Strikes at Foxconn

Once again, Foxconn is in the news for labor issues. Although the company denies allegations, reports show workers on strike because of poor working conditions and unrealistic expectations for production. The maker of the iPhone 5 and other Apple products acknowledged two small disputes but no organized strike or stoppage. 

Last week, videos showed workers rioting. This Reuters report calls the situation "the dark side of tech assembly plants in China."

According to China Labor Watch, a watch group based in New York, between 3,000 and 4,000 workers have gone on strike. The group explains the conflict in a press release:

"In addition to demanding that workers work during the holiday, Foxconn raised overly strict demands on product quality without providing worker training for the corresponding skills. This led to workers turning out products that did not meet standards and ultimately put a tremendous amount of pressure on workers. Additionally, quality control inspectors fell into to conflicts with workers and were beat up multiple times by workers. Factory management turned a deaf ear to complaints about these conflicts and took no corrective measures. The result of both of these circumstances was a widespread work stoppage on the factory floor among workers and inspectors."

 Discussion Starters:

• So far, Apple has not issued a response to the latest news at Foxconn. Should the company respond, and if so, how?
• What is Apple's responsibility in this situation with its major supplier? What should the company do?

Viewer Regrets Comments About TV Anchor's Weight

A local news station viewer in Wisconsin says he "never meant to hurt" the TV anchor whom he accused of being a poor role model for young people because she's obese. Jennifer Livingston's husband posted the email on his Facebook page and wrote that it "infuriated" him.

In a four-minute, on-air response, Livingston called the comments "hurtful" and says that "attacks like this are not okay." She also took the opportunity to reinforce National Anti-Bullying Month.

Krause felt some remorse for his comments. He told ABC News, "It's possible I would revise a few things. I never meant to hurt Jennifer. If she is truly hurt, I do apologize for that." But Krause denied the label of "bully": "I'm in no position to bully her. She's a big media personality. I'm just a working stiff."

Discussion Starters:

• How effective was Livingston's response in explaining her position? Do you empathize with her more after watching the video?
• Krause argues that bullying has something to do with power or position. What is his argument, and do you agree with him?

American Airlines Responds to Loose Seats

After reports of seats coming loose during flights, American Airlines is investigating the situation and inspecting 47 planes. American admits that six planes each had a row of seats that weren't properly clamped down. Some became dislodged while in flight.

American spokeswoman Andrea Huguely issued a statement including these excerpts:

"Originally, American planned to evaluate the seats on eight Boeing 757 airplanes, but out of an abundance of caution, the decision was made to proactively evaluate a total of 47 Boeing 757 airplanes that have the same model Main Cabin seats with a common locking mechanism."
 
"American's internal investigation has focused on one of three types of Main Cabin seats on the 757s and how the rows of these three seats fit into the track that is used to secure the rows to the floor of the airplanes. Our maintenance and engineering teams have discovered that the root cause is a saddle clamp improperly installed on the foot of the row leg."

"Safety is -- and always will be -- American's top concern."

The seats are the latest in a series of issues plaguing the airline. Now under Chapter 11 bankruptcy protection, American has been grappling with labor relations issues that airline management blames for recent flight delays and cancellations.

According to a Washington Post article, the airline spokeswoman Andrea Huguely said that airline employees last touched the seats, but a labor union representative took issue with the accusation: "Our workers were the last to touch the seats only in the sense that after the seats came loose, we were dispatched [to fix them." Because seat installation is handled by a third-party, the labor union denies responsibility and blames management for the outsourcing decision. Indeed, Timco Aviation Services installed the seats. 

Regardless of where the responsibility lies, this is more bad publicity for American Airlines.

Discussion Starters:

• How can American Airlines manage this latest bout of bad news?
• How do you assess the airline's response?
• If you were the president of Timco Aviation Services, what would you do now?

Disgruntled Employee's Resignation Email Makes the Rounds

An employee at UK-based media agency MEC left the company with some harsh words. Kieran Allen, a senior account manager, wrote a bitter resignation email addressed to "All Staff" in the London office. Someone leaked the email, and it went viral. 

A spokesperson for MEC issued this poorly written response:

"We are sad that one of our employees has chosen to share their personal views in such a public way and has left the company with such bad feeling. 

"We are taking this issue seriously though given the highly personal nature of the email, we cannot comment further."

The interviewee named in the email denies the accusation of having sexual relations with her future boss: "I didn't sleep with him. I kissed him. I had been to the pub with Greg for an informal interview for a job. It was a kiss in the foyer whilst waiting for taxis. We were both single at the time."

