Leaving Goldman Sachs."

For now, we don't know how true the WSJ report is. 

Discussion: 

• The Wall Street Journal report is very clear, although it doesn't identify sources, but that is typical. How do news reports like this happen? Who is responsible if it is a mistake? 
• How well did Blankfein handle the situation? What, if anything, should Goldman communicate as a company at this point?

KFC Shuts Stores and Blames DHL

About 900 KFC UK restaurants closed because they didn't have chicken. A problem with DHL as their new transportation partner caused the problem, which upset customers so much they called the local police and Parliament.

The company has been sending steady messages and is trying to find humor in the situation. A spokesperson said, "We know that this might have inconvenienced some of you over the last few days, and disappointed you when you wanted your fried chicken fix — we're really sorry about that. Shout out to our restaurant teams who are working flat out to get us back up and running again.” A notice on the company website reads, "Thanks for bearing with us," and lists other locations nearby.

In addition, KFC posted a message on Twitter:

Another post read, "KFC runs out of chicken. You couldn't make it up, but we'll make it up to you. Join the Colonel's Club and get a finger lickin' reward when your restaurant opens." 

Discussion:

• How well do you think KFC is communicating about the situation?
• DHL made a big announcement in October of 2017: "KFC revolutionizes foodservice supply chain with DHL." But a press release about the current situation is nowhere to be found. Should the company be more vocal? 
• Is it appropriate for KFC to blame DHL? In what ways does this both demonstrate and lack accountability?

News Conference About Florida Shooting

Officials have made statements about the school shooting in Parkland, Florida, that left 17 people dead and another 16 injured. Themes focus on healing—giving families and others affected time to mourn, charging the perpetrator, and preventing similar incidents from happening in the future.

As we typically see in these news conferences, multiple people give their perspective, and we may see the influence of their role and their personal views.

Political conversations about the FBI's role and gun control have already started. President Trump also made a statement after the tragedy.

Discussion:

• Analyze each person's contribution to the news conference. How do you see their role and their personal views affecting what they say and how they say it?
• What's your view about the political conversation: should we avoid talking about gun control now, or it this the best time? How do your own political views factor into your perspective?

L.L. Bean: Return Doesn't Mean Lifetime Replacement

L.L. Bean has had it with customers who abuse their generous return policy. The company is making two major changes: customers must return products within one year unless they are damaged, and customers must produce a receipt.

A company spokesperson explained the decision:

"If it's been over a year and someone is able to provide a proof of purchase and if the product does not fall within one of our Special Conditions such as products damaged by misuse, abuse, pet damage, personal reasons unrelated to product performance or satisfaction and more, we would honor the return."

Although it was a small percentage of customers, some had taken advantage of the product "guarantee." The question we might ask is, Why did it take so long? Or, why now?

Discussion:

• Why do you think L.L. Bean waited until now to tighten the return policy? What are the potential consequences of the decision?
• Assess the message to customers. Who are the primary and secondary audiences? How well does the message meets its objectives?
• How do you see this as an issue of integrity? How is L.L. Bean demonstrating learning from failure?

Misleading Headlines About the Market Dip

The stock market took a dive this week, but headlines are making it sound worse than it is. Here are three examples:

• FoxNews: "Investors hope for reversal after biggest stock market dip of all time"
• The Guardian: "Australian and Asian stock markets slide after Dow suffers biggest one-day points fall – as it happened"
• CNBC: "Dow's nearly 1,600-point plunge marks its biggest one-day point drop ever"

The headlines are technically correct that a nearly 1,600 point decline is the largest in U.S. history, but looking at only the point value is misleading. A percentage drop would be a better indication of the effect. This table represents the largest daily stock market losses. The display below is sorted by point loss; the table at right is sorted by percentage. You can see that 2018-02-05 falls in rank when we look at the percentage.

Also, the stock market has had incredible gains this past year, so the 26,000+ value could be viewed as an anomaly, and most analysts didn't believe those gains were sustainable.

Discussion:

• What are the ethical considerations for news agencies publishing these headlines?
• What might be a more appropriate headline for the news?

Perhaps this one-year chart helps keep the loss in perspective. It includes today's rebound of 567 points.

Toys "R" Demonstrates Vulnerability in Message to Customers

Struggling with competition from Amazon and Wal-Mart, retailer Toys "R" Us will close 1,600 stores to try to stay in business. The news follows the bankruptcy filing in September and may be the company's last chance.

