Do lawyers rule the corporate roost? Article icon

Do

In an episode of the US legal drama The Good Wife, a PR supremo and a lawyer clash about the best way for a chief executive whose poisoned cheese has been killing school kids to handle a press conference.

The tension between the lawyer and the spinmeister will be recognised by most crisis experts. The lawyer wants to stonewall, while the PR pushes for ‘the full Toyota’.

It’s a funny episode but should make uncomfortable viewing for communicators who increasingly appear to struggle to gain the upper hand in today’s increasingly litigious world.

Back to the real world and most communicators seem to blame the lawyers for the disastrous handling at Thomas Cook of the tragic deaths of two young children, Christi and Bobby Shepherd, who died from carbon monoxide poisoning in their holiday villa.

More recently, another leading British company, Merlin Entertainments, owner of Alton Towers, is following its crisis plan – advised by Andrew Grant, founder at Tulchan Communications – after an accident on a rollercoaster left five people in hospital, with very serious injuries.

Perhaps with the Thomas Cook saga fresh in communicators’ minds, Merlin’s chief executive Nick Varney has made himself available for extensive TV and newspaper interviews, apologising in a way that appears to be genuine and unmediated by overly restrictive legal guidance.

Alton Towers was temporarily closed and similar rollercoaster rides have been suspended at other amusement parks owned by Merlin Entertainment while an investigation is undertaken. And when it emerged that one of those injured had suffered an above-the-knee amputation, the company revealed it had written to all 16 people affected by the accident, accepting full responsibility, irrespective of the outcome of its own investigation.

‘We have recommended each of the injured guests or their families instruct a lawyer and submit a claim for compensation which we will ensure is dealt with swiftly and sensitively,’ it concluded.

Seasoned communicators point to three examples in recent British corporate history where legal advice appears to have been followed to the exclusion of other advice, with disastrous reputational consequences.

First there is Thomas Cook, where the company had nine years to prepare its response but seemed to flounder when it was hit by a new wave of public criticism following an inquest in which a jury reached a verdict of unlawful killing and ruled that Thomas Cook had breached its duty of care.

Journalist Nils Pratley wrote in the Guardian that a half apology given last month by relatively new chief executive Peter Fankhauser was ‘a textbook example of giving lawyers too much influence’.

Then there are BP and News UK, where both companies suffered tangible and costly reputational damage after allowing lawyers to dictate how they communicated through a crisis. Indeed, BP’s shares have never made up ground since the Deep Horizon disaster.

Victoria Tomlinson, chief executive and founder of Northern Lights PR, is concerned about the creeping influence of lawyers and also of insurers, who many say are more likely than lawyers to object to apologies or admissions of responsibility, in case it is considered an admission of financial liability.

Tomlinson says: ‘Lawyers and insurers are beginning to run companies and stopping them doing the decent thing. Of course, lawyers have a job to do but what is needed is help for business leaders, for many of whom it is the first time they have to decide between following the lawyers’ advice and heeding the communications advisor.

‘A lawyer’s advice is persuasive because it is so commercially obvious. They can say you could be sued for up to £x million. That is a strong business case, but look at what can happen over the long term if reputation is damaged. In Thomas Cook’s case there has been a share price fall and reportedly a 50 per cent drop in Google searches for Thomas Cook holidays.’

Tomlinson is not alone in her concerns. The trouble is that lawyers are trained to be risk averse and to point up potential legal problems. They will look only at the ‘evidence’ or ‘facts’ in front of them, at that time, rather than the balance of probabilities, or possible future developments.

One communicator who has seen this in practice, to the later detriment of the company, says: ‘Many lawyers – with the exception of those at the top of their profession – will have a very black and white interpretation, no degree of pragmatism and will always default to the most cautious solution. That’s what they are paid to do.’

Where things go wrong for companies is when people mistake legal advice for the external communication strategy. In a well-run and transparent business that cares about its reputation, the chief executive will take legal advice alongside the advice of other key advisers in the corporate and communications team.

A director of communications says: ‘A good experienced management team should take a deep breath, step back and look at the bigger picture. They won’t simply default to legal.’

Andrew Griffin, chief executive of crisis and issues consultancy Regester Larkin, says: ‘Good business leaders and crisis team leaders listen to both equally. A crisis usually plays out in the court of public opinion first, but plays out in the court of law at some stage. Planning for only one of those court appearances is a job half done.’

