Crisis Management

What happens when leaders go ‘off-piste’?

How does a company cope when a senior leaders speaks out of turn?

It didn’t take long for the upcoming referendum on Britain remaining in the European Union to claim its first business leadership scalp. That swiftly became John Longworth after the British Chambers of Commerce director-general told the organisation’s annual conference that the UK ‘would be better off taking a decision to leave’ the EU. A day later, Longworth was temporarily suspended for breaching the chamber’s commitment to neutrality on the issue. After a further 24 hours, he resigned, denying he had been pressured into doing so.

Compared to transgressions by other business chiefs, Longworth’s comments, which he stressed were his personal views and did not reflect the chamber’s position, seem mild. Contrast his ‘crime’ with the 2013 revelations that Co-operative Bank chairman, the Rev Paul Flowers had been filmed apparently agreeing to buy cocaine and methamphetamine and had two years earlier, while working for Bradford Council, handed in for servicing a computer containing adult material.

More recently, the trial of former Dragons’ Den judge Doug Richards on charges of under-age sex threw up lurid claims about his taste for domination and submission role play. Richards was cleared of five charges in January.

Then there was former BP chairman Lord Browne’s admission of perjury in 2007 after lying to a court about how he met his gay lover. And the 2009 revelations that Aviva’s then chief executive Andrew Moss was having an affair with Deirdre Galvin, who was working for the company as a human resources director. Moss and Galvin later divorced their spouses and married each other.

An overreaction can just kick the story on and make the situation worse by creating both a reputational and succession crisis

The details of these allegations varied hugely in their scale, gravity and impact on the companies involved. Yet the issue for corporate communicators involved was roughly the same: what do you say and do when your company’s leadership goes ‘off-piste’?

The obvious first response, and one that Longworth and the BCC immediately employed, is to stress that the comments or actions are personal and in no way reflect the views of the organisations represented. ‘You have to just stress that it is a personal view and not reflective of the company’s position,’ says Louise Shield, director of external communications at insurance group RSA.

‘For example, most ‘Brexit’ positions of UK companies are reflective of a board decision. But it does become difficult. There’s such a fine line between a personal and a corporate view.’

Bobby Morse, chief executive of Buchanan Communications, agrees. ‘First and foremost, establish from the senior management what precisely is the company’s position in relation to the issue which is being aired,’ he advises. ‘If it differs from what was said by a leader who is a bit ‘off-piste’, it’s clearly a personal view from that leader and any communicator would need to re-iterate this, as well as reconfirming the company’s position on such an issue, if there is one.’

There are grades of gravity for such indiscretions, however, according to Jonathan Clare, executive chairman of PR agency Newgate Communications. ‘It’s very easy to say that something is somebody’s personal life and should be completely separate from their work life,’ he says. ‘But if what’s happening starts to interfere with their ability to function effectively as chief executive or chairman, that’s when it becomes an issue for the company.’

Clare does feel, however, that a business leader supporting a ‘Brexit’ when his board has the opposite view should fall into the category of a simple error of judgment. ‘If a chairman or chief executive came to me in those circumstances and said they wanted to write a letter to The Times, I would say they ought to go away and think about the effect that would have on the outside world and how the story is likely to be written. You’re just creating a problem where there doesn’t need to be one,’ he states.

Yet embarrassment by the boss can take many forms. Sometimes it can be comments about a subject of direct interest to the organisation, such as in 2007 when Robert Hiscox, then chairman of insurance group Hiscox, wrote a newspaper column declaring that if the Lloyd’s of London’s famous inside-out tower was ever bulldozed, nobody would bother rebuilding the insurance market.

This caused understandable questions for Hiscox’s Lloyd’s syndicate. Longworth’s comments, meanwhile, were especially controversial since they were about an issue on which its members are divided, with a recent survey of 2,000 BCC members finding a 60 to 30 per cent split in favour of staying in the EU with ten per cent undecided.

Phil Smith, managing director of Business West, the UK’s largest chamber in the BCC, said he was ‘appalled’ by Longworth’s comments while Richard Swart, a member of the north-east chamber, described them as a ‘dereliction of duty to most members’ views’.

BCC president Nora Senior said Longworth decided to step down because his personal view on the referendum was ‘likely to create confusion’. ‘All representatives of the BCC have the right to personal and political views on the key issues of the day,’ she added. ‘However, they are not expected to articulate these views while acting in their professional capacity, as their views could be misconstrued as representing the position of the organisation as a whole.’

Longworth said he had not been pressured to resign but had ‘voluntarily resigned’ in order to have ‘the freedom to express myself on the European referendum’. However, his resignation sparked a political outcry with London mayor Boris Johnson and former defence secretary Liam Fox, both prominent campaigners for the UK to leave the EU, weighing in on his behalf.

