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Chapter 6 Ethics Chapter Objectives 1. To discuss the one aspect that should differentiate public relations from the law and other business pursuits—ethics. 2. To explore ethics—or the lack thereof—in today’s business, government, media, and public relations cultures. 3. To discuss the concept of corporate social responsibility. 4. To underscore the bedrock importance of public relations professionals “doing the right thing.” FIGURE 6-1 From parking lot to slammer. Fleishman-Hillard’s convicted public relations chief in more carefree times. (Photo: ZUMA Press/Newscom) LOS ANGELES, CA Jan. 7, 2011—A former executive for an international public relations firm must begin serving his prison sentence after an appeals court refused to overturn his conviction for defrauding Los Angeles taxpayers. An attorney for 61-year-old Douglas Dowie tells the Los Angeles Times Friday that the former head of the Los Angeles office of Fleishman-Hillard Inc. will begin serving the 3 1/2-year term in federal prison next month. Dowie was convicted in 2006 of conspiracy and wire fraud for padding consulting bills to the city Department of Water and Power and other clients for more than $500,000 from 2000 to 2003. The firm paid the city $6 million in 2004 to settle a related lawsuit. Dowie’s former aide, John Stodder Jr., was sentenced to one year and three months in prison. His appeal is pending. 1 Poor Douglas Dowie, public relations man turned jailbird (Figure 6-1). Dowie, former power broker as head of the Fleishman-Hillard public relations office in Los Angeles during the mayoral administration of Jim Hahn, used his friendship with the mayor to overcharge the city’s Department of Water and Power about $50,000 a month for three years, according to those who testified against him.2 Dowie and two Fleishman-Hillard subordinates were fined and sent to prison. The fate of the three was just one indication that more and more society expected public relations professionals to conduct themselves ethically in pursuit of their increasingly high-powered assignments. ■ In 2010, the U.S. Federal Trade Commission settled a complaint against public relations firm Reverb Communications for using employees to pose as ordinary customers to post glowing reviews of client video games on Apple’s iTunes store.3 ■ In 2011, former Bill Clinton White House apologist Lanny Davis grudgingly resigned from serving as public relations representative for murderous Ivory Coast leader Laurent Gbagbo. Davis, who wrote a book about the importance of “transparency” in public relations, was the subject of withering criticism for serving as a hired gun for a Gbagbo regime that reportedly committed legendary human rights abuses.4 ■ In 2012, Walmart cut its ties with Mercury Public Relations after a junior staff member at the L.A. public relations firm showed up at an anti-Walmart union news conference, posing as a reporter. The union discovered the ruse and alerted the media.5 The practice of public relations is all about earning credibility. Credibility, in turn, begins with telling the truth. Public relations, then, must be based on “doing the right thing”—in other words, acting ethically. In the 21st century, with scandals popping up periodically in every sector of society—from politics to religion, from business to sports—the subject of ethics is a pervasive one. What precisely are ethics? A sociologist posed that question to business people and got these answers: ■ “Ethics has to do with what my feelings tell me is right or wrong.” ■ “Ethics has to do with my religious beliefs.” ■ “Being ethical is doing what the law requires.” ■ “Ethics consists of the standards of behavior our society accepts.” ■ “I don’t know what the word means.” Classical ethics means different things to different people. Ethics theories range from utilitarianism (i.e., the greatest good for the greatest number) to deontology (i.e., do what is right, though the world should perish). While the meaning of ethics may be hard to pin down, there’s no secret to what constitutes unethical behavior. Unfortunately, it’s all around us. Consider the following: ■ In government, ethical lapses know no party affiliation. Washington seems perpetually rocked by ethical scandals. In 2010, longtime New York congressman Charley Rangel was convicted of a variety of ethical offenses, all stemming from his misuse of power.6 (The disgraced Rangel, whose career would have been doomed in any other profession, came back to win primary reelection in 2012. But hey, that’s politics!) In 2011, Rangel’s New York colleague Anthony Weiner resigned from the House after it was revealed he had sent provocative tweets to female followers (see Case Study in Chapter 12).7 In the summer of 2012, President Obama’s Justice Department was called to task for its questionable Operation Fast and Furious, which allowed thousands of guns to be bought by arms traffickers in the hopes of exposing Mexican drug cartels. On the Republican side, when former George W. Bush Presidential Press Secretary