Lerbinger O. Corporate Public Affairs. Interacting with Interest Groups, Media, and Government

Подождите немного. Документ загружается.

nalism Review article revealed that, over the previous 12 years, seven Su

preme Court Justices had enjoyed first-class, all-expense-paid winter

trips to luxury resorts where they gathered to select the winner of a

$15,000 prize awarded annually by West Publishing for “Distinguished

Service to Justice.” Cases involving the company were heard by the jus

tices during those years; all of the cases were decided in favor of West.

Other approaches are also used to influence the judicial system. Koch

Industries, an oil, natural gas, minerals and agribusiness giant, is the

largest contributor, among approximately 90 other major corpora

tions, law firms, and foundations, to a University of Kansas foundation

that offers small groups of hand-picked state judges a two-part “Eco

nomics Institutes for State Judges” seminar, usually at resort hotels.

They are taught hard-nosed, market-based economics. For example,

one course talks about “the costs of overdeterrence” by judges who pun

ish companies for harming people or the environment. The institute’s

syllabus for this session states, “Many potentially hazardous activities

offer great benefits to society.” At another session, judges were told that

they “let too much ‘junk sciences’ into cases involving damage claims

against companies and that the rules of the federal Environmental Pro-

tection Agency and the Labor Department’s Occupational Safety and

Health Administration are enormously expensive and often ineffective.”

Since 1995, 550 judges have attended these seminars. Koch has also

launched a rating system for judges that “grades them on how their de-

cisions affect the business community.”

POWER OF THE JUDICIAL BRANCH OF GOVERNMENT

The enormous power of the judicial branch of government is increas-

ingly recognized. A book review of Kenneth W. Starr’s First Among

Equals: The Supreme Court in American Life, reflects this fact. Starr’s view

is, “The judiciary is not merely first among three equal branches of gov

ernment. There’s nothing equal about it: The Supreme Court reigns su

preme.”

A major reason why issues management extends to a fourth

stage is that the courts have not restricted themselves to their tradi

tional role of ruling on legislative matters; too often the courts appear

intent on usurping the rights of the legislative branch of government. In

recent Supreme Court cases, justices have repeatedly reversed judges

“who had read new rights into the Constitution or expanded their own

authority to resolve disputes.”

As a sign of business concern about the power of the Supreme Court,

business is now focusing on replacements for the three soon-to-retire

Supreme Court justices: Justice John Paul Stevens, Chief Justice William

H. Rehnquist, and Justice Sandra Day O’Connor. More than ideological

conservatism is sought because, as Robin S. Conrad, senior vice-presi

dent of the U.S. Chamber of Commerce’s National Litigation Center, ob

served, “Being a conservative is not the same as being pro-business.” For

312 I CHAPTER 12

example, conservative justices Antonin Scalia and Clarence Thomas

have consistently voted against efforts to restrain punitive damages, a

top business priority. Judicial conservatives defend federalism by being

generally unwilling to preempt state laws that place higher standards

on companies than overlapping federal statutes.

GROWTH OF LITIGATION PUBLIC RELATIONS

Lawsuits concern corporations because they have a dual impact: on rep

utation and the bottom line. When plaintiffs—government, other busi

nesses, individuals, and public interest groups—file a lawsuit,

corporations face the prospect that the case will receive widespread pub

licity. In fact, public interest groups file lawsuits as a way to raise public

consciousness about an issue and to demonstrate the interest group’s

activity and effectiveness. In this process, however, corporate reputa-

tions may be tarnished. “Media coverage of a court battle can damage a

company’s reputation, destroy a product market, and shake up the con-

fidence and morale of shareholders, managers, and other employees,”

wrote Christopher P. A. Komisarjevsky in 1983, then a senior vice presi-

dent of the public relations firm Hill & Knowlton and recently the presi-

dent and CEO of Burson-Marsteller Worldwide.

As for their bottom lines, the tobacco companies have been most af-

fected by litigation. A recent verdict against Philip Morris USA, the larg-

est tobacco company, was for $10.1 billion. Plaintiffs accused the

company of deceiving smokers that “low tar,” “light,” “ultralight,” and

“mild” cigarettes were less risky than other cigarettes. Altria, the parent

company, faced a court order to post a $12 billion bond to appeal the Illi-

nois verdict, and the cigarette division faced the possibility of being

forced to file for bankruptcy-court protection.

