Weekly November 2, 2012
Sandy: A Shrill Lesson from the Lâ€™Aquila Earthquake
03 Contents 04 09 10 14 18 19 20 COVER Image: In late October 2012 Hurricane Sandy affected at least 24 states in the United States, from Florida to New
England, with tropical storm force winds stretching far inland and mountain snows in West Virginia. The cyclone brought a destructive storm surge to New York City on the evening of October 29, flooding numerous streets, tunnels and subway lines in Lower Manhattan and other areas of the city and cutting off electricity in many parts of the city and its suburbs. Extensive damage occurred in New Jersey, especially in the communities along the Jersey Shore.
A Shrill Lesson from the Lâ€™Aquila Earthquake
Amgenâ€™s Widespread Repercussions with Paul Ferrillo Initial Public Offerings with Alex Lynch
Monster Needs to Wake Up & Smell the Coffee Communicating Difficult Decisions NACD Boardvision Blogs
In the News
ust before Hurricane Sandy struck
This language went dramatically beyond clear
New York and New Jersey with full
simple communications. It was more than an
force on October 29, there was a bit
impassioned plea. Consider the use of the word
of mild disagreement among a few
“remains” to instill a frightening visual impres-
communications and media observers
sion, conjuring up disturbing physical images
as to the appropriateness of the public safety warnings, New Jersey’s in particular.
A Shrill Lesson from the L’Aquila Earthquake
supportive messages in equally pointed upper-
issues of thunderous importance (pun in-
case language. The storm was expected to
tended) as it now seems that hundreds of lives,
“slam” into the coast. Sandy is “potentially
at least, hung in the balance. It also leads to
historic,” injuries are “probably unavoidable,”
an odd but, we’d argue, fairly credible conclu-
and so forth. The NWS concluded with advice
sion: that the approach to the looming disaster
to “err on the side of caution.”
directly conditioned by extraordinary events
Originally Published on Forbes.com
The advisory continued on with powerfully
In retrospect, that “mild disagreement” raises
by public officials, at least in New Jersey, was
Richard S. Levick, Esq.
of what will happen if you don’t comply.
in Italy where, just a few days before Sandy, six scientists and one government official were sent to jail for not adequately preparing the population ahead of the L’Aquila earthquake that killed over 300 people.
When we first read the warning, it seemed the NWS was doing just that itself: erring on the side of caution. As it turned out, there was no erring about it at all, as the storm turned out to be at least as bad, probably worse, than expected. As of this writing, there have been over 50 deaths and the protracted power outage is
On the Sunday afternoon preceding Sandy,
back-breaking. (Rumors in New Jersey put full
the National Weather Service (NWS) in Mount
recovery at up to two weeks.)
Holly, N.J. provided an advisory designed to spook and shock resistant evacuees. Shouting in caps, the warning included language that particularly caught the attention of communications professionals:
Commentators who, just before the storm, were wondering if “the tone of the service’s Sunday evening message was completely appropriate” might reflect on what it really
If you are reluctant, think about your loved ones, think about the emergency responders who will be unable to reach you when you make the panicked phone call to be rescued, think about the rescue/recovery teams who will rescue you if you are injured or recover your remains if you do not survive.
Anton Oparin / Shutterstock.com
lev radin / Shutterstock.com
means to err on the side of caution in all
because there was no power for either fridge
professional communications. Sometimes
or TV. Bloomberg’s lighter tone certainly did
it means being very guarded in tone; some-
no harm, as his comments in no way left any-
times it means being extremely bold. In other
one less prepared for the torrent to come. But
words, caution is not necessarily synonymous
you do have to hand it to New Jersey Gov. Chris
Christie. The same guy who predicted that the
We were particularly struck by one article praising Mayor Michael Bloomberg for being rather more congenial about the whole thing than his counterparts in New Jersey. Bloomberg did discharge his duties strongly and responsibly, likewise warning citizens that failure to evacuate threatens the lives of the first
dynamics of the race seems to have had the best gut sense for the kind of communications that would work most effectively here as well. Christie is now winning plaudits for his “trademark bluntness and aplomb” in handling the storm emergency.
responders. At the same time, the article quotes
It may be a “trademark” approach, but his
him as suggesting that people “sit back, have a
strategy could only have been encouraged by
sandwich from the fridge, watch television.”
the six-year sentences handed down in Italy
Well, you couldn’t actually have a sandwich or watch a ballgame in many areas of the city
Denver Presidential debate would change the
because of “falsely reassuring” statements before the 2009 L’Aquila earthquake. Close in
Anton Oparin / Shutterstock.com
tone to Bloomberg’s attempted insouciance,
kind of dire warnings that Sandy prompted in
Bernardo De Bernardinis, then deputy chief
New Jersey but something more was obviously
of Italy’s Civil Protection Department, had
needed in Italy, if only a reminder that it’s not
advised residents to go home and have some
really worth risking your life just because the
wine. “Absolutely a Montepulciano,” he added.
probability of disaster is very low.