Scott McClellan wrote a tell-all memoir in 2008, critics decried his ethical impropriety (see PR Ethics Mini-Case in this chapter). ■ In business, insider trading scandals, where Wall Street fat cats bilked unsuspecting investors out of millions, have dominated the news in recent years. Hedge fund titans Bernie Madoff, Allen Stanford, Raj Rajaratnam, and disgraced former McKinsey & Co. CEO Rajat Gupta all faced hard time after their unethical behavior was displayed before the world. ■ In sports, several of history’s most legendary baseball players, from slugging Mark McGwire to fire-balling Roger Clemens to slammin’ Sammy Sosa to all-everything Alex “A-Rod” Rodriguez, were all tarnished in the wake of the sport’s 21st-century steroids scandal. Even revered cyclist Lance Armstrong couldn’t escape the reality that doping gave him an unfair advantage.8 ■ In education, the president of Penn State University was drummed out in 2011 in the wake of the pedophilia scandal that also cost football coach Joe Paterno his job—and, some argued, his life. President Graham Spanier, whom all agreed did a superlative job in building Penn State’s reputation, nonetheless was found wanting in covering up the awful Jerry Sandusky scandal (see Case Study in Chapter 13).9 ■ Similar charges of sexual abuse embroiled the venerable Catholic Church in ethical scandals from the beginning of the decade under Pope John Paul II and later under his successor, Pope Benedict XVI. ■ In the realm of nonprofit organizations, supposed to aid those less fortunate, ethical improprieties also weren’t uncommon. For example, in 2012, CNN revealed that a charity designed to serve veterans with disabilities had instead squandered millions of dollars on marketing costs that benefited Disabled Veterans National Foundation’s organizers.10 ■ As noted, not even the practice of public relations could escape serious ethical lapses, as the Fleishman-Hillard, Walmart, Lanny Davis, and other ethical scandals revealed. Again, public relations professionals are expected to do the right thing. The cardinal rule of public relations is to never lie. Nonetheless, in one startling survey at the turn of the century of 1,700 public relations executives, it was revealed that 25% of those interviewed admitted they had “lied on the job,” 39% said they had exaggerated the truth, and another 44% said they had felt “uncertain” about the ethics of what they did.11 While the industry never repeated that survey (Wonder why?), the Public Relations Society of America (PRSA) did invest $100,000 in revamping its code of ethics. The code (see Appendix A), underscored by six fundamental values that the PRSA believes vital to the integrity of the profession (see Figure 6-2), demonstrates the significance of ethics to the practice of public relations. FIGURE 6-2 PRSA’s six values. The values of advocacy, honesty, expertise, independence, loyalty, and fairness form the basis of the PRSA ethical code. (Copyright Public Relations Society of America. Reprinted by permission) Doing the Right Thing What exactly are ethics? The answer isn’t an easy one. The Josephson Institute, which studies ethics, defines ethics as standards of conduct that indicate how one should behave based on moral duties and virtues. In general, ethics are the values that guide a person, organization, or society—concepts such as right and wrong, fairness and unfairness, honesty and dishonesty. An individual’s conduct is measured not only against his or her conscience but also against some norm of acceptability that society or an organization has determined. Roughly translated, an individual’s or organization’s ethics comes down to the standards that are followed in relationships with others—the real integrity of the individual or organization. Obviously, a person’s ethical construct and approach depend on numerous factors—cultural, religious, and educational, among others. Complicating the issue is that what might seem right to one person might not matter to someone else. No issue is solely black or white but is rather a shade of gray—particularly in making public relations decisions. That is not to say that classical ethical distinctions don’t exist. They do. Philosophers throughout the ages have debated the essence of ethics. ■ Utilitarianism suggests considering the “greater good” rather than what may be best for the individual. ■ To Aristotle, the golden mean of moral virtue could be found between two extreme points of view. ■ Kant’s categorical imperative recommended acting “on that maxim which you will to become a universal law.” ■ Mill’s principle of utility recommended “seeking the greatest happiness for the greatest number.” ■ The traditional Judeo-Christian ethic prescribes “loving your neighbor as yourself.” Indeed, this golden rule makes good sense as well in the practice of public relations. Because the practice of public relations is misunderstood by so many—even including some of those for whom public relations people work—public relations people, in particular, must be ethical. They can’t assume that ethics