Five Things That Practitioners Need to Know About Crisis Management
At the Business and Securities Law Institute event, “The LifeCycle of a Crisis: Strategy, Response, and Management,” panelists discussed institutional responses to a wide range of scandals. From Larry Nasser’s crimes to automakers defrauding environmental regulators to corruption in Detroit’s government, panelists David Jaffe and Barbara McQuade, along with moderator Bradley Dizik, talked through what lawyers need to know about ethical crisis management.
#1. STOP. DON’T MAKE DECISIONS WITHOUT FACTS.
Pause and ask yourself: is the crisis an isolated problem, an accident, or deliberate misconduct?
Lawyers are seldom the first to know about an institutional crisis, yet they’re under pressure to make fast decisions. It’s critical to launch a thorough internal investigation. Learn what happened and who is involved. This will inform institutional decisions moving forward, and provide decision-makers with vital information about the scale (and possible consequences) of the problem.
During the investigation, do NOT take employees’ explanations at face value. Insiders are often inclined to make assumptions that will help the institution, and they may present those assumptions as facts. Their information is likely tainted by wishful thinking. Start by determining who is believable and who isn’t by tracking down the evidence to back employees’ claims.
When you complete the investigation, make a high-stakes decision. Determine whether your organization should voluntarily disclose a potentially criminal problem.
“If you voluntarily disclose a criminal problem, you can get a lot of credit for that – up to and including no criminal prosecution,” said McQuade. “It’s not a guarantee, but voluntary disclosure is one of the most important factors that prosecutors look at when considering criminal charges against corporations who engage in misconduct.”
#2. BE REALISTIC.
Separate what you know to be true from what you hope to be true. While leadership is motivated to minimize financial and reputational damages, there are certain sunk costs associated with institutional crises. It’s best to think ahead and accept those costs in a forthright manner.
“There’s going to be a narrative, and what you want desperately is to control the narrative,” said Jaffe. “And you probably can’t.”
Denying information that’s demonstrably true will gain you nothing – and will cause you to lose public credibility. Institutions often try desperately to protect facts that will inevitably leak. Such organizations fail to realize they could exert more influence over the case’s resolution by cooperating with investigators or by developing good relationships with the plaintiffs.
Don’t assume that all internal information is privileged; or that privilege is a protection from public outcry. Even if your claims of privilege are legitimate, if the privileged information gets out from another source, you will have expended a lot of social capital with the public and prosecutors for no benefit.
There are limits to your control, and overplaying your hand will ultimately compound your woes.
#3. CONSIDER COOPERATION.
When an institution cooperates with prosecution, it demonstrates proactive investment in the prevention of future crises. The nature of the interaction between the institution and the prosecutor can have far-reaching implications on the resolution of the case. Remember: prosecutors have a spectrum of remedies at their disposal (from fines to loss of licensure to criminal prosecution), and opting to cooperate can influence prosecutorial decisions.
It’s not a requirement, but companies can also elect to waive attorney-client privilege, and according to McQuade, waiving privilege is meaningful to prosecutors when determining whether or not an institution was cooperative. If you don’t elect to waive, she cautions that the over-aggressive assertion of privilege can count against an institution; again, not every document and email is privileged.
If your institution decides that they are not going to cooperate with prosecutors, above all, don’t lie about choosing not to cooperate. Don’t hold secret meetings, and don’t destroy documents. There’s no need to compound potential penalties with an obstruction of justice charge.
#4. THINK BEYOND THE LAW.
When asked to consider the role of lawyers in public relations work, Jaffe was quick to point out that “they’re usually really bad at it.” Thinking about a crisis only through the lens of the legal case can blind lawyers to the public implications. What goes on in the world reverberates in the courtroom – and can have bigger real-world consequences for the institution than the actual outcome of the case.
Rather than taking a short-term view and letting the case dictate PR decisions, partner with an experienced communicator, and think three steps down the road. The standard PR approach to crisis includes:
- Admitting what you did wrong (all at once, rather than in installments);
- Apologizing fully; and
- Explaining how you’re going to make it right.
Because PR rules don’t always work in an active legal situation, it’s critical for the legal team and public relations professionals to make collaborative decisions.
“Don’t let a litigator run your communications strategy – period,” advised Jaffe.
#5. LOOK OUT FOR YOURSELF.
It’s easier to find a professional environment that values ethical actions than it is to extricate yourself from an unethical environment mid-crisis – or mid-career. During your job search, pay attention to the culture: is it bottom-line focused? Is there an emphasis on delivering – even if the desired outcome is impossible? Are employees encouraged to question their leaders? If that’s not the case, those can be warning signs.
“You need to find this out on the front end,” said McQuade, “because when you’re in the midst of it, the shades of gray could overwhelm your ability to see black and white.”
Your career goals and financial security are common (and powerful) disincentives to taking a decisive moral stance during an institutional crisis. Both McQuade and Jaffe have seen employees struggle to be honest with themselves once the professional stakes are high. “After many years in a company, people begin to tell themselves lies,” said McQuade.
Jaffe concurred: “People tell themselves a lot of things to justify not leaving.” He encourages lawyers to determine if their actions can improve the situation, or if it’s so bad that they need to leave to legally protect themselves.
If the crisis your institution faces is sufficiently serious, you need to take protective actions on your own behalf, and understand the personal costs of doing the right thing.
Panelist Barbara L. McQuade served as the US attorney for the Eastern District of Michigan from 2010 to 2017, overseeing cases involving public corruption, corporate fraud, health care fraud, and theft of trade secrets. Prior to that role, she served as an assistant US attorney in Detroit for 12 years. She is also a legal analyst for NBC News and MSNBC, and is currently a professor from practice at Michigan Law.
Panelist David B. Jaffe spent 24 years in a wide range of executive leadership roles at Guardian Industries Corp., a $5 billion manufacturing company. He built and implemented Guardian’s first compliance function, and guided the company through international expansions. Today, he applies his decades of experience in building compliance and ethics programs at multinational companies at his own firm, Jaffe Counsel.
Moderator Bradley L. Dizik, is an ’09 MSU Law graduate. He started his career with brief stints at the SEC and the Committee on Capital Markets Regulation, followed by service as an associate with Weil, Gotshal & Manges. He currently guides clients through difficult reputational, legal, and regulatory challenges as president and founder of Tiberian Advisers LLC/Dizik PC.
SIDEBAR: Considering withholding documents on the basis of privilege? Ask these questions:
- Does privilege apply? Privilege exists when communication was generated for the purpose of legal advice; was intended to be confidential; and is to, from, or with an attorney.
- Is the information likely to leak to the media?
- Does this information also exist in non-privileged forms (emails to institutional outsiders, for instance)?
- Does this information make the institution look worse than it would otherwise look?
- Is the benefit of suppressing the information worth the cost of damaging relationships with the prosecutors and the public?