Johnson called Longworth’s treatment ‘scandalous’, while Fox said ministers should clarify if they were involved in any way in putting pressure on the BCC to suspend the director-general. Ten Downing Street said ‘no pressure’ had been put on the chamber.

Longworth is unlikely to be the last head of a major organisation to fall foul of the ‘Brexit’ issue, with large corporates coming under increasing pressure to declare where they stand on the EU referendum.

Other comments by top executives, meanwhile, can cause embarrassment precisely because they are not about a company’s own business or industry, such as the content of a letter from the then RSA chairman John Napier to President Obama in 2010.

The letter stated that Obama should act in a ‘more statesmanlike way’ in regard to his criticism of oil group BP following the Deepwater Horizon oil disaster, resulting in a flurry of media activity.

When there are criminal charges, the situation is more straightforward, though there can be issues of timing. In the Co-operative Bank case, Flowers resigned as chairman in June 2013, was suspended by the Methodist Church that November and convicted of drug possession the following year.

But in the recent trial of footballer Adam Johnson for sexual activity with a child, Margaret Byrne, the chief executive of his Premier League club Sunderland, faced accusations that she allowed the winger to continue to play for the team for nine months after being passed police interviews containing admissions of guilt. It was almost two weeks after Johnson’s conviction before Byrne resigned, admitting she had been aware of his guilt.

Tom Berry, chief executive of PR agency Chameleon, says: ‘How communicators should react depends on what sort of embarrassment has been caused and how ‘off-piste’ a CEO has gone. ‘Organisations have their policies, messages, principles and ethics and in the case of the BCC they have an independent stance but you cannot get away from the fact that CEOs are human beings under an awful lot of pressure.

‘You often get the sense that people who are supposed to take a party line and ‘eat their own dog food’ actually just want to say what they believe. So you then have to decide what is actually embarrassing to an organisation and what is just a CEO or senior person saying what they think.’

More serious issues, such as CEOs disparaging their company’s products, commenting unfairly on competitors or saying something outrageous, can have a negative impact on the share price and brand value and arouse regulatory trouble.

Berry believes that in such cases, the executives responsible need to ‘fall on their swords pretty quickly’. ’When a CEO just says something that’s a personal opinion on a matter that doesn’t contravene an organisation’s policy, you have to decide as an organisation whether this is going to have a longlasting negative impact on your brand value,’ he adds.

‘If it will, you have a duty of care to try to do something about it. If it doesn’t and is basically semantics, I would advise my clients to let it go but also take the CEO through why it wasn’t a great thing to say.’

You have to decide what is actually embarrassing to an organisation and what is just a CEO or senior person saying what they think

Claire Rudall, managing director for corporate and brand business at PR consultancy Brands2Life, believes that having an open and honest relationship between CEOs and communications teams can make the difference in dealing with slip-ups when they occur.

‘Ideally, there should be no surprises and significant differences of opinion should be addressed internally, before going external,’ she says. ‘However, leaders will occasionally shoot from the hip and communications teams need to be close enough to stakeholder audiences to explain credibly that this is the individual’s position, rather than that of the organisation.’

Other organisations might reach for their legal advisers before their communicators in such a situation. But Darrren Isaacs, a partner at GQ Employment Law, a specialist employment law practice, believes that adroit communications in a crisis is a business imperative.

He says: ‘The first thing you should be dealing with is the PR angle, rather than the legal and human resources aspects because the situation with Longworth being suspended and then going off and resigning actually created more negative press, with Boris Johnson wading into the debate and giving it a longer shelf life than it could have had.

‘I would always advise clients that the very first thing they need to do is to go on a positive PR offensive to try and contain the issue. That’s the most important thing from a business perspective. Quite often, lawyers and HR people only think of that as a second line or support for the business when actually it should definitely be the first line.

‘Legally, you then look at whether what the person is supposed to have done is so serious that it constitutes gross misconduct and you can’t possibly be expected to keep employing them.’

This argument finds agreement from George Trefgarne, the former Maitland partner who is now chief executive of boutique communications consultancy Boscobel & Partners.

‘The key thing in a situation like this is not to overreact and to inflame the situation,’ he says. ‘An overreaction can just kick the story on and make the situation worse by creating both a reputational and succession crisis.’

At least the next director-general of the British Chambers of Commerce should have no doubt what’s politically unacceptable at one of the nation’s leading business organisations. Lightning, after all, doesn’t strike twice in the same place. Does it?

This article first appeared in issue 104