Stronger Than Dirt

The litany of corporate accounting scandals is wide-ranging, some might say ingenious. Efforts to repair the damage -- and to guard against scandals in the first place -- must be even more so.

The Great Profile?

Accounting scandals gnaw at the heart of a company because accounting is the basic fiber of a corporation, asserts branding expert James Bell, a senior partner with Lippincott Mercer. The situation tends to be worse for high-profile companies than for their wallflower counterparts, he adds; press coverage, especially since it often focuses on the bad news, tends to prolong the problem.

The best response to a scandal? “Be clear, concise, and quick,” coaches Roulac, the management consultant. He applauds the message sent by Edward Breen immediately after taking office, when the new Tyco CEO restocked the entire board and sacked 50 top executives. Roulac does worry, however, that the grand gesture left Tyco with little corporate memory. He suggests that the company might have done better to keep two or three hand-picked officials from the prior regime, perhaps granting them emeritus status.

Joe Phelps notes that product recalls are easier to recover from than accounting scandals. He maintains that it’s easier for a company to repair a product — or the perception of safety — than to regain trust after a greedy executive has fudged the numbers. That loss of trust is exacerbated, says Aviv, when stakeholders are insulted by an atmosphere of old-boy politicking and arrogance.

Unsurprisingly, a new corporate name may come across simply as a further insult, as if the company were trying to sell the public a bill of goods. And as for repeat offenders, “If the same problems comes around again, it’s much worse [for the company image] the second time around,” counsels Phelps.

And not to be totally cynical, but “The public tends to be very forgiving if a company turns a profit,” says Marc Holland, the CEO and a host of in-flight-programming company Sky Radio Network. “I wouldn’t be surprised if the public forgave Enron if the company became profitable.” Interfor’s Aviv adds that although time may not always heal, at least it puts the right amount of distance between a scandal and public acceptance.

Each of the companies we examine in our cleanup profiles has plenty of work ahead — though as for the cleanups themselves, a single “strategic misstep,” however major, must be approached far differently than “breakdowns in financial controls.” Perhaps the lesson here comes not from Le Carré, but from Tolstoy: “All happy families are alike; every unhappy family is unhappy in its own way.”

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