Here's the email with names redacted:

From: Kieran Allen
Sent: 25 September 2012 08:11
To: MEC London UK All Staff
Subject: Leaving

Hello MEC,

It feels quite strange to be writing my leaving speech after 2 1/2 yrs. of loyal service to the company. It's the longest I have spent at a company and I owe MEC a lot for my training and development. I leave in a position where I can go and further my career in digital if I so wish and for that I pay MEC great tribute.

However I leave with a horrible taste in my mouth after my working life for the past 8months has been ruined by <redacted>.

Background:
Joined MEC in May 2010. Soon after I started to receive continuous praise from Kevin Kirby Account Director and <redacted> for my outstanding performance across accounts (mainly Specsavers) Inc. a commendation from <redacted> to Jason Dormieux about my ability and contribution. I also received high praise from Amy Creasey and Louise Temperley (re general Specsavers performance and securing a PPC turnaround for Colgate inc a 100%+ YoY spend increase).

October 2011
I decide to hand in my notice and join another agency in order to further my development. <Redacted> while initially cold to my departure rapidly changed tone and started to court me in order to stay.

January 2012
I retract my notice after <redacted> promotes me to Senior AM and gives me a substantial pay-rise along with the promise of rapid development.

However while all seemed well on the surface things were far from ideal in the background.

Oct-Feb 2011/12
My client load had been nearly trebled from 6 to 16 clients due to the departures of Aoife Bergin and Jacob Knox-Hooke (Brand team).
I was initially asked to help out in order to help service the clients while staff were recruited but I ended up being made the de-facto brand team manager along with my original client list.
The stress and strain took its toll and during late January – early February 2012 my health started to deteriorate rapidly.
I ended up breaking down to <redacted> that I couldn't take it anymore and that I was losing my mind under the pressure. Nothing changed although he knew I was beyond stacked.

Feb 21st I had to go to the doctors due to an imminent breakdown where I was ordered to stay off work indefinitely. I was signed off with Work Related Stress. I ended up needing over 2weeks off in order to recover.

On my return things went from bad to worse. <Redacted> instead of welcoming me back and looking to make things right, instead attacked me and made me feel an outsider. I was made to feel that I had actually done wrong.

Soon after my return in early March <redacted>

- blocked my 2011 bonus due to
1)"poor performance in 2011″
2) "being given a pay rise and promotion in Jan 2012″
3) "things not working out as recently planned"
4) "being monitored after coming back from illness"

- Gave me an official company verbal warning for poor performance in 2011

- Put me on a performance review

All of this though after
- Praising me regularly throughout 2010/11
- Courting me to stay when i decided to leave
- Promoting me to Senior Account Manager
- Giving me a 15% payrise
- Describing my performance as "outstanding" as late as December 2011 when there was a lot of issues due to staff departures
and my ability to step in and manage the brand teams PPC activity…

The only thing that changed during Feb/March 2012 is that I had to take 2 weeks off work due to work related stress and that <redacted> was questioned as Head of Department as to why this had happened under his watch and instead of taking responsibility he instead decided to attack me and my reputation in order to discredit my time off and make himself look less liable for blame.

This type of approach would seem extreme from a decent man but this is <redacted>  who openly in front of other team members

- Made jokes about the "Spastic Olympics" (referring to Para-Olympics)
- Openly claimed to be proud "not to have a drop of Jewish blood in him"
- Regularly made sexist and other bigoted remarks
- Took a female colleague out for a drink on the day he interviewed her, then later took her back to the MEC offices that night and had
sexual relations with her in the meeting rooms on the 3rd floor

The above is all common knowledge throughout the team. This is <redacted>'s style of leadership and is gross misconduct on many levels. It is hard to fathom that such a man is responsible for the work wellbeing of over 30staff.

I am writing this message in order to expose these failings and protect others in future. I am far from perfect personally or professionally but I am a good human being who treats people with respect. In 2012 this behaviour is not acceptable and certainly not in a company which touts itself as being all about its people.
Not one thing on this email has been exaggerated or made up. This is my truth to you all.

No doubt I fully expect the above to be ripped apart but as long as the truth is out there then that's all I can do.

Good luck to MEC and all those good people who strive to make her great.
Kieran

Kieran Allen
MEC
Senior Account Manager
Interaction

Discussion Starters:

• What's your impression of Allen's letter? Do you sympathize with him, or could there be another side to this story? 
• Does a bad work experience ever justify an email sent to all employees of a company, with the potential to go viral?
• Rewrite MEC's response to be more substantive and grammatically correct.