Amgen’s Widespread Repercussions with Paul Ferrillo
It was, in hindsight, a gratuitous comment that enraged many Italians and helped convict De Bernardinis. Were the court sentences fair? I hardly think so. Did Christie face similar penalties had he been anything less than blunt and even scarifying? Of course not, but the governor reads the news. Just a day or two before Sandy, the Italian debacle had to be, at the very least, a reminder not to pull a single punch; again, to err on the side of caution by being as
Disaster planning is all about risk management
blustery as possible.
and risk management is often about com-
From a communications standpoint, the events in Italy are all the more pertinent because those convicted were not convicted for failing to predict the earthquake. Earthquake prediction is a difficult science to ever get right, as an international commission on forecasting set up after L’Aquila reminded us. An earthquake is a potential “hazard…all the time,” said one commission member. On the other hand, there were tremors before the L’Aquila quake. In similar past instances, residents would typically sleep in their cars, just to be sure. Here, according to the allegation, the assurances by the scientists directly led to people deciding it was all right to stay indoors. The defendants are thus going to jail for failing to communicate. It’s not reasonable
munications. To be sure, there are significant lessons for business here, underscored by our current public preoccupation with transparency and accountability. When you prepare for problems, you must calibrate the communications. Sometimes you need to shout like Chris Christie. Sometimes a prominent disclaimer will suffice.
In this LEVICK Daily video interview, we discuss the class certification issues raised by the Amgen litigation with Paul Ferrillo, Senior Securities Litigator with Weil Gotshal & Manges, LLP. With
The one thing businesses can be sure of is
cases such as Amgen and Walmart bringing more clarity to class certification issues, companies
that, when there’s any possibility of a disaster
—and especially those in the public sphere—need to carefully consider how they share news
(e.g., product recall, insider trading arrest, you
affecting the company and what to say when events don’t transpire as planned.
name it), more than a bottle of Montepulciano will be needed. L Richard S. Levick, Esq., President and CEO of LEVICK, represents countries and companies in the highest-stakes global communications matters—from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church.
to have expected those tremors to incite the
Initial Public Offerings with Alex Lynch
What is to be learned from the less than stellar IPOs issued by Groupon and Facebook in recent months? What are the lessons for companies outside the technology sector? Alexander Lynch: The primary lessons from the Groupon and Facebook IPOs are not only applicable to technology companies but are
Richard S. Levick, Esq. Originally Published on LEVICK Daily
applicable to all companies looking to complete an IPO. First, listen to your advisors. IPO companies should retain advisors who are experienced in
Over the next several weeks, LEVICK Daily
the IPO process and can help it avoid the many
will share selected interviews from our
pitfalls. One of the most common pitfalls is
recent NACD Directorship article entitled
gun-jumping or marketing the IPO outside of
“What’s Next? The Top Issues of 2013 and
the typical registration process. Gun-jumping
Beyond.” Today, we feature a discussion
can delay your offering, result in liability, and
on initial public offerings (IPOs) with Alex
produce bad press during the roadshow. Many
Lynch, a partner in Weil Gotshal’s Capital
of the gun-jumping issues in the Groupon IPO
could have been avoided if the standard advice
Mr. Lynch focuses on the representation of companies, particularly technology, health-
Second, when setting the valuation of the IPO,
care, financial services, and other growth en-
leave some room for the stock to appreciate
terprises, as well as leading investment banks
and be mindful of who is being allocated stock.
and private equity firms. He has extensive
Facebook priced its IPO at a rich valuation
experience in equity capital markets transac-
and increased the number of shares sold in
tions, with a particular focus on initial public
the offering. IPO companies need to balance
offerings. He also advises boards on securities
between trying to maximize the price and the
and corporate governance matters.
size of the offering and selecting the right type
At the conclusion of the interview, you can find LEVICK’s own communications best practices appended.
lev radin / Shutterstock.com
regarding publicity had been followed.
