Ben DiPietro, The Wall Street Journal’s Risk & Compliance Journal, September 29, 2014
In this new feature we invite crisis management and reputation experts to dissect a story in the news and offer their views on how well the companies responded externally. This week’s post focuses on news that U.K.-based supermarket chain Tesco PLC overstated its first-half profit estimate by more than $400 million.
Since news of the shortfall was made public the company has suspended four senior executives and called in outside auditors and attorneys to investigate. It also moved up the starting date for its new chief financial officer, who was supposed to take over in December but who now is starting immediately. We asked our crisis and reputation experts if the actions taken by Chief Executive Dave Lewis—who assumed the top job just last month—are sufficient to quell the negative publicity.
Davia Temin, president and CEO, Temin and Co.: “When companies are this troubled, new issues keep bubbling up, as this latest one seemingly did. And that is in direct conflict with crisis management rule 101–get all of the bad news out right away, don’t let it trickle out–so that once it is all in the open, you can focus on the fixes.
“What is at issue, of course, is trust. The trust of investors, employees, and the public has been breached multiple times, and it will take more than assurances to rebuild that trust. Mounting an internal investigation is a start, but those investigations by lawyers and accounting firms are often ‘managed’ publicly and investors and the public know it. Therefore it will take an extraordinary leap of transparency to get all the bad news out there–the full findings of professional investigators–and then to radically clean house. The new CEO and CFO need to leave nothing buried, and to rebuild the strategy and team from the ground up.
“Will this be enough to win back investors, employees, customers? The jury is out. But no one has tolerance any more for repeated errors in judgment, strategy and fiduciary responsibility. Fairly or unfairly, in this environment, the new management team has about a month to move quickly and prove their power to right this ship.”
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