Monday, May 14, 2018

AT&T and Novartis doing damage control in light of Michael Cohen deals

AT&T and Novartis want to put the toothpaste back into the proverbial tube.

The companies made financial arrangements, through Donald Trump’s longtime fixer Michael Cohen, to curry favor with the newly installed Trump administration, one devoid of traditional D.C. lobbying ties.

Now, with Cohen under investigation by special prosecutor Robert Mueller, the companies are backtracking, removing executives who brokered the deals and apologizing to employees and customers.

Along the way, they’re delivering positive and negative examples of crisis communication.

A party line

AT&T’s current CEO wrote a note to employees admitting that the deal with Cohen was a mistake—an internal memo that quickly found its way into public circulation.

The New York Times wrote:

“Our company has been in the headlines for all the wrong reasons these last few days and our reputation has been damaged,” Mr. Stephenson wrote in a memo to employees. “There is no other way to say it — AT&T hiring Michael Cohen as a political consultant was a big mistake.”

Mr. Stephenson’s note followed the revelation that the company had paid Mr. Cohen $600,000 to advise on the $85.4 billion merger with Time Warner and other regulatory matters. Mr. Stephenson also said in the memo that the company’s head of lobbying and external affairs, Bob Quinn, 57, would be retiring.

AT&T wanted to develop a relationship with Trump so it could proceed with its planned $85 billion purchase of Time Warner, a deal opposed by the Trump administration.

Bloomberg wrote:

While it now acknowledges it was a mistake to hire Cohen, AT&T probably didn’t want to leave any stone unturned as it tried to read the signals from the new president who had repeatedly attacked Time Warner’s CNN and said his administration wouldn’t approve the deal.

Stephenson has staked the company’s future on the Time Warner acquisition. He argues that AT&T needs Time Warner’s media assets, including HBO and Turner Broadcasting, to help it compete in the age of Netflix and Amazon—especially as viewers drop costly pay-TV packages for cheaper options.

AT&T’s statement was released on Twitter:

Some aren’t ready to forgive the telecom company:

A bitter pill

Meanwhile, Novartis employees are angry over the drug giant’s financial entanglements with Cohen.

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STAT reported:

“Yesterday was not a good day for Novartis,” wrote [CEO] Vasant Narasimhan, a physician and former McKinsey consultant, who joined the drug maker more than a decade ago and oversaw global drug development before being promoted to chief executive this past February.

“Many of you have seen media reports regarding the Novartis relationship with Essential Consultants in the U.S. and many of you will feel disappointed and frustrated,” according to the email, which was shared with STAT by a Novartis employee.

Novartis tried to strike a personal tone in its response to the scandal, with Narasimhan sharing his own frustration over the agreement.

“We made a mistake entering into this engagement and as a consequence are being criticized by a world that expects more from us,” he continued. “Personally, for my family it was also a difficult day as unfounded stories spread through the U.S. news… I went to sleep frustrated and tired.”

The note is the most forceful response by the company, one of the world’s largest drug makers, to the overwhelmingly bad publicity about the one-year contract that Novartis signed early last year with Michael Cohen and his firm, Essential Consultants.

Novartis has laid blame on former employees.

The New York Times continued:

Novartis said its former chief executive, Joe Jimenez, hired Essential Consultants. Like Mr. Stephenson, Norvartis’ current chief executive, Vasant Narasimhan, also distanced himself from Mr. Cohen, saying this week that he had no role in the decision to hire Mr. Cohen.

Novartis said it discovered soon after signing the contract that Mr. Cohen could not provide the services he had promised and allowed the contract to expire.

The company may have some difficulty convincing readers that its financial ties to Cohen were unfruitful, however; the Trump administration has agreed not to lower Medicare drug prices, a major concession favoring the Swiss drug company.

Some have credited Novartis for its candor.

Part of the problem is the sum Novartis spent.

Axios wrote:

STAT reports that there "weren’t any contracts under which an individual company paid a single lobbying firm [as much as] $1.2 million in 2017," the amount the Swiss drug maker paid Michael Cohen.

The big picture: Cohen was expected to help the company navigate through political challenges as a consultant but was paid more than any lobbyist in D.C.

The takeaways

Here are four lessons for crisis communicators from these apologies:

1. Don’t forget your own people.

Employee anger, in part, is perpetuating the Novartis crisis.

STAT wrote:

According to one senior employee, speaking on the condition of anonymity, many who work there “feel disgusted.” This person added: “People are angry and confused, because it makes all of us look bad.”

When addressing a crisis, don’t overlook a vital contingent of stakeholders: your employees. They can be important assets in spreading your message; they also could work against you, if they feel abandoned or ignored.

2. Use internal memos to promote authenticity.

By allowing reporters to cover what the CEO is saying to company insiders, Novartis and AT&T are preventing reporters from wondering whether they are being told one story while other stakeholders get another. In today’s fast-paced online atmosphere, internal statements will find their way to media outlets anyway. Plan accordingly, and make sure your internal memo uses honest, direct and jargon-free language.

3. Admit when you’re wrong.

Castle Group founder and CEO Sandy Lish says: “This is a classic example of how companies can be swept into larger issues.

“By acknowledging that engaging Michael Cohen was a mistake—and directly addressing that this news made both of their companies look bad—the CEOs took an important step toward quelling external and internal outcry. They must continue to reassure stakeholders, and their own employees, about their ethics and values as they move forward.”

4. Don’t make it personal.

If your company has made a mistake, Lish says, executives’ emotions can send the wrong signal to employees and external stakeholders. (Remember BP’s chief executive, Tony Hayward?)

She says:

One thing that struck a wrong chord from the Novartis CEO’s employee letter: “Personally, for my family it was also a difficult day as unfounded stories spread through the U.S. news… I went to sleep frustrated and tired.” This is irrelevant in a communication designed for employees—it’s not about how this affects him personally. It can be hard to control emotion when crises are raging, but I would have removed that.

What do you think of the companies’ apologies, PR Daily readers?

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