are strictly personal choices without relevance or related methodology for resolving moral quandaries. Public relations people must adhere to a high standard of professional ethics, with truth as the key determinant of their conduct. Indeed, ethics must be the great differentiator between public relations practice and other functions. Public relations people must always tell the truth. That doesn’t mean they divulge “everything” about those for whom they work. But it does mean that they should never, ever lie. All one has in public relations is his or her reputation. When you lie, you lose it. So a high sense of ethical conduct must distinguish those who practice public relations. Professional ethics, often called applied ethics, suggests a commonly accepted sense of professional conduct that is translated into formal codes of ethics. The essence of the codes of conduct of both the PRSA and the International Association of Business Communicators is that honesty and fairness lie at the heart of public relations practice. Indeed, if the ultimate goal of the public relations professional is to enhance public trust of an organization, then only the highest ethical conduct is acceptable. Inherent in these standards of the profession is the understanding that ethics have changed and continue to change as society changes. Over time, views have changed on such issues as discrimination, the treatment of women and minorities, pollution of the environment, concern for human rights, acceptable standards of language and dress, and so on. Again, honesty and fairness are two critical components that will continue to determine the ethical behavior of public relations professionals. Boiled down to its essence, the ethical heart of the practice of public relations lies, again, in posing only one simple question to management: Are we doing the right thing? In posing that critical question, the public relations officer becomes the “conscience” of the organization. Often the public relations professional will be the only member of management with the nerve to pose such a question. Sometimes this means saying no to what the boss wants to do. Public relations professionals must be driven by one purpose—to preserve, defend, sustain, and enhance the health and vitality of the organization. Simply translated, the bottom line for public relations professionals must always be to counsel and to do what is in the best long-term interests of the organization. Ethics in Business For many people today, regrettably, the term business ethics is an oxymoron. Its mere mention stimulates images of disgraced CEOs being led away in handcuffs after bilking their shareholders and employees out of millions of dollars. In one period alone, the 2012 “summer of shame,” a dizzying array of corporate executives was charged with ethical violations. ■ The summer began with Irving H. Picard, the trustee overseeing the liquidation of Bernard Madoff’s investment advisory firm, receiving permission to “claw back” profits from those Madoff rewarded in his Ponzi scheme that bilked investors out of some $7.3 billion—the most costly swindle in investing history. ■ The Madoff number was just slightly more than high-flying Texas financier R. Allan Stanford was convicted of swindling out of investors over a two-decade scam involving 30,000 investors in 113 countries. ■ In June, the conviction of Rajat Gupta was perhaps the most shocking scandal of all. Gupta, former McKinsey CEO and a member of the board of premier investment banker Goldman Sachs, was an eminently respected business leader. But he also turned out to be a common criminal, feeding insider information to convicted hedge fund felon Raj Rajaratnam (Figure 6-3). Gupta’s conviction culminated a wave of insider trading cases that yielded 66 indictments and 60 convictions over two-and-a-half years. These followed business scandals earlier in the decade that exposed subprime lenders as crooks, banks and other financial institutions as less-than-responsible stewards of public wealth, and CEOs as suspect in terms of ethics and credibility. With venerable companies such as Bear Stearns and Lehman Brothers going out of business and others, such as AIG and General Motors (GM), tottering, the early part of the 21st century was not a stellar period for business credibility. No wonder confidence in business has deteriorated. One 2011 survey by the Ethics Resource Center found that although employees seemed more ethical in their own jobs, more employees had negative views of the ethics of their supervisors. Confidence in senior leadership fell to 62% in 2011, matching the historic low of 2,000 and down six points from just two years earlier. One-third of U.S. employees said their own managers “didn’t exercise ethical behavior.”12 FIGURE 6-3 Escort service. Raj Rajaratnam, one of Wall Street’s most powerful hedge fund managers, is escorted by the FBI in 2009 after being arrested for earning millions from illegally obtained stock tips. (Photo: BRENDAN MCDERMID/REUTERS/Newscom) Indeed, many believed “crooked CEO” was redundant. One book, written by former management consultants, described CEOs thusly: Among the more than 14,000 publicly registered companies in the U.S. and the even larger number of privately held companies there is a class of people who will lie to the public, the regulators, their employees and anyone else in order to increase personal wealth and power. 