The Biggest Corporate Image Catastrophes

By Stephen D. Simpson, CFA | July 29, 2010 AAA
The Biggest Corporate Image Catastrophes

It is a dubious testament to the well-greased PR machine of the corporate world that the general public tends to accept all manner of corporate malfeasance and blundering with barely a second look. But despite spending millions of dollars on PR, some companies still manage to muddy their reputations with tone-deaf responses to trouble. Let's look at some of the most egregious PR offenders of recent days.

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1. BP
BP
's (NYSE:BP) handling of the well explosion and subsequent oil spill in the Gulf of Mexico is going to go down as a classic case of horrible corporate public relations. Even though BP tried to stop the leak as soon as physically possible, tone-deaf comments from the now-former CEO quickly led to a thundering backlash. Much as Exxon Mobil (NYSE:XOM) never completely out-ran the legacy of the Valdez oil spill, it's likely that BP will always be stained by how it handled this accident. (For more insight on how much this type of disaster can cost, see The Most Expensive Oil Spills.)

2. Goldman Sachs
When the Blues Brothers told people they were on a mission from God, it became a classic line of cinema. When the CEO of Goldman Sachs (NYSE:GS) said words to basically the same effect, he became People's Exhibit A for the hubris of Wall Street. Later, when the public learned that Goldman was allegedly misleading some of its customers, paying huge bonuses and essentially lecturing the government on how things ought to be, the public said "enough". Truth be told, Goldman did not do anything new or anything that its peers have not done - it was just clumsy enough to do it in front of microphones at precisely the time when the public wanted contrition and modesty. (Find out more about why Goldman came under fire in The Goldman Sachs Accusation Explained.)

3. Toyota
Sometimes a company's well-earned reputation for quality comes back to bite it. Toyota (NYSE:TM) had long been regarded as an example of quality in both manufacturing and customer service. Yet, when reports first began to emerge that there was a problem with a sticky accelerator in some models, the company basically stonewalled.

After laughable excuses, including blaming the floor mats, Toyota ultimately acknowledged the problem and launched a recall. But in waiting so long to fess up to the problem, Toyota lost its gold-plated reputation as being a better kind of car company. Will buyers still pay up for a Toyota when the company has exposed itself as more like everybody else than people previously thought? (Learn about the impact of a recall in The Cost Of An Auto Recall.)

4. The "Big Three"
It is never an easy to sell to convince the public that their tax dollars should go toward bailing out companies that have run themselves into the ground. Auto industry executives made their job even harder in late 2008 when they flew to Washington, D.C. - aboard private jets - to plead their poverty in front of the Congress.

When Ford (NYSE:F), Chrylser and GM (OTC:MTLQQ) began hearing the backlash, their PR teams sprang into action - by pointing out that corporate policies required private jets "for safety reasons", and focusing on that issue was merely "diverting attention away from a critical debate". For those who do not remember, that "critical debate" was basically "gimme, gimme, gimme!"

Of course, keep in mind that GM later launched an ad campaign to talk about how it repaid its government loans - but then failed to mention that that payback was funded by other government funds made available to the company through the Troubled Asset Relief Program (TARP).

5. JetBlue
It is a sad statement of affairs when it is all but impossible for an airline to disappoint people's expectations of a flight experience. Really, at this point, most of us are just happy to have an indoor seat and arrive safely at our destination. Nevertheless, on a snowy Valentine's Day in 2007, JetBlue kept several plane loads of passengers sitting on the tarmac for hours - with one plane being held captive for nine hours. JetBlue eventually did apologize (five days later) and talked about a "customer bill of rights", but the damage had already been done. (Just how bad has flying become? Find out in 7 Air Travel Perks That Used To Be Free.)

6. Abercrombie & Fitch
Some companies just do not seem to learn. It seems like every other year or so, youth retailer Abercrombie & Fitch (NYSE:ANF) ticks off somebody with its behavior. Whether it's print ads that are a hair's breadth from soft-core porn, questionable taste (thongs for kids?), racist t-shirts, or company hiring policies that put the less-than-beautiful people in the back room, it is amazing to see a company that is so in tune with the tastes of its target market and so out of tune with larger society.

Yes, Abercrombie can reap a benefit by seeming edgy and rebellious, but the company treads on thin ice, and eventually even the edgiest and most rebellious stars become tiresome and yesterday's news.

7. Apple?
Perhaps it is testament to the loyalty of Apple (Nasdaq:AAPL) fans that the company does not join this list today. Much to the amazement of those of us who just do not "get" the love some people have for Apple, customers do not seem to be punishing the company for its antenna screw-up in the new iPhone.

Here, then, is a lesson - Apple has built up quite a reservoir of goodwill with its customer base and even though the company could have reacted faster and with a little more transparency, admitting that they screwed up and offering a free fix will likely prove enough to bury the memory of this screw-up in only a short period of time.

The Bottom Line
Boards of directors pay CEOs hundreds of times more than their workers, companies treat customers like cattle, and executives rarely find themselves called to account for slimy (if not illegal behavior). And yet, some companies nevertheless manage to push our sensibilities to the breaking point and earn themselves black eyes and yards of bad press.

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