Ryanair CEO Says People Who Don't Print Boarding Passes Are "Stupid"

Suzy McLeod was charged €300 because she didn't print five boarding passes for a Ryanair flight. McLeod complained about the charge and received lots of support on Facebook but not from Ryanair. CEO Michael O'Leary responded to her complaint by saying that the woman should pay, "...for being an idiot and failing to comply with her agreement at the time ofbooking. We think Mrs. McLeod should pay 60 euros for being so stupid."

McLeod said that she didn't print the boarding passes for her family because her trip was too long: they were away for 15 days, and the return passes had to be printed within two weeks. O'Leary had little sympathy for her dilemma: "She wasn't able to print her boarding card because, as you know, there are no internet cafes in Alicante, no hotels where they could print them out for you, and you couldn't get to a fax machine so some friend at home can print them and fax them to you."

O'Leary also said, "She wrote to me last week asking for compensation and a gesture of goodwill. To which we have replied, politely but firmly, thank you, Mrs. McLeod, but it was your ****-up."

A spokesperson for Ryanair simply relayed the airline's policy:

"As is clearly outlined in the terms and conditions for every Ryanair passenger, Mrs McLeod agreed at the time of booking that she and her fellow passengers would check in online and print their boarding cards before arriving at their departure airport, and she also accepted and agreed that if she failed to do so then she would pay our boarding card re-issue penalty of £60 per passenger."

On Facebook, McLeod's post received more than 500,00 "likes," but so far, the airline is unrelenting.

O'Leary has a reputation for making inflammatory comments, such as these:

"You're not getting a refund so **** off. We don't want to hear your sob stories. What part of 'no refund' don't you understand?"

"People say the customer is always right, but you know what - they're not. Sometimes they are wrong and they need to be told so."

"Nobody wants to sit beside a really fat ****** on board. We have been frankly astonished at the number of customers who don't only want to tax fat people but torture them."

Discussion Starters:

• Should the company have responded differently to the complaint, or does the policy speak for itself?
• How does this situation fit with Ryanair's status as a discount airline? Are customers justified in being upset, or should they simply comply with the policy?

More Fake Twitter Followers Than You May Think

I'm so naive. Turns out, about 30% of ESPN's, CNN's, and Lady Gaga's Twitter followers are fake. Of Twitter's own followers, only 23% are considered "good": neither fake nor inactive. An infographic compiled by Social Selling University gives us a few examples.

According to Status People, a social media management company, "at least 11,283 Twitter users have purchased more than 72,000 fake followers." Followers are easy to buy: a Google search reveals many companies willing to sell you fake followers at the bargain price of $2 and $55 per 1,000. However, The New York Times reported one example of a marketing company buying 250,000 for just a penny each.

The pricier options look more authentic than the cheaper versions. To make Twitter profiles appear real, sellers follow real and random people and post tweets.

With its "Fake Follower Check," Status People will tell you how many fake and real followers you and others have on Twitter. Both President Obama and Mitt Romney have bought their share of followers, according to Social Selling University.

Twitter is cracking down on fake followers, but at least for now, the practice persists.

Discussion Starters:

• If you wanted to garner support for your Twitter feed, would you consider buying followers? Why or why not?
• What does having fake followers do to the credibility of Twitter? Do you think this practice is a serious threat, no big deal, or something else?
• Do you consider the practice ethical? Why or why not?

Harvard Responds to Cheating Scandal

Harvard University is investigating whether students wrongly collaborated and plagiarized each other's work on a take-home exam in a Government class last spring. Almost half of the 279 students' exams in "Government 1310: Introduction to Congress" are under further review. The course faculty member, Professor Matthew B. Platt, noticed similar responses and drew attention to the possibility of widespread cheating. 

The Harvard Crimson posted an image of the exam instructions:

 

The Crimson quoted students who were frustrated by the lack of support in preparing for the exam:

"'Almost all of [the students at office hours] had been awake the entire night, and none of us could figure out what an entire question (worth 20% of the grade) was asking,' the student wrote. 'On top of this, one of the questions asked us about a term that had never been defined in any of our readings and had not been properly defined in class, so the TF [teaching fellow] had to give us a definition to use for the question.'

"That same student also expressed frustration that Platt had canceled his office hours the morning before the exam was due. In a brief email to the class just after 10 a.m. on May 3, Platt apologized for having to cancel his office hours on short notice that day due to an appointment."