13 To stem the feeling that chief executives and their companies weren’t acting ethically, a number of firms increased their efforts to make their activities more transparent to the public. Companies from Coca-Cola to Amazon.com to General Electric announced plans to make accounting procedures more understandable. One CEO, Henry Paulson of investment banking giant Goldman Sachs, called on his fellow CEOs, in a memorable speech, to reform before regulation forced them to do so: “In my lifetime, American business has never been under such scrutiny. To be blunt, much of it is deserved.”14 Paulson’s call for business ethics helped secure his selection as Secretary of the Treasury under President George W. Bush; where later he presided over the meltdown and thankful recovery of the U.S. financial system. Corporate Codes of Conduct By the second decade of the 21st century, most organizations devoted an increasing amount of time and attention to corporate ethics. The vast majority of companies conducted periodic risk assessments, with more than half doing so annually. Three-quarters of all companies conducted training in such areas as sexual/workplace harassment, conflicts of interest, and protecting confidential information. Many firms devoted upwards of $500,000 a year, exclusive of personnel costs, for ethics and compliance programs.15 Most organizations also adopted formal codes of conduct to guide their activities. A code of conduct is a formal statement of the values and business practices of a corporation. A code may be a short mission statement, or it may be a sophisticated document that requires compliance with articulated standards and that has a complicated enforcement mechanism. Whatever its length and complexity, the corporate code of conduct dictates the behavioral expectations that an organization holds for its employees and agents. Formal codes of conduct can help accomplish a number of public relations purposes. ■ To increase public confidence. Scandals, credit crises, oil shocks, etc., have all shaken investor confidence and have led to a decline of public trust and confidence in business. Many firms have responded with written codes of ethics. ■ To stem the tide of regulation. As public confidence has declined, government regulation of business has increased. Some estimated the cost to society of compliance with regulations at $100 billion per year. Corporate codes of conduct, it was hoped, would help serve as a self-regulation mechanism. ■ To improve internal operations. As companies became larger and more decentralized, management needed consistent standards of conduct to ensure that employees were meeting the business objectives of the company in a legal and ethical manner. ■ To respond to transgressions. Frequently, when a company itself is caught in the web of unethical behavior, it responds with its own code of ethics. Ralph Waldo Emerson once wrote, “An organization is the lengthened shadow of a man.” Today, many corporate executives realize that just as an individual has certain responsibilities as a citizen, so, too, does a corporate citizen have responsibilities to the society in which it is privileged to operate. As business becomes globalized, companies are being encouraged by interest groups, governments, educational institutions, industry associations, and others to adopt codes of conduct. Accordingly, formal ethical codes, addressing such topics as executive compensation, accounting procedures, confidentiality of corporate information, misappropriation of corporate assets, bribes and kickbacks, and political contributions, have become a corporate fact of life for every company executive, up to and including the members of the board of directors. Corporate Social Responsibility Closely related to the ethical conduct of an organization is its corporate social responsibility (CSR). Simply stated, CSR is about how companies manage the business processes to produce an overall positive impact on society. This implies that any social institution, from the smallest family unit to the largest corporation, is responsible for the behavior of its members and may be held accountable for their misdeeds. In the late 1960s, when this idea was just emerging, initial responses were of the kneejerk variety. A firm that was threatened by increasing legal or activist pressures and harassment would ordinarily change its policies in a hurry. Today, however, organizations and their social responsibility programs are much more sophisticated. Social responsibility is treated just like any other management discipline: Analyze the issues, evaluate performance, set priorities, allocate resources to those priorities, and implement programs that deal with issues within the