Reputational Stumbles of the Week: Chevron, the Coal Industry, and Facebook

Last Updated May 16, 2011 7:52 PM EDT

Companies know they put their reputation on the line when they do something wrong, but often forget they can take a worse reputational hit from trying to spin it. Last week, these three companies tarnished their reputations by trying to enhance them -- inflicting some collateral damage on those around them as well.

Chevron
Aguinda v. ChevronTexaco is one of the most complicated and drawn-out global lawsuits in history, seeking damages for the environmental and health impacts of oil extraction in Ecuador dating back to the 1960s. It's the subject of a documentary called Crude from director Joe Berlinger and has been featured on 60 Minutes.

Chevron (CVX), the successor defendant following its purchase of Texaco, is currently appealing an $18 billion judgment. An independent report released this week criticizes the financial, operational, and reputational risks of Chevron's response to the judgment. It will be dismissed by some because it was commissioned by Amazon Watch and Rainforest Action Network, who are frank about their own point of view. (Their website is called ChevronToxico: The Campaign for Justice in Ecuador.)

But it is hard to dispute the findings by Simon Billenness and Sanford Lewis that the company's admissions about its liability risks in court documents are inconsistent with its financial reports and that its legal and public relations strategy poses an unacceptably high risk. It isn't only the "Chevron-Toxico" logo that is leaking toxic material.

The coal industry and Scholastic
School budgets are getting slashed and some companies are helping out by providing resources. This can be a win-win when it enhances a company's brand as a community supporter. But it backfired on the coal industry this week when it turned out that curriculum materials it provided at no charge to 4th grade classrooms across the country served mostly as an infomercial for coal.

It covered the "benefits of coal and the pervasiveness of power plants fueled by it -- and omitted mention of minor things like toxic waste, mountain-top removal and greenhouse gases." Coal companies apparently hoped to win the hearts and minds of eight-year-olds, but found themselves on the wrong side of a New York Times editorial.

This was a repuational two-fer as the materials' distributor, the admired children's publisher Scholastic (SCHL), was subjected to a campaign of protest letters to CEO Richard Robinson organized by the Campaign for a Commercial-Free Childhood. Its weak response that the materials were not intended to be the entire curriculum was disingenuous and disappointing. Scholastic has promised to reconsider its "partnerships."

Facebook
And it was just last week that we learned that Facebook hired public relations firm Burson-Marsteller to spread bad stories about Google. What is this, middle school? Burson-Marsteller, which didn't know enough about public relations to prevent this hit to its reputation, at least understands crisis management well enough to have mustered a prompt, frank apology. It has acknowledged that this was a violation of its own principles and has promised to do better in the future.
Facebook, on the other hand, perpetuates its own poor reputation for transparency, invasion of privacy and reliability with a whine: "No 'smear' campaign was authorized or intended." No smear campaign could have hurt Facebook as much as its attempt to hide its involvement in smearing Google. Remember the middle school saying about the rubber and the glue.

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  • Nell Minow

    Nell Minow, a member of the board of GovernanceMetrics International and founder of The Corporate Library, writes about corporate governance issues, focusing especially on CEO pay, executive compensation, shareholder rights and best business practices.You can follow her on Twitter at @nminow.

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