An article in the Harvard Gazette included a response by the school dean: 

The article also quoted university President Drew Faust:

"These allegations, if proven, represent totally unacceptable behavior that betrays the trust upon which intellectual inquiry at Harvard depends. We must deal with this fairly and through a deliberative process. At the same time, the scope of the allegations suggests that there is work to be done to ensure that every student at Harvard understands and embraces the values that are fundamental to its community of scholars."

While the investigation is under way, Harvard is stepping up communications around academic integrity. The College Committee on Academic Integrity also will make recommendations to the faculty to reinforce school policies, and the committee may propose new policies or an honor code.

Discussion Starters:

• With the information you have, what's your view of the situation? For example, are the instructions clear? Do you understand why students could have shared answers during the take-home exam?
• What is the definition of plagiarism? How might that apply in this case?

Urban Outfitters' 11 Missteps

The Week has chronicled 11 "controversies" of Urban Outfitters in the past few years.

The most recent is the company's new t-shirts that some say promote drinking. With slogans such as "I Love Vodka," "USA Drinking Team," and "Misery Loves Alcohol," Urban Outfitters is targeting its main demographic, 18- to 24-year-olds. MADD (Mothers Against Drunk Driving) has taken a strong stance against the product line. The group's president, whose daughter was killed by a intoxicated, underaged driver, said, "Kids shouldn't be wearing these t-shirts." 

The Week tallies other questionable products:

• A t-shirt offered in two colors: "White/Charcoal" and "Obama/Black." Urban Outfitters responded, admitting "[we] screwed up, and are sincerely sorry," and explaining that they had developed a "Obama Blue" color intended for internal use only.
• A t-shirt that read "Eat Less" and was displayed on a very thin model.
• A "Navajo" line of products, which a member of the Santee Sioux Nation called "distasteful and racially demeaning" in a letter to Urban Outfitters' CEO.

Discussion Starters:

• What's your view of Urban Outfitters' products: clever, insulting, or something else?
• What advice would you give to the company as it develops future products?

High School Valedictorian Offends and Doesn't Get Diploma

Kaitlin Nootbaar said "hell" in her graduation speech, angering the school principal, who refused to give her the diploma without an apology.

In her speech at Prague High School in Oklahoma, Nootbaar told of her challenges in choosing a career path and her tendency to change her plans. Nootbaar said that she responds to questions about her career by saying, "How the hell do I know? I've changed my mind so many times." The quote was inspired by a graduation scene in "Eclipse," of "The Twilight Saga." In the film, Anna Kendrick's character says, "who the hell knows?"

"Heck" was used in the written version of Nootbaar's speech, but she says that she changed to "hell" at the last minute. Still, she didn't know anything was wrong because the crowd responded well. 

According to Nootbar's father, when he went to pick up the diploma, "The principal shut the door on us and told us she [Kaitlin] will type apology letters to him, the school board, the superintendent and all of the teachers." Nootbaar's father was angry and said his daughter had received straight As and that she "excelled beyond anything I'd expect ever being my child."

In response to questions by the press, Superintendent Dr. Rick Martin said, "This matter is confidential, and we cannot publicly say anything about it."

Nootbaar explained her perspective to a local newspaper:

"First off, I would like to thank everyone who is backing me on this, especially my friends and family. And to those who don't agree with me, that is fine also. Everyone is entitled to their own opinion and is free to comment however they choose. It's one of the great advantages of living in a free country. A country where we are free to speak. I would also like to note that I do not hate Prague. I have loved that town since I was a child. I don't hate the school either, the teachers have always been great! I don't feel that the whole town should suffer from the mistakes of few. Again, thanks:)"

Discussion Starters:

• What are the communication barriers in this situation?
  
• What are Kaitlin Nootbaar's and the principal's responsibilities here?

Progressive Fights Lawsuit and Responds to Backlash

Progressive Insurance lost a lawsuit and a social media battle. When Katie Fisher was killed in a car accident, Progressive fought to avoid paying a settlement to her family. The company was obligated to contribute because the other driver was underinsured. Katie's brother, Matt, wrote a blog post that captured attention: "My Sister Paid Progressive Insurance to Defend Her Killer In Court." 

When Progressive was criticized on Twitter and on other social media sites, the company produced repeated tweets, which only fueled the backlash: 

The app TwitLonger linked to Progressive's full message, which was longer than 140 characters:

"This is a tragic case, and our sympathies go out to Mr. Fisher and his family for the pain they've had to endure. We fully investigated this claim and relevant background, and feel we properly handled the claim within our contractual obligations."