Companies that previously shunned the political arena have some-

times scrambled to catch up after facing judicial problems. When Judge

Thomas Penfield Jackson ruled on April 3, 2000, that Microsoft was sti

fling innovation and on April 30 proposed a breakup of the company

into two entities, Microsoft’s chief lobbyist, Jack Krumholtz, launched a

vigorous campaign with the aim to “convince official Washington that

Justice’s attempt to split the company up is misguided.” Audiences in

cluded members of Congress, federal judges, and a future president.

Microsoft used its “apparently bottomless store of money” to convert it

into virtually all the political resources available to a corporation (see

Box 1.1).

This expensive, high-powered campaign, intended to influence the

court system, possibly including the Supreme Court, did not go unchal

lenged. Microsoft’s enormous presence in the capital, according to Ed

Black, president of the Computer Communication Industry Association,

amounted to intimidation: “It is an outrageously blatant attempt to try

to nullify a judicial and law enforcement proceeding by leveraging their

LITIGATION COMMUNICATION I 313

political muscle and money.”

Another voice against “the unseemly

campaign of Mr. Microsoft” was Mike France, who covered the

Microsoft trial from New York. While acknowledging that Microsoft

has the “constitutional right to make political contributions, fill the air

waves with ads, and lobbying Congress,” he found something “quite

disturbing about watching the world’s richest man trying to buy his

way out of trouble with Uncle Sam.” He adds, “One of the most deep-

seated principles in American jurisprudence is that nobody should be

above the law. Another is that judicial decisions should be free from po

litical interference.”

However, harsh political realities require bold ac

tion. On November 2, 2001, the Justice Department and Microsoft

announced that they had reached a settlement.

It was very much in

Microsoft’s favor.

Total War Against Corporations

Reflecting on trends in lawsuits against their corporations, general

counsels from several large companies drew the disturbing conclusion

that some forces in the United States have declared a “total war” against

corporate America. As described by Coleman S. Hicks, a senior vice pres-

ident of Oak Industries and former partner at Covington & Burling, this

is a new form of litigation, where the aim is not only to seek damages

from a company but also to “destroy the company, to question its moral

ethic, to question the values of its officers and its board.” He and other

current or former corporate general counsels from Monsant, Exxon,

Philips Petroleum, Kerr-McGee, and Browning-Ferris Industries met to

discuss what most called “bet-your-company litigation.”

One conclusion drawn by this group, as stated by Rufus Wallingford

of Browing-Ferris, is that “external forces are now part of the game.…

It’s wishful thinking for anyone to believe we can keep this [litigation]

confined to the four walls of the courthouse, and the press or commu

nity will not get involved.”

Even within the four walls of a courtroom,

the group felt, the system of litigation leaves Fortune 500 companies at a

competitive disadvantage. “Things like successor liability, joint and sev

eral liability, unlimited punitive damages and the inability to get to a

resolution in the court system hang a bull’s eye around American busi

ness,” said Wallingford.

Unlimited punitive damages are the main

problem, as demonstrated by the astonishing jury award of $4.9 billion

against GM in a lawsuit involving burns on three passengers, caused by

a fuel tank that exploded because it was too close to the bumper. Of this

amount, compensatory damages amounted to only $107 million.

“You can’t just rely on a strategy within the courthouse. It has to be

much broader than that,” said R. William Ide, III, senior vice president

and general counsel at Monsanto.

Furthermore, when external

sources are involved, “you do not have rules and it’s a free-for-all loaded

with misinformation,” added Charles W. Matthews, Jr. of Exxon.

314 I CHAPTER 12

parently agreeing with corporate general counsels, Acting Justice Har

old J. Rothwax of the New York State Supreme Court commented,

“Lawyers now feel it is the essence of their function to try their case in

the public media.… It’s no longer courtroom based … it’s a whole new

ethic that has to be looked at carefully.”

Ways must be found to deal

with publicity surrounding a case.