of IPO investors and letting those new investors enjoy some success. A rich valuation and large deal size can reduce the demand for the stock in the market after an IPO. In addition,
How can boards of directors best prepare themselves for the transition from private to public ownership? Alexander Lynch: Remember, IPOs are the beginning; not the end. An IPO will not be the last time the IPO company accesses the mar-
lenges faced by the IPO company and ensure that they are manageable. Make any necessary changes to the business, management or advisors before the IPO process to avoid having to make these changes during the IPO when public scrutiny is most intense.
ket. Preparation for life as a public company
In connection with considering an IPO, I
is critical for success. Also, a well-executed
advise boards and management teams to
IPO provides a substantial amount of goodwill
act like they run a public company before
and positive publicity, while a poorly executed
being public. L
IPO can damage an IPO company’s reputation
Richard S. Levick, Esq., President and CEO of LEVICK, repre-
for a long time. Accordingly, preparation by
sents countries and companies in the highest-stakes global
the board is critical.
communications matters—from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church.
allocating IPO shares to hedge funds and indi-
and alert the IPO company’s advisors of any
vidual investors rather than long-only mutual
funds can result in increased selling pressure if things don’t go well. Remember, an IPO is not the last time to the market.
What are the responsibilities of boards of directors in the IPO process? Alexander Lynch: Directors have a number of unique responsibilities in the IPO process. First and foremost, directors have personal liabil-
company’s readiness to be a public company. Make sure you have the right management
Second, focus on accounting issues. Is the IPO
team in place. Confirm that you have the right
company ready to report on a quarterly basis?
accountants and attorneys. Assess the chal-
This post is excerpted from Richard Levick’s recent NACD Directorship feature “What’s Next? The Top Issues of 2013 and Beyond.” To read the full article and learn more about the most significant issues impacting boardrooms today, click here.
Can it produce financial statements on a timely
BEST COMMUNICATIONS PRACTICES:
basis? Are there any accounting policies that need to be reconsidered? Do you have any material weaknesses or significant deficiencies? If so, how are they being remediated and will they be remediated in advance of the IPO?
ity for material misstatements and omissions
And third, make sure the IPO company is
in the registration statement and prospectus.
ready to be public by asking the tough ques-
Directors also personally sign the registration
tions. Do you have the right management team
statement. As a result, it is critical for directors
in place? Why is the IPO company going pub-
to give themselves the time necessary to read
lic? Is the business model mature enough to
and review the registration statement carefully
withstand investor scrutiny? If you don’t have
in advance of the initial filing and throughout
the right answers to these questions, the IPO
the process. They should then compare the dis-
company is likely not ready to be public.
closure to what they know about the business
Be honest in your assessment of the IPO
The price at which you set your IPO communicates a lot about your value proposition. What happens to that price after the offering communicates even more. Boards need to maintain investor confidence by allowing room for the share price to grow.
The IPO is the beginning, not the end. It is not only a financial event, but a corporate branding opportunity. Boards need to ensure that newly-public companies communicate their value just as aggressively post-IPO as they do in the critical months leading up to it.
Boards need to be ready for circumstances in which high IPO trading volume creates glitches in the system that cost investors’ money and has a negative impact on trust in the system. Companies need to be ready with statements that can forestall chaos and confusion under all anticipated contingencies.
Monster needs to Wake Up & Smell
the Coffee Gene Grabowski Originally Published on LEVICK Daily
he U.S. Food and Drug Administra-
other stimulants could have horrible conse-
tion (FDA) is now investigating five
quences—especially for children. All the while,
deaths and one non-lethal heart
the market for these drinks has seemed to
attack that have been linked to Monster energy drinks. The FDA inquiry came after Monster Beverage Corp. was sued in California Superior Court by the parents of a 14-year-old Maryland girl who claim the company’s marquee product caused their daughter’s cardiac arrest.
expand exponentially. Now, however, it seems the safety questions have reached critical mass. On the day the
If Monster tries to ride out a storm this size without protecting itself better, it will likely pay a very painful price in brand damage and litigation costs.”
Maryland parents announced their lawsuit, Monster’s share price dropped 16 percent. That alone is evidence that the radio-silence strategy
The actions are just the latest salvo against
simply isn’t going to work anymore. Monster
Monster and other energy drink makers whose
and others need to stop letting media critics,
products have caused increasing concern
concerned parents, lawmakers, regulators, and
among food and beverage safety advocates.
plaintiffs’ attorneys tell their story for them.
As the inquiries have grown, we’ve heard little
Even if Monster wins costly court cases, more
in response to allegations that consuming con-
are sure to follow unless the company takes
centrated amounts of caffeine, sugar, and
steps to head them off now.