The response wasn't received well either, and Progressive has since deleted the tweet and issued this longer statement:

Discussion Starters and Assignment Ideas

• What's your view of Progressive's role in the Fisher case: is the company a monster, just doing what it should to protect itself, or something else?
• Let's help Progressive write better messages. Rewrite the "robo-tweets," as CNN Money called them. What could have been a better initial response?
• We can understand Progressive's desire to explain its role in the lawsuit, but the official statement, above, could be improved. Also, according to CNN Money, "Court documents show that Progressive was added to the case last year as a defendant, alongside the at-fault driver, and that it actively participated in fighting against the Fishers' claims." So, technicalities aside, Matt Fisher was correct that Progressive fought the settlement to Fisher's family. Rewrite Progressive's statement to improve the company's image.

Companies' Green Claims Count More than Actions

A recent study concludes that companies' messages about environmental actions have a more positive effect on market value than do positive actions themselves. Or, as one article put it, "...greenwashing is better than being green." 

The study, "Do Actions Speak Louder than Words? The Case of Corporate Social Responsibility (CSR)," analyzed data from 2,261 firms in 43 countries from 2002 to 2008. Authors from Fuqua School of Business and the London Business School explored the conditions under which CSR (corporate social responsibility) affects financial performance. According to Environmental Leader, the study found the following:

"The authors found symbolic actions have a higher impact on market value than substantive actions, when the company has higher CSR-based assets. The study also concluded that a larger gap between symbolic and substantive actions has a higher positive impact on firm performance; and the more companies engage in both symbolic and substantive actions, the higher the value accumulates to the company."

The Environmental Leader further describes the distinction between "symbolic" and "substantive" actions:

"Symbolic actions include any ceremonial conformity or compliance: for example, a company announcing plans to form a sustainability or corporate ethics committee to provide the appearance of an action, without necessarily having any substance. Symbolic actions can be more generally described as 'window dressing' or greenwashing – essentially anything designed to give an appearance of an action while allowing business to proceed as usual.

"Substantive actions are the real actions taken by an organization to meet certain expectations and often require changes in core practices, long-term commitments and investments in corporate culture."

The paper is consistent with a Deloitte report that companies' communication about CSR practices impacts the bottom line.

Image source.

Discussion Starters:

• What's your view of greenwashing for the purpose of improvement corporate financial performance? Is it ethical? Why or why not?
  
• If you were the CEO of a Fortune 500 company, how, if at all, would you use the results of this study?

Toshiba Apologizes for "Test Monkey" Ads

A Toshiba ad for the Satellite Ultrabook computer pokes fun of people who participate in clinical trials. The ad claims that Toshiba, unlike other "tech companies," fully tests products and doesn't treat "paying customers like test monkeys." With a similar message, a print ad features a cosmetics tester.

The ads riled clinical researchers, who struggle to find participants in medical trials. In fact, Toshiba's own medical systems group is currently looking for young people to participate in a trial.

A sokesperson for the Association of Clinical Research Organizations (ACRO) explained the group's concern: "It's dangerous. We don't need any more reasons to discourage people from research. We need to encourage people and not portray them as some kind of freak."

According to PR Daily, "The ad does seem to contradict parts of Toshiba's corporate social responsibility guidelines. According to its standards of conduct for advertising, Toshiba group directors and employees should 'not use advertising to cast third parities in a negative light, in an attempt to make Toshiba Group appear more favorable, or for any other negative purpose.'"

In response to ACRO's criticism, Toshiba's director of marketing communications sent this response:

"Dear Mr. Peddicord,

"Thank you so much for raising your concerns over one of Toshiba's new television commercials showing people in medical testing situations.
 
"Our intent was not to minimize the value of clinical research or insult people participating in clinical trials.
 
"We will absolutely take your objections into consideration as we develop future advertising."

So far, the company has not pulled the ads, which ACRO had requested.

Discussion Starters:

• What's your interpretation of ACRO's complaint? Is the group right, overreacting, or something in between?
• Looking at Toshiba's standards of conduct for advertising, do you believe the company violated its own standards?
• If you led Toshiba's marketing communications group, would you pull the ads? Why or why not?

Adidas Responds to Controversy over "Shackled" Shoes

Adidas has apologized for an advertisement that some consider racist. The chains around the shoes are said to be reminiscent of slavery-and prisons, particularly because of the orange color. With the tag line, "a sneaker game so hot you lock your kicks to your ankles," the shoes cost $350. A Washington Post article sums up the "dangerous message" Adidas and other companies are sending: "We want your money, but we aren't concerned with being sensitive to your history, culture and socio-economic plight."