Corporate Scandals Increase Vulnerability

The Enron and ensuing scandals of 2002 have made matters worse. A

first-of-its-kind survey of potential jurors released in October 2002 by

DecisionQuest, a Los Angeles trial consultancy, showed that 75% or

more distrust corporations on a variety of counts; the historical level

was 50%. The survey consisted of telephone interviews of 1,000 people

eligible for jury service. Large majorities of those surveyed cited greedy

executives, crooked accountants, and shredded documents. They were

also critical of corporations in other areas; for example, 85% answered

that they believe companies hide dangers associated with their products

and their waste until the government or a lawsuit forces them to tell the

truth. Attitudes toward managers and executives were particularly crit-

ical, with 71% of the respondents believing that those at the top are

more likely to lie than lower level employees or expert witnesses. Placing

top officials on the stand could thus prove risky. Moreover, says Stephen

L. Hill, Jr., who delivered the news in a speech to a group of financial of-

ficers, pat, legalistic-sounding defenses that lack explanations for a

company’s actions just aren’t going to cut it anymore. The survey sup-

posedly sent shivers through boardrooms and executive offices.

Antibusiness biases are also likely to affect jurors, according to de-

fense lawyers who asked 50 prospective jurors about their reaction to

this statement: “Corporate executives will lie to increase their profits.”

More than half agreed. When asked about the statement, “A representa

tive of a company will say whatever it takes to keep the company out of

trouble,” 72% agreed, with 22% of these agreeing “strongly.”

When companies are silent or evasive in the face of litigation, the

public is inclined to find them guilty, according to a Hill & Knowlton/

Opinion Research survey about public attitudes of corporate defen

dants. Unfortunately, this finding is likely to be reinforced because cor

porations are still mainly guided by a bunker mentality. Harlan Loeb,

U.S. director of Hill & Knowlton’s litigation services practice, advises

that the “same savvy thinking and strategic fiber that sets apart a com

pany in a spirited marketplace must be cut and pasted to the litigation

communications domain.”

Thus the need for litigation public relations services is recognized.

“Companies need an action plan that provides an organizational mandate

to anticipate and control the public dimensions of litigation, ”says Loeb.

The corporate brand must be protected by devising an integrated strategy

LITIGATION COMMUNICATION I 315

to preempt audience attitudes before a complaint is in the field. The op

portunity aspect of litigation should also be recognized. When the spot

lightisonthecompany,brandbuildingispossible(e.g.,byreachingout

to tuned-in customers and other audiences).

Komisarjevsky advises the

public relations staff and legal staff of companies to develop a

close-working, mutually respectful, and trusting relationship.

Litigation Public Relations Gains Recognition

Within the last decade, the importance of litigation public relations has

been recognized by books and articles on the subject and the addition of

this service in law and public relations firms. An early book (1995) is

Susanne A. Roschwalb and Richard A. Stack’s Litigation Public Relations:

Courting Public Opinion; a later one (2003) is James F. Haggerty’s In the

Court of Public Opinion: Winning Your Case With Public Relations. A typical

law journal article is Deborah A. Lillanthal’s “Litigation Public Rela-

tions: The Provisional Remedy of the Communications World.”

One of

the main points made by this literature is exemplified by Haggerty’s

statement, “Communication is now central to the management of mod-

ern litigation. It can mean communicating to external audiences such as

the media, or to internal audiences like employees, investors, sharehold-

ers, and others with a vested interest in the organization.”

Confirming

the acceptance of litigation public relations, a recent survey of the top

200 corporate law departments in the United States found that nearly

50% regularly use public relations techniques in litigation and 23% said

they do so “often” or “always.”

Companies fighting costly legal battles now recognize the need to

sway public opinion as well as the courts, and accordingly, they turn to

public relations. “Whether it’s cameras in the courtroom or reporters on

the courthouse steps, a media strategy to protect, enhance and bolster

your litigation strategy is almost always a necessity,” says Sheila Tate,

president of Powell Tate.

Martha Stewart, the high-profile celebrity and founder of Martha

Stewart Living Omnimedia, accused of lying about an insider trading

deal of Imclone stock, illustrates the complexity of litigation public rela

tions. In the pretrial period, her defense team chose media appearances

wisely and well, according to Judy Leon of DecisionQuest. She appeared

on both the Barbara Walters and Larry King shows, which were “safe

media ‘venues’ in which Stewart could remind the public that she is, af

ter all, a human being, not a punch line, a person who has suffered in

tense public humiliation and immense financial loss months before the

first day of her trial, and an American citizen facing a fundamental

threat to her personal liberty.”