John Keefe, director of public affairs at Eurotunnel, says he is lucky to have a collaborative and positive working relationship with his legal counterpart, who has never tried to constrain how the company communicates with its passengers and the outside world, even through two non-fatal Channel Tunnel fires in 1996 and 2008.

‘When there is disruption, damage or injury, you need to find a formula that allows people to know that you recognise that something has gone wrong within your zone of control. People need to know that you are considering your part in a crisis and are not just covering your arse,’

He adds: ‘People are suspicious of business when it does not speak to people in their own language.’

For those reasons, Eurotunnel always apologises for disruption and for delays. ‘In some people’s book, it is an admission of liability. For us it is an admission of care for the people who are using your service,’ Keefe says.

Eurotunnel has rehearsed how it would communicate in the event of a more serious or tragic event. ‘If the worst happens, the first thing to do is acknowledge the loss. If it [an apology] comes up front and is sincere as a voluntary gesture it carries far more weight. If it is extracted and comes late, it is never perceived as genuine. People think you were forced into it.’

Another area where lawyers and comms advisers frequently fall out is over payouts for underperforming executives. One director of comms recalls a lawyer stating adamantly that an executive at the centre of a crisis would have to be paid out ‘because there was no evidence of any wrongdoing on their part’.

However, a common sense interpretation – which later turned out to be a correct reading of it – would deem that the departing executive was ‘up to their eyeballs in it’ and that public opinion would be aghast at them receiving a so-called ‘payment for failure’.

Experienced communicators often use their gut instinct or feeling, honed by years of working, to know what may be the right thing to say or do, but lawyers are trained to consider only the facts in front of them.

Chris Scott, a partner at law firm Schillings, which has advised about a quarter of the UK’s leading companies about reputational matters says: ‘It’s always convenient to blame the lawyers but they are there to advise the company and the senior executives and have a clear role to protect the business. They are not going to take a risk that damages the business without good reason, but they don’t have a veto.’

Even the director of communications who confides that he spends his whole life ‘fighting lawyers’ admits that his contemporaries cannot really blame them, when communications backfire.

‘You have to blame the board because it is their job to take a balanced view and listen to those they pay to bring the outside world in. A good chief executive is able to take all that on board and be unafraid to take unpopular decisions quickly,’ he says. ‘Once you start down the road of an overly-legalistic response and position – it is often very hard to claw your way back from that route.’

Thomas Cook has certainly found that – its legal strategy was set in place nine years ago when the tragedy first occurred and was not significantly changed for the British inquest, which triggered the recent public outrage.

Jonathan Hemus, founder and managing director of Insignia Communications, crisis management training consultancy, agrees a strong focus on legal risk has the potential to increase reputational risk and vice-versa.

‘My view is that your reputation is your most valuable asset and long-term protection of your reputation must be achieved at almost all costs. Protecting your legal risk often results only in a short-term benefit,’ Hemus suggests.

Despite the Thomas Cook story, Hemus argues that it is wrong to think that lawyers are increasingly winning out in this scenario.

‘The world is more litigious but there is also increasing recognition of the role of communicators. You only have to look at social media to see that reputation is becoming much more central. Anyone who thinks that the law is a way of protecting reputation is living in a fools’ paradise,’ Hemus says.

Worryingly, though, many boards have no idea how social media works, or how quickly problems can arise from it. ‘Many boards think using it is like admitting to watching soaps – it’s a bit naff and below their pay grade,’ Tomlinson says.

Such arrogance can bring companies down rapidly. Failure to prepare and discuss crisis scenarios is not as uncommon as you might suppose.

Many organisations fall into the same trap that Thomas Cook did. In the tour operator’s case the problems were exacerbated by a financial crisis. Four years ago, it almost collapsed under the weight of debts totaling £1.5 billion. Since the tragedy, there have been numerous senior management changes, resulting in a lack of corporate memory and an entrenched view that only the supplier was at fault – as the Greek courts had found – and inquest dates that always seemed far off.

In a crisis, or in the wake of a problem, there is a temptation for companies to be as low profile as possible and wait for the storm to pass. Usually, though, that is never in the best interests of the organisation. Even The Good Wife’s cheese-selling chief executive could see that.