 

Outrage was rampant on Facebook, with comments such as this one, posted by Antonio Leche: "Slavery isn't a fashion example. Everyone involved in this show should be fired ASAP! This is the new reason I won't buy any Adidas anymore!"

In a statement, Reverend Jesse Jackson voiced his criticism:

"For Adidas to promote the athleticism and contributions of a variety of African-American sports legends -- especially Olympic heroes Wilma Rudolph and Jesse Owens and boxing great Muhammad Ali -- and then allow such a degrading symbol of African-American history to pass through its corporate channels and move toward actual production and advertisement, is insensitive and corporately irresponsible.

"These slave shoes are odious and we as a people should be called to resent and resist them. If put into production and placed on the market, protests and pickets signs will follow. Adidas cannot make a profit at the expense of commercialized human degradation."

Adidas did respond to the criticism, first with this statement:

"The JS Roundhouse Mid is part of the Fall/Winter 2012 design collaboration between Adidas Originals and Jeremy Scott. The design of the JS Roundhouse Mid is nothing more than the designer Jeremy Scott's outrageous and unique take on fashion and has nothing to do with slavery.

"Jeremy Scott is renowned as a designer whose style is quirky and lighthearted and his previous shoe designs for Adidas Originals have, for example, included panda heads and Mickey Mouse. Any suggestion that this is linked to slavery is untruthful."

Of course, this didn't resolve the controversy, so Adidas tried again-and cancelled the shoe release:

"Since the shoe debuted on our Facebook page ahead of its market release in August, Adidas has received both favorable and critical feedback. We apologize if people are offended by the design and we are withdrawing our plans to make them available in the marketplace."

Discussion Starters:

• What is your view of the Adidas ad? Do you see it as racist, harmless, or something else?
• How do you assess the company's response? What might have been a better response to the criticism?

Jamie Dimon, JPMorgan Chase, Testifies

Jamie Dimon, JPMorgan Chase's chairman and chief executive, testified before the Senate Banking Committee regarding losses that could balloon to $5 billion. Questions focused on whether the bank should have done more to stem risky derivative trades by the chief investment office. As a strong opponent of federal banking regulation, Dimon was on the hot seat about this perspective.

In advance of the testimony, BloombergBusinessWeek compiled this "Timeline of Risk," under the article title, "House of Dimon Marred by CEO Complacency Over Unit's Risk."

During the testimony, Dimon made several comments of particular interest to business communication students:

• He referred to the bank as having an "open kimono" with regulators. Dimon used this same odd, but common business expression on Meet the Press. Here's an interesting discussion of the phrase.
• "The American business machine is the best in the world." The New York Times DealBook calls this a "little burst of patriotism." It's a admirable attempt at emotional appeal.
• Jeff Merkley, a senator from Oregon, said that JPMorgan Chase was saved by the 2008 bailouts. According to DealBook, this was the first time Dimon got "testy." He replied, "You're factually wrong," to which Merkley said, "Let's agree to disagree." Business communication students may question what constitutes a "fact" in this disagreement. 

Discussion Starters:

• What the entire video testimony. At what points is Jamie Dimon most and least convincing?
• What are the strongest and weakest lines of questioning by the senators?
• Overall, did Dimon's testimony strengthen or weaken JPMorgan Chase's credibility regarding the losses?

Sponsors of an Award Demand that They Receive It

In an odd turn of events, the 2012 BII Scotland Annual Awards ceremony surprised attendees. The British Institute of Innkeeping Scottish Awards includes "Bar Operator of the Year," a prize that judges say was slated to go to BrewDog, a brewery in North East Scotland. However, at the last minute, the award went to Diageo, one of the event's main sponsors.

On its blog, BrewDog had quite a bit to say about the situation. From the company's perspective, BrewDog was the clear winner, in part because of comments made by Kenny Mitchell, BII's chairman of the award committee: 

"Diageo (the main sponsor) approached us at the start of the meal and said under no circumstances could the award be given to BrewDog. They said if this happened they would pull their sponsorship from all future BII events and their representatives would not present any of the awards on the evening.

"We were as gobsmacked as you by Diageo's behaviour. We made the wrong decision under extreme pressure. We should have stuck to our guns and gave the award to BrewDog."