Her courtroom performance appar

ently lacked public relations sensitivity. She and her defense team de

cided not to have Martha Stewart testify on her own behalf, which ran

counter to jury and public expectations formed by TV law-and-order

316 I CHAPTER 12

shows. Parading an array of celebrities through the courtroom to show

support for Stewart was a bad idea, according to Alan M. Dershowitz, a

well-known and outspoken professor of law at Harvard: “It made al

most no impression. If anything, we may have taken it as a little bit of

an insult.”

Stewart lost the case.

Another person who turned to public relations is Richard M. Scrushy,

who was ousted in March 2003 as HealthSouth’s chairman and CEO af

ter being charged for his alleged role in a $2.7 billion accounting fraud at

the company. When relations between federal prosecutors and

Scrushy’s lawyers boiled over, the latter held a news conference on the

courthouse steps alleging that prosecutors concealed evidence that

proved Scrushy’s innocence. Furthermore, one of Scrushy’s attorneys

appeared on a local radio shows on which he accused the government of

witness tampering and manufacturing evidence.

The attorneys as well

as Scrushy and his wife also appeared on their own television show.

Scrushy and federal prosecutors agreed to a court order restricting pub-

lic comments about his upcoming fraud trial, scheduled for September

2004.

Known to curry favor with the local community, Scrushy was

recasting his persona from someone known for partying in Hollywood

with his girl band 3rd Faze to that of a “humble man from the south

whose faith will help him weather the current storm.”

Recognizing the role played by public opinion, the general counsels

from the large corporations realized that they needed to involve their

communications or public affairs people. William G. Paul, former gen-

eral counsel of Phillips Petroleum, referred to the company’s “really fine

communications team … who are skilled at dealing with the press—

much more skilled than I or any of the lawyers internally and much

more skilled than outside counsel.” He added, “Those people work

closely with lawyers. They know the case; they know the issues; they

don’t talk to the press until they are fully informed.”

Exxon also relies on specialists in the public affairs group to handle

the news media. Charles W. Matthews, Jr., the company’s general coun

sel, added that on occasion the lead trial attorney might become an inte

gral part of the process “as long as the outside counsel understands the

business, the problems, the needs, whatever concerns we have.”

Wallingford cautioned that trial lawyers “tend to pop off too much and

they’re not trained.”

Referring to a south Texas situation, he said he

prefers to let a community affairs specialist develop strategy and serve

as company spokesperson in dealing with external matters.

What these corporate general counsels alluded to was the emergence

of litigation public relations: the attempt to control the publicity sur

rounding a lawsuit, with the intention of influencing public opinion as

well as the dispositions of juries and judges. The judicial branch of gov

ernment, which traditionally has been treated as off limits to parties

wanting to influence it beyond the courtroom, was now to be treated as

another important audience by lawyers and public affairs profession

als. As stated by Mary Gottschall, a legal affairs correspondent for The

LITIGATION COMMUNICATION I 317

New York Times: “This [litigation public relations] has emerged as an in

creasing trend, especially where major litigation is involved. The idea is

that the case might be tried in the court of public opinion as well as be

fore a jury.”

Growth as a Professional Service. Many public relations and legal

firms are now offering litigation public relations services, often in the

context of crisis management.

Among the major players are public re

lations giants Burson-Marsteller and Hill & Knowlton, as well as others,

such as Ketchum, the seventh largest global public relations firm. Based

in Washington, DC, Ketchum’s Litigation Communications practice

confirmed the importance of litigation public relations by hiring a lead

ing figure in the field in 2003, Rose Marshall. She had run her own firm,

Legal PR, for 10 years and represented such clients as Monsanto, the

American Trucking Association, and the Product Liability Advisory

Council. Another prominent player in the field is The Lukaszewski

Group, whose flyer, describing members as “management advisors in

litigation communications,” states, “When critical legal, regulatory,

and ethical situations arise that threaten organizational reputation and

credibility.… It’s not a game!” Its principal, James E. Lukaszewski, fa-

vors active public relations participation in litigation matters on the

premise that news media treatment of a case may affect legal judgments

and undoubtedly affects corporate reputation, both in the short and in

the long term.

