Reputation damage – Toyota & BP

Two global corporations with previously good reputations have succumbed within recent months to serious reputation damage. One an oil giant and the other a motor manufacturer, each has managed to drive down share value and destroy investor confidence, while at the same time believing itself a victim. What can be learnt from comparing the two stories?

Firstly both corporations were engaged in the US operating as foreign firms in the US either in oil extraction in the gulf and motor manufacture in the mid west. Each was vulnerable to political jostling for the hearts and minds of a domestic audience keen to find a scapegoat for a stalled economy. Each manufacturer stealing jobs and market share in the US ‘back yard’ where indigenous corporations with lobby influence felt cheated of their birthright. Not only a Japanese but also a British corporation was extracting dollars right under the nose of good old Uncle Sam.  As a result the necessary goodwill was not in the bank ahead of any detrimental incident.

Secondly in each case the tipping point incident was self inflicted and could not be seen to have been an accident deserving of sympathy. For Toyota car faults had been recorded over 10 years yet the company carried on in denial, for BP the American partners who supplied rigging equipment and valve technology had known that component standards were not the highest. In each case the ‘accident-waiting-to-happen’ was documented and understood by key operatives but the stimulus for remedial action was absent in senior management. Neither corporation could claim that the reputation damaging incident was a complete surprise, each was infact a known and acceptable risk.

Thirdly the response of each corporation was poor. In the case of Toyota there was an attempt to deny wrongdoing and fight claims for compensation, in the arrogant belief that the corporation could win. The fine, when it came, proved them wrong. In the case of BP there was an attempt fro man early stage to blame local contractors and partners which was never a clever strategy. Failure to take responsibility and an eagerness to shift blame would not work when fishing and tourism and wildlife industries were at stake. Neither corporation took the warning signals seriously or responded quickly enough or acted as responsible corporate citizens.

The three classic ingredients for reputation damage existed: absence of goodwill banked in advance, an event that was clearly self-inflicted, and a tardy and ineffective response to a crisis enabling US politicians and regulators to get their teeth into invasive foreign corporations and thus divert public attention away from problems in the domestic economy. There are lessons for all here, be aware of how reputation damage is compounded by the three key ingredients for what in media relations will turn out to be a 'perfect storm'.