A Diageo spokesperson issued a simple statement in response to the controversy:

"There was a serious misjudgement by Diageo staff at the awards dinner on Sunday evening in relation to the Bar Operator of the Year Award, which does not reflect in any way Diageo's corporate values and behaviour.

"We would like to apologise unreservedly to BrewDog and to the British Institute of Innkeeping for this error of judgement, and we will be contacting both organisations imminently to express our regret for this unfortunate incident."

BrewDog was unsympathetic to the apology:

"As for Diageo, once you cut through the glam veneer of pseudo corporate responsibility this incident shows them to be a band of dishonest hammerheads and dumb a** corporate freaks.  No soul and no morals, with the integrity of a rabid dog and the style of a wart hog.

Discussion Starters: 

• How do you asssess Diageo's response to the situation? What is missing from the company's response statement?
• Identify the number of words in the quotes, above, that are uncommon in the United States. What do they mean?

JPMorgan Chase Loses More than $2B

JPMorgan Chase is trying to explain how the bank lost $2 billion and may lose another $1 billion as it settles a trade. In just six weeks, the bank's Chief Investment Office, a group that invests extra assets to hedge risks, lost this extraordinary amount of money.

In a conference call, Jamie Dimon, CEO of JPMorgan Chase, called the situation "self-inflicted":

"We're accountable, and what happened violates our own standards and principles about how we want to operate the company. This is not how we want to run a business."

Liz Rappaport, a Wall Street Journal reporter on PBS NewsHour questioned the terminology that Dimon used, specifically that the Chief Investment Office was intended as an "economic hedge." According to Rappaport, this was an "unclear thing to say": a hedge typically is used to protect against a specific investment, but "exactly...what this group actually hedges against is unclear, and the fact that this was such a large and outside position in one direction, and they got caught...flat footed with it, also doesn't sound like a hedge-it sounds like a bet." The distinction is important: did the investments hedge against risk or create more risk for the bank?

Rappaport also said that this wasn't really a "rouge trader" situation, as we saw at UBS in September 2011. Rather, at the center of the controversy is a London trader nicknamed the "London Whale" for his large investment positions. Unlike the UBS situation, the Chief Investment Office's trades were apparently "run up the flag pole," according to Rappaport.

Discussion Starters:

• What do you see as the distinction between a "hedge" and a "bet"? 
• How do you assess Jamie Dimon's response to the situation?

Resume Trouble for Yahoo's CEO

Did Scott Thompson purposely misrepresent his degree on his resume, or was it, as he says, an "inadvertent error"? In a recent regulatory filing, Thompson's qualifications included a Bachelor's degree in accounting and computer science from Stonehill College. However, Stonehill didn't start its computer science program until the early 1980s, and the school's records indicate that Thompson earned a"Bachelor's of Science in Business Administration (Accounting)" on May 20, 1979. This major also is conveyed on Stonehill's website:

Daniel S. Loeb, hedge fund manager, wrote a letter to the Yahoo board of directors, calling for Thompson's termination.

Yahoo is at a crucial point now and is relying on Thompson to move the company forward. According to The Wall Street Journal, someone close to the company said, "Maintaining him as CEO of Yahoo at this time is more important than whether he had a computer science degree or not."

In response to the controversy, Yahoo issued this statement: 

"Scott Thompson's degree at Stonehill College was in bachelor science in accounting. There was an inadvertent error that stated Mr. Thompson also holds a degree in computer science. This, in no way, alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies. Under Mr. Thompson's leadership, Yahoo! is moving forward to grow the company and drive shareholder value."

 Thompson also sent an email to Yahoo employees, trying to keep everyone "focused":

Update: Thompson has resigned. He also told the Board that he has thyroid cancer. 

Discussion Starters:

• How do you assess the controvery over Thompson's resume: career-ending misrepresentation, innocent mistake, or something else?
• If you were a member of Yahoo's Board of Directors, how would you handle the situation?

Jimmy John's Will Rehire Employees Who Put Up Posters

Sandwich restaurant Jimmy John's had disappointing news this week: a federal judge ordered the company to rehire and pay lost wages to six employees. The employees were fired after they posted 3,000 notices implying that sandwiches could be made by sick workers.

The employees claimed that if they called in sick but couldn't find a replacement, they feared being fired. In the court decision, the judge ruled that, by removing the posters, Jimmy John's violated workers' rights under the National Labor Relations Act. This decision was based on a labor dispute under way at Jimmy John's: a union held an election to organize workers and, although the union was narrowly rejected, it filed unfair labor practices, claiming that Jimmy John's interfered with the election process.