Public relations and other communications counselors have been

hampered in giving advice to clients because they don’t enjoy the same

attorney–client privilege protection as lawyers. Richard E. Nicolazzo,

president of Nicolazzo & Associates, has strongly stated that communi-

cations counsel must be accorded the same protection. He states that cli-

ents must “be ably represented in the court of public opinion and the

court of law.”

For example, in a case involving secret grand jury testi-

mony about possible crimes committed by a well-known businessper

son, identified in the lawsuit only as Target, prosecutors subpoenaed a

public relations consultant hired by the client’s attorney. When the con

sultant refused to appear or to supply records, the prosecutors moved to

compel compliance. The judge in the case, Lewis A. Kaplan, sided with

the consultant, saying,

This court is persuaded that the ability of lawyers to perform some of their

most fundamental client functions … would be undermined seriously if

lawyers were not able to engage in frank discussion of facts and strategies

with the lawyers’ public relations consultants. For example, lawyers may

need skilled advice as to whether and how possible statements to the

press—ranging from “no comment” to detailed factual presentations—

would likely be reported in order to advise a client as to whether the making

of particular statements would be in the client’s legal interest.

318 I CHAPTER 12

Describing litigation public relations activities, Carole Gorney, a

professor of public relations at Lehigh University, says, “In today’s li

tigious society, generating publicity favorable to plaintiffs has become

a well-planned, often-used legal strategy.”

It has become common

for plaintiffs, and sometimes their attorney, Gorney reports, to appear

on televised talk shows or give interviews for highly personalized arti

cles in newspapers and magazines with the purpose of shifting public

opinion in their favor.

Among the lessons learned from litigation communication is that the

news media typically consider an accusation by a plaintiff more news

worthy than a company’s denial. A DuPont ad put it more bluntly: The

media take “the perspective of a plaintiff’s lawyer.”

Often without any

courtroom evidence, the media take up the plaintiff’s cause, granting

hours of unchallenged coverage. Meanwhile the company under attack

is often restricted, from legal and public relations standpoints, in its

own response. Not only might a corporate attorney advise the dubious

“no comment” reply for his client; a judge might even curb the firm’s

public defense, forbidding the use of image advertising and publicity as

“undue influence on the jury.”

Another lesson is that caution must be exercised in attempting to

improve a company’s image prior to a trial. Image ads used by

Northrop were ill advised and raised objections from the trial’s judge

(see Box 12.1).

LITIGATION COMMUNICATION I 319

Box 12.1 Image Ads by Northrop

Federal judge Pamela Rymer objected to Northrop’s use of image

ads a week before jury selection in the government’s suit against the

company. She ordered the ads to be pulled from local airwaves in

Los Angeles, the site of the trial. One of the ads described the way

people at Northrop think: “We try to get things to be as good as pos

sible. This can take years and years … so that we can get it just right

before it goes into the aircraft.” The spot appeared during such

heavily watched programs as Good Morning America, The Cosby

Show, the evening and late-night news, and Los Angeles Lakers bas

ketball games.

Because Northrop was indicted for allegedly falsifying tests on

parts for the Harrier jet and the air-launched cruise missile, the judge

thought this ad might prejudice jurists against the government’s

case, even without their realizing it. Judge Rymer’s ruling for prior

restraint exemplifies the “classic struggle between the First Amend

ment’s protection of free speech and the court’s interest in ensuring

the integrity of the judicial process,” according to an article in the

Wall Street Journal.

PRODUCT LIABILITY

The courts have increasingly become outlets for individuals who feel

they have been victimized. Suits dealing with defective products, racial

or sexual discrimination, sexual harassment, environmental pollution,

and other matters have become commonplace. Of these, product liabil

ity cases have loomed largest in both number and cost.

Growth in Product Liability Cases

The Rand Corporation’s Institute for Civil Justice reported that 17,000

U.S. companies were lead defendants in product liability lawsuits be

tween 1974 and 1986.

Between 1974 and 1990, product liability case

filings in U.S. federal courts increased by over 1,100%.