constraints of the organization’s resources. Many companies have created special committees to set the agenda and target the objectives. Social responsibility touches practically every level of organizational activity, from marketing to hiring, from training to work standards. A partial list of social responsibility categories might include the following: ■ Product lines—dangerous products, product performance and standards, packaging, and environmental impact ■ Marketing practices—sales practices, consumer complaint policies, advertising content, and fair pricing ■ Corporate philanthropy—contribution performance, encouragement of employee participation in social projects, and community development activities ■ Environmental activities—pollution control and climate change projects, adherence to federal standards, and evaluation procedures for new packages and products ■ External relations—support of minority enterprises, investment practices, and government relations ■ Employment diversity in retaining and promoting minorities and women—current hiring policies, advancement policies, specialized career counseling, and opportunities for special minorities such as the physically handicapped ■ Employee safety and health—work environment policies, accident safeguards, and food and medical facilities More often than not, organizations have incorporated social responsibility into the mainstream of their practices. Most firms recognize that social responsibility, far from being an add-on program, must be a corporate way of life. They recognize that in a skeptical world, business must be responsible to act ethically and improve the quality of life of their workforce, their families, and the broader society. Outside the Lines Test Your Workplace Ethics So you want to enter the workplace? The question of ethics looms larger today than at any previous time, especially with the advent of technology and the potential abuses it brings. To test how you might measure up as an ethical worker, answer the following questions. And don’t cheat! Questions 1. Is it wrong to use company email for personal reasons? 2. Is it wrong to use office equipment to help your family and friends with homework? 3. Is it wrong to play computer games on office equipment during the workday? 4. Is it wrong to use office equipment to do Internet shopping? 5. Is it unethical to visit pornographic Websites using office equipment? 6. What’s the value at which a gift from a supplier or client becomes troubling? 7. Is a $50 gift to a boss unacceptable? 8. Is it okay to take a pair of $200 football tickets as a gift from a supplier? 9. Is it okay to take a $120 pair of theater tickets? 10. Is it okay to take a $100 holiday fruit basket? 11. Is it okay to take a $25 gift certificate? 12. Is it okay to accept a $75 prize won at a raffle at a supplier’s conference? Answers From a cross-section of workers at nationwide companies, the answers to these questions were compiled by the Ethics Officer Association, Belmont, Massachusetts, and the Ethical Leadership Group, Wilmette, Illinois. 1. 34% said personal email on company computers is wrong. 2. 37% said using office equipment for homework is wrong. 3. 49% said playing computer games at work is wrong. 4. 44% said Internet shopping at work is wrong. 5. 87% said it is unethical to visit pornographic sites at work. 6. 33% said $25 is the amount at which a gift from a supplier or client becomes troubling. Another 33% said $50. Another 33% said $100. 7. 35% said a $50 gift to the boss is unacceptable. 8. 70% said it is unacceptable to take $200 football tickets. 9. 70% said it is unacceptable to take $120 theater tickets. 10. 35% said it is unacceptable to take a $100 fruit basket. 11. 45% said it is unacceptable to take a $25 gift certificate. 12. 40% said it is unacceptable to take the $75 raffle prize. Ethics in Government Politics has never enjoyed an unblemished reputation when it comes to ethics. In the first two decades of the 21st century—with the U.S. political system polarized between harsh right and hard left—politicians seemed to be losing more ground in terms of trustworthiness and ethical values. Both the legislative and executive branches of the federal government took a beating in the public eye. Congress, according to Gallup polling, “reduced its public approval rating in the winter of 2013 to 14%. That means that the other 86%” of the nation had real trouble with the ethics and ability of Congress. But at least the rating was better than the 10% congressional approval rating recorded at the beginning of 2012.16 The president generally fared better than Congress, but presidential approval still had trouble consistently piercing the 50% approval barrier. The advent of 24-hour cable news and the 24/7 Internet blogosphere cast a perpetual 21st-century spotlight on the activities of the president and his allies. No administration could escape the harsh glare of prying eyes noting ethical failures. President Bill Clinton suffered the ultimate ethical ignominy: being impeached by the House of Representatives