As a start, the company needs to engage its crit-
Both the third party experts and the most
ics in the digital venues that dominate prod-
supportive facts need to be front and center in
uct perceptions today. Right now, Monster’s
company blog posts and during every effort
website (screenshot left) is extremely dark,
to engage the digital and traditional media
mysterious, foreboding and in many places,
influencers who are now controlling Monster’s
sexually themed. That’s perfect for attracting
story online and in the mainstream media.
the disaffected, rebellious teenagers to whom the company markets. Unfortunately, about a third of the visitors to its site now are parents, lawyers, regulators and aides to crusading lawmakers. Their prejudices and suspicions are being reinforced by what they see. As such, the site needs to consider showing some lessthreatening images and highlighting some positive information to meet the concerns of these critical audiences. At the same time, Monster needs to enlist some
If Monster tries to ride out a storm this size without protecting itself better, it will likely pay a very painful price in brand damage and litigation costs. Until now, only teens and 20-somethings were paying attention to Monster. Now it’s under the scrutiny of frightened moms and dads, their lawyers, and the FDA. That should be enough to energize any company. L Gene Grabowski is an Executive Vice President at LEVICK and a contributing author to LEVICK Daily.
expert support—whether they be food scientists, nutritionists, researchers, or even successful athletes and entertainers—that can attest to the safety and efficacy of its product. Above all, the company must repeatedly hammer home the best fact on its side now: that a can of Monster contains less caffeine than a Starbucks’ Image public domain. monsterenergy.com
Communicating Difficult Decisions
In this edition of NACD BoardVision, we explore the communications options available to corporate leaders in this challenging economic environment with Mary Ann Cloyd, a Leader in the PwC Center for Board Governance, and Peter Gleason, the Managing Director and CFO for the National Association of Corporate Directors. In an era of belt-tightening across the business landscape, honesty and transparency are essential to ensuring that difficult decisions are not only understood, but accepted and eventually embraced by employees, customers, and the full gamut of corporate stakeholders.
Financial Communications Litigation Corporate & Reputation Public Affairs Crisis
BLOGS worth following Thought leaders
Amber Naslund brasstackthinking.com
Holmes Report holmesreport.com
Amber Naslund is a coauthor of The Now Revolution. The book discusses the impact of the social web and how businesses need to “adapt to the new era of instantaneous business.
A source of news, knowledge, and career information for public relations professionals.
Brian Halligan hubspot.com/company/management/brian-halligan HubSpot CEO and Founder.
The National Association of Corporate Directors (NACD) blog provides insight on corporate governanceand leading board practices.
Chris Brogan Chrisbrogan.com
PR Week prweekus.com
Chris Brogan is an American author, journalist, marketing consultant, and frequent speaker about social media marketing.
PRWeek is a vital part of the PR and communications industries in the US, providing timely news, reviews, profiles, techniques, and ground-breaking research.
David Meerman Scott davidmeermanscott.com
PR Daily News prdaily.com
David Meerman Scott is an American online marketing strategist, and author of several books on marketing, most notably The New Rules of Marketing and PR with over 250,000 copies in print in more than 25 languages.
Guy Kawasaki guykawasaki.com
Guy Kawasaki is a Silicon Valley venture capitalist, bestselling author, and Apple Fellow. He was one of the Apple employees originally responsible for marketing the Macintosh in 1984.
PR Daily provides public relations professionals, social media specialists and marketing communicators with a daily news feed.
BUSINESS Related FastCompany fastcompany.com
Fast Company is the world’s leading progressive business media brand, with a unique editorial focus on business, design, and technology.
Jay Baer jaybaer.com
Jay Baer is coauthor of, “The Now Revolution: 7 Shifts to Make Your Business Faster, Smarter and More Social.
Forbes is a leading source for reliable business news and financial information for the Worlds business leaders.
Rachel Botsman rachelbotsman.com
Rachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration and sharing through network technologies.
Seth Godin sethgodin.typepad.com
Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing.
Sign Up Today
NACD Blog blog.nacdonline.org
Social Media news blog covering cool new websites and social networks.
IN THE NEWS Articles USA TODAY | November 1, 2012 Trees One of Storm’s Biggest Killers Productivity@Work | October 29, 2012 Joining—and Capturing—the Online Community PR Week | October 29, 2012 Federal Agencies Use Social to Preach Preparedness Reputation Rhino | October 29, 2012 Interview with Crisis Communications Expert Richard LEVICK—Part 1 Star Tribune | October 26, 2012 Best Buy Stock Hits a 10-year Low
THE URGENCY OF NOW.