The union perspective is that the workers were terminated "for blowing the whistle on company policies that expose customers to sandwiches made by sick workers." 

MikLin Enterprises, which owns Jimmy John's, will appeal the decision.

Discussion Starters:

• What is your perspective of the posters? What is the company's perspective?
• How does this case relate to comments in social networking sites, a hotly debated topic for the National Labor Relations Board?

Communications in the Wal-Mart Bribe Inquiry

With a New York Times headline that reads, "Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle," news can only be bad for the world's largest corporate employer. Of course, the evidence is that revealer of so many corporate secrets: email.

The New York Times article reports the severity of the situation:

"Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico's top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart's headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart's lead investigator, a former F.B.I. special agent, summed up their initial findings this way: 'There is reasonable suspicion to believe that Mexican and USA laws have been violated.'"

"The lead investigator recommended that Wal-Mart expand the investigation.

"Instead, an examination by The New York Times found, Wal-Mart's leaders shut it down."

The article also points to several internal communications about the situation:

• Rather than hire outside, independent investigators, Wal-Mart leadership decided that its own legal counsel would oversee a "preliminary inquiry." 
• In what is referred to in the article as a "terse report," the director of corporate investigations for Wal‑Mart in 2005, says that the situation is "not looking good."

Apparently, more than $16 million dollars was paid in "donations" or "contributions" to the Mexican government since 2003 to secure permits and build several stores in Mexico.

The first comment selected by the NY Times staff reflects public cynicism about the company:

Discussion Staters:

• Does the news about Wal-Mart in Mexico surprise you? Why or why not?
• Once again, how can people protect their communications from becoming public?
• How, if at all, should Wal-Mart respond to this situation?
• A follow-up NY Times article says that "...Bribery Is Taken in Stride" in Mexico. How, if at all, does that affect your perspective of this Wal-Mart situation?

Secret Service Responds to Scandal

While in Columbia planning for President Obama's arrival, 11 U.S. Secret Service agents and 10 military personnel were involved in a scandal: 21 prostitutes were hired to entertain the fellas. A hotel manager learned of the situation when an argument over payment ensued between one of the prostitutes and an agent.

 

Image source.

Although prostitution is legal in parts of Columbia, other issues help us determine whether this behavior was ethical. One issue is that hiring a prostitute was been banned for military personnel in 2006. This ruling was put in place during the Bush Administration, partly to address human trafficking, a practice in Columbia as well.

In addition, a writer of an Atlanta blog sums up potential risks and consequences of the situation:

"Most importantly, while there is no evidence that the security of the president of the United States was endangered in this incident, an agency with this kind of internal culture could be easily manipulated by those with reason to do so. At the very least, the scandal has created a significant embarrassment for the U.S. government and put at risk the generally good reputation of the Secret Service."

How has the Secret Service handled the response? One PR and marketing manager gave the Secret Service an A- for its response-not a bad grade for handling a difficult situation. Here's his analysis (a rubric, of sorts): 

1. Communication. Following the breaking news of the scandal, the federal government appeared to work fast to alleviate concerns about a widespread issue. Many, however, feel this incident is possibly symbolic of a bigger cultural issue in the Secret Service. Grade: B+

2. Acknowledgement. When the story broke on April 13, Edwin Donovan, a Secret Service agency spokesman addressed the rumors by stating that an unspecified number of agents had been recalled and replaced by others. Army Gen. Martin Dempsey and White House Spokesman Jay Carney acknowledged the incident and have already voiced deep concern, plus several members of Congress have spoken out to defend the Secret Service vowing to launch a full investigation. Grade: A

4. Accountability. By all accounts, the military and Secret Service have appeared to take accountability. Although the story broke via a Washington Post reporter, the federal government has taken full responsibility for the agency's actions. Grade: B+

5. Timely updates. Following the news, the federal government steered the conversation to itself and became the irrefutable source of timely updates. Grade: A

6. Rectification. U.S. Secret Service agent Mark Sullivan swiftly announced that he is leading an investigation of the incident with support from Congressman Peter King, Chairman of the Homeland Security Committee, and Senator Susan Collins, the ranking Republican on the Homeland Security Committee. By all accounts, it appears that the Secret Service, military and Congress wish to assuage any concerns that this incident somehow compromised national security. Grade: A 

Overall grade: A-

Discussion Starters:

• How do you assess the response to the scandal? Do you agree with the "A-" grade?
• What else does the Secret Service agency need to communicate at this point? How should its leaders provide updates to rebuild confidence?