for his inexplicable and shocking behavior with a young intern in the White House. Both President George Bush and Vice President Dick Cheney were criticized harshly for everything from the disposition of and reasons for war in Iraq to their past corporate energy affiliations. President Obama, as he ran for reelection in 2012, also was attacked by critics for everything from politicizing his declaration of a path to citizenship for children of illegal immigrants to his Justice Department’s “Fast and Furious” decision to provide guns to Mexican arms traffickers. The “sleaze factor” in government continued to poison politics. ■ In 2008, New York’s crusading Democrat Governor Elliott Spitzer was forced from office when he was found to have been a client of a high-priced prostitution ring. Later that year, Congressman Rangel faced a series of ethics violations and failure to comply with tax laws. ■ In 2009, Republican Mark Sanford refused to resign as South Carolina governor after his extramarital affair was exposed. He ultimately lost his family and his job. ■ In 2011, Democrat Congressman Anthony Weiner was drummed out of the House for sexting young women pictures of his … well, never mind. Later that year, Republican presidential primary candidate Herman Cain was upended by allegations of sexual misconduct. ■ In 2012, former Democrat senator and presidential candidate John Edwards was exonerated from charges of using campaign funds to hide a mistress and love-child, although the damage to his career was done. Whew! After all the white-collar crime and political scandals that have marked the first two decades of the 21st century, the public is less willing to tolerate such ethical violations from their elected officials. It is likely that ethics in government will become an even more important issue as voters insist on representatives who are honest, trustworthy, and ethical. PR Ethics Mini-Case The Sad Memoir of Scott McClellan By 2006, when he was “relieved” of his duties as President George W. Bush’s press secretary, Scott McClellan was a dazed and bitter man. Arguably one of the weakest presidential press secretaries in history, McClellan was labeled “the human piñata” because of the way he was battered at White House press conferences. Forced to deal with several embarrassing White House problems, not the least of which was the accusation against Vice President Dick Cheney and his deputy, Lewis Libby, in leaking the name of a CIA operative, McClellan was forced to endure constant battering at the hands of an empowered White House press corps. If nothing else, he served the Bush Administration as a “good soldier” (Figure 6-4). FIGURE 6-4 Et tu Brute? President George Bush welcomes incoming Press Secretary Scott McClellan to the White House as successor Ari Fleischer looks on. (Photo: Shawn Thew/EPA/Newscom) In the spring of 2006, McClellan was mercifully replaced by Fox News broadcaster Tony Snow, who quickly brought order and credibility back to the press secretary job with a confident, open approach. A year later, inexplicably, Scott McClellan turned on the hand that had fed him for his entire career as a government employee. Indeed, George W. Bush had loyally taken McClellan with him from the State House in Texas to the White House in Washington for the better part of two decades. But when McClellan left the White House, he let his former patron have it with both barrels blazing. In his memoir, segments of which were leaked less than a year after his White House departure, McClellan ripped into Bush, claiming his former mentor, among other things: ■ Relied on “propaganda” to sell the Iraq war, ■ Veered “terribly off course” in war policy, ■ Refused to be “open and forthright on Iraq,” and ■ Took a “permanent campaign approach” to governing. The McClellan memoir sent shockwaves through Washington and was an instant bestseller. Democratic opponents of President Bush hailed it as a “smoking gun,” revealing all the improprieties of the Bush White House. But others wondered about the “ethics” of a former press secretary choosing to attack the only former client he ever had, a man whom the press secretary had publicly praised just months before the tell-all book. Moreover, if the essence of public relations counsel is to advise an employer on “how to act,” some wondered why McClellan hadn’t offered the advice to the president when he served next to him, rather than criticizing him, for money, well after the fact.* Questions 1. How would you assess Scott McClellan’s ethical responsibility to be loyal to his boss versus his ethical responsibility to reveal what happened at the White House? 2. What are the public relations ethical considerations revealed by the McClellan case? *For further information, see Mike Allen, “McClellan Rips Bush, White House,” Politico.com (May 27, 2008); Elisabeth Bumiller, “In Ex-Spokesman’s Book, Harsh Words for Bush,” The New York Times (May 28, 2008); and Fraser P. Seitel, “The Sad Memoir of Scott McClellan,” odwyerpr.com (November 26, 2007). Ethics in Journalism The Society of Professional Journalists is quite explicit on the subject of ethics (Figure 6-5). Journalists at all times will show respect for the dignity, privacy, rights, and well-being of people encountered in the course of gathering and presenting the news. 1. The news media should not communicate unofficial charges affecting reputation or moral character without giving the accused a chance to reply. 