In a message to customers posted on the website, Chairman and CEO David Brandon delivers the bad news and demonstrates vulnerability:

In addition to the update, Brandon confirms, in bullets, two issues that may be most relevant to customers now:

• We are open for business and ready to serve you.
• We are honoring customer programs.

Discussion:

• Read the entire message to customers. What are Brandon's objectives, and how well does he meet them?
• How does Brandon demonstrate learning from failure and vulnerability?
• Assess the message organization and writing style. What works well, and what could be improved?

MSU President's Resignation Letter

After calls for her resignation, Lou Anna Simon, the 13-year Michigan State University president submitted her letter. She could not escape criticism that she knew of Dr. Larry Nassar's sexual abuse of students and didn't do enough. Simons admitted encouraging an investigation and not receiving the final report. Reports also say that at least 14 university staff members received complaints about Nassar over two years.

Although most of the board initially supported her, students and others did not, and in the end, the board chair wrote, "We agree with Dr. Simon that it is now time for change."

Simon's letter is a mix of sympathy for the victims, love for the college, and defeat. In this paragraph, she focuses on blame:

As tragedies are politicized, blame is inevitable.  As president, it is only natural that I am the focus of this anger.  I understand, and that is why I have limited my personal statements.   Throughout my career, I have worked very hard to put Team MSU first.  Throughout my career, I have consistently and persistently spoken and worked on behalf of Team MSU.  I have tried to make it not about me.  I urge those who have supported my work to understand that I cannot make it about me now.  Therefore, I am tendering my resignation as president according to the terms of my employment agreement.

Discussion:

• Critics say Simon shifts accountability in her letter, particularly the paragraph above. What's your view?
• Did Simon make the right decision? Why or why not? 
• What should the university do to help the campus recover from this situation? How can they rebuild trust and make MSU feel like a safe place?

Calls for Michigan State President to Resign

Some believe it's a matter of integrity and accountability; others believe this will start the healing process. In addition to public demands, one Michigan State trustee says it's time for the university president to resign over Dr. Lawrence G. Nassar's sexual abuse of dozens of female athletes.

The rest of the university trustees have shown public support for the president, Lou Anna Simon. In a statement, they said, "President Simon is the right leader for the university, and she has our support." But the sole trustee, Mitch Lyons, disagrees:

“I don’t feel that President Simon can survive the public outcry that has been generated by this tragedy. I feel that our best recourse is for President Simon to resign immediately in order to allow the healing process to begin."

According to a Detriot News story, several university officials, including the president, heard complaints about Nassar. Simons admits, “I was informed that a sports medicine doctor was under investigation. I told people to play it straight up, and I did not receive a copy of the report. That’s the truth.” People question her judgment in not seeing the final report, particularly given the recent explosive case at Penn State University. We will see what happens next.

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Discussion:

• Should Simon resign? Why or why not?
• What does it take for Lyons to break rank with the rest of the trustees? How would you describe the possible dynamics on the board?
• How does such abuse go on for so long? About 140 women complained about Nassar when he was working with Olympic athletes, and at least eight students came forward at the Michigan State.
• At the end of the trustees' statement, a reporter asks, "Why no questions?" But the board leaves the room without saying anything. Should they have taken questions? Why or why not?

Neiman's Outgoing CEO Demonstrates Humility

It may be difficult for Karen Katz to leave her role as president and CEO of Neiman Marcus after 30 years of service. She will serve on the board, but she's been replaced with an outsider—Geoffroy van Raemdonck from Ralph Lauren. Katz will step down just about one year after her predecessor, who served for less than three years in the position.

According to a CNBC report, the retailer is struggling as many are today:

The move comes at a crucial time for the high-end department store, which has been working to restructure its roughly $4.4 billion in long-term net debt and readjust to the rapidly changing retail landscape.

In a news release, the company announced the change, and Katz is included in the list of people quoted:

It has been a unique privilege serving as CEO, and I am proud of the substantial progress and success our team has achieved. Geoffroy has an impressive track record of success at luxury brands, and he is the right person to lead the Company through this next phase of growth.

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Discussion:

• Read other news and opinions about Katz's departure. What is said in the company's news release, and what is perhaps unsaid?
• Should the company be more transparent about the decision in this statement? Why or why not?
• How does this CEO departure statement compare to others? Research other companies' statements to compare circumstances and approaches.
• In what ways does Katz demonstrate humility?