More recent re

cords show that between 1985 and 1991, 107,000 personal injury

suits, 48,000 asbestos liability suits, and almost 3,000 other product li-

ability suits were filed in the United States. In 1991 alone, 1,500 product

liability suits were brought in federal district courts against Fortune

1000 companies, 95% of which were personal injury cases.

The cost of

liability suits, says business, displaces funding for research and develop-

ment, increases insurance costs, and ultimately raises the price of con-

sumer products and services.

The costs of some notable lawsuits are

shown in Box 12.2.

Ominously, more class-action lawsuits are forecast. An insurance

publication writes, “the next wave of mass tort cases threatens to engulf

the nation’s businesses and, in turn, their insurance carriers.”

The

number of plaintiffs will grow and the legal issues will be complex and

wide in scope. Besides manufacturers and sellers, those affected will be

building owners, landlords, contractors, and public housing authori

ties. Other battles include construction products defects, intellectual

320 I CHAPTER 12

Box 12.2 Notable Lawsuits

Lawsuits brought against some of the biggest U.S. corporations have

resulted in billion-dollar judgments against them. Manville Corporation

(formerly Johns-Manville) faced product liability suits stemming from

asbestos-related deaths and illnesses estimated to cost over $2.5 bil

lion; A. H. Robins, maker of the Dalkon Shield, was ordered to set

aside $2.48 billion to pay claimants; Exxon was ordered to pay $5 bil

lion to 34,000 fishermen and other Alaskans who said they were

harmed by the Exxon Valdez oil spill; and Dow Corning and other sili

cone breast implant makers proposed a $4.75 billion settlement to

handle the claims of thousands of lawsuits. A feature of these lawsuits

is that they started with individual claims but ended up as class ac

tions, which some companies agree are the most efficient way to deal

with the thousands of suits.

property rights, and tobacco. In what could amount to “Asbestos II,”

building owners of about 14 million housing units face claims for injury

or damage caused not only by asbestos and lead but also by chemicals in

office furnishings and harmful vapors and gases in ventilation and

air-conditioning systems.

Cost of Litigation

Lawsuits cost Americans $80 billion a year plus another $300 billion in

indirect costs, declares Peter Huber, an academician whose research is

used by some to buttress a claim that the U.S. legal system is making the

nation less competitive.

Other estimates are as low as $29 billion to

$36 billion and as high as $117 billion.

A more recent study by

Tillinghast-Towers Perrin says that the overall tort system cost the

country $205 billion in 2001.

Litigation costs to the nation, which already account for 2.3% of the

gross domestic product (up from 1.76% in 1984, 1.5% in 1970, and 0.6%

in 1950), will mount.

Furthermore, in studying the relationship be-

tween the prevalence of lawyers and economic growth in 28 countries, a

University of Texas economist, Stephen Magee, found that having more

lawyers is associated with less growth. Lawyers are engaged in “trans-

fer seeking,” says one theory; that is, getting richer by acquiring some-

one else’s wealth rather than producing more wealth themselves. The

number of lawyers over the past three decades has tripled, from

260,000 in 1960 to about 760,000 in 1992.

U.S. businesses incur the highest liability costs in the world, said for-

mer vice president Dan Quayle when he announced the findings of the

President’s Council on Competitiveness; they are 15 times higher than

Japan’s and 20 times higher than Europe’s.

In a speech about tort re-

form, William S. Stavroupoulos, CEO of Dow Chemical, said that in the

United States Dow spends a dollar on litigation expenses for roughly ev

ery $100,000 in sales, whereas in Europe it spends a dollar for every $40

million in sales.

The “I’ll sue” culture is spreading to Europe. Cases in Britain’s county

courts have risen by almost two thirds in the past 10 years and totaled

almost 114,000 in 1996. Several large class-action product liability

suits have been moving through the courts, including one against two

British tobacco companies.

Lawsuits by the middle class are facilitated

by a “no-win, no-fee” system, a conditional fee system whereby the

lawyer’s cut, should he or she win, is limited to double the basic fee and

to 25% of the award for the total bill.

Class Action Suits Feed Lawyer Frenzy. Lawyers motivated by

self-gain are promoting class-action suits; this is one reason for the high

cost of product liability cases. Newspaper headlines, such as the Wall

Street Journal’s “Widening Horizons: Lawyers Lead Hunt for New

LITIGATION COMMUNICATION I 321