Managing Ethical Crises

Instances of ethical misconduct still occur despite the best efforts of managers to implement policies and create an ethical culture. The way that you respond to an ethical crisis will determine the damage your organization sustains and the length of the recovery time.

Avoiding crises

By far the best way to handle an ethical crisis is to avoid it in the first place. Companies with well-constructed and effectively communicated ethics policies are better protected against corporate crisis and reputation issues than companies who consider such measures a luxury. It is not enough just to have policies in place—you need to monitor them constantly and update them to match the shifting, and increasingly stringent, expectations of your various stakeholders.

Try to anticipate potential crises, and consider your responses in advance: what would you do, for example, if a hacker gained access to your computer network and stole sensitive customer details? Or if one of your products had to be recalled?

Learning from mistakes

In 1995, the campaigning organization Greenpeace protested vocally against the way that oil giant Shell UK chose to dispose of Brent Spar, a storage facility in the North Sea. Shell’s failure to present its case to stakeholders eroded the company’s well-founded reputation for environmental responsibility. However, Shell learned from the experience, and implemented major stakeholder dialogue programs, including a website where anyone could question Shell about its environmental standards, and an annual report of its activities in improving social and environmental conditions.

Acting decisively

If a crisis situation does arise, you need to act fast to preserve the organization’s reputation. Acknowledge that the crisis exists, assign a team of specialists in all relevant areas to consult on actions, draw up and enact a crisis-management plan, and appoint a spokesperson to liaise with stakeholders and the media. If your organization is demonstrably at fault, accept responsibility and act promptly to compensate any injured parties. It is often in your best interests to exceed the minimum compensation; this shows that your organization cares about stakeholder interests.

Good communication is essential. Establish media contacts, rather than waiting for the media to approach you, and demonstrate that the organization is taking rapid action to resolve the situation. Failure to communicate strongly suggests that your company does not care or is trying to avoid blame.

Coping in crisis

Table

Fast track	Off track
Staying calm	Panicking during the crisis
Being honest with the public about the situation	Trying to cover up facts
Accepting responsibility when at fault	Assigning blame to others
Looking at the situation from the stakeholders’ perspectives	Focusing on internal politics and preoccupations
Communicating regularly with the public and media	Trying to keep a low profile