2. The news media must guard against invading a person’s right to privacy. 3. The media should not pander to morbid curiosity about details of vice and crime. And so on. Unfortunately, what is in the code often doesn’t reflect what appears in print or on the air. More often than not, journalistic judgments run smack into ethical principles—especially in a day when every citizen is a publisher on the Internet. ■ Plagiarism scandals at three of the nation’s leading newspapers—The New York Times, Washington Post, and Boston Globe—resulted in the firings of high-profile journalists. The Times fell victim to the new century’s most embarrassing instance of suspect journalistic ethics. In 2003, the “Great Gray Lady” was stunned when one of its promising young reporters, Jayson Blair, was discovered to have fabricated numerous dispatches for the paper over an extended period. The Times found out about Blair’s fraud only when a reporter from another paper tipped it off. Blair was immediately fired, and the Times took a major reputation hit. ■ In 2005, the Times was shocked again after one of its star reporters, Judith Miller, served 85 days in prison for refusing to reveal confidential administration sources related to stories involving the leak of the name of a CIA operative married to a Bush administration critic. On her release, the Times criticized her for being too cozy with the White House. Miller hastily resigned after 28 years at the Times and was hired by Fox News. FIGURE 6-5 Journalists’ code. The Society of Professional Journalists has elaborated in some detail on the ethical guidelines that should govern all journalists. (Photo: Copyright © 1996–2007. Reprinted by permission of the Society of Professional Journalists, www.spj.org) ■ In 2009, the Times was faced with a different kind of ethical dilemma, when Editor Bill Keller decided to keep quiet the kidnapping by the Taliban in Afghanistan of investigative reporter David Rohde. When Rohde escaped to freedom seven months later, the Times was criticized by some for suppressing the news. In 2010, Keller made the decision to publish a cache of a quarter million confidential diplomatic cables, purloined by WikiLeaks, an organization dedicated to revealing secret documents. Some questioned the ethics of putting diplomats and the nations they worked for at risk.17 ■ In the new millennium, with 152 blogs on the Internet, 25 billion tweets sent each year, and two billion YouTube videos watched each day, as well as the exponential increase in TV news, cable stations, and programming on the Internet, the pressure has increased on news outlets to get stories at any cost.18 Network television news organizations—once the bastion of heralded journalists from Edward R. Murrow and Walter Cronkite to Chet Huntley and David Brinkley—resorted to paying news sources to appear on their airwaves. In 2011, after ABC was embarrassed when it was revealed the network paid accused baby killer Casey Anthony $200,000 for photos, the network became the first to adopt a policy that it would no longer “pay for play.”19 ■ And then, of course, there were the screamers. Cable television news, in particular, was rocked by the phenomenon in the 21st century of “nonstop screaming,” where adversaries on either side spent most of their air time declaring a “my way or the highway” point of view. Partisanship was the order of the day. Such popular programs as Fox News Channel’s The O’Reilly Factor with Bill O’Reilly, MSNBC’s Hardball with Chris Matthews, and CNN Headline News’ with Nancy Grace, all distinguished by their voluble hosts, added plenty of heat but little light to the national dialogue. Indeed, by 2012, CNN, the one cable network that tried to remain neutral, had lost miserably in the only thing that mattered to TV executives: ratings.20 And many times, it was non-journalist late-night comedians who landed the top name guests—or “gets” as they say in the news biz (Figure 6-6). A Gallup poll in 2012 revealed that Americans rated journalists at 26% in terms of “Honesty/Ethics,” just ahead of bankers and lawyers. Nurses ranked first at 84%.21 Such was the demoralized state of journalistic ethics in the last half of the first decade of the 21st century. FIGURE 6-6 The new “journalists.” Late-night comics, such as Jay Leno, out-muscled journalists in the 21st century to interview the really big “gets.” (Photo: White House Photo by Pete Souza) Ethics in Public Relations Ethics is—or at least, should be—the great differentiator between public relations and other professions. In light of numerous misconceptions about the practice of public relations, it is imperative that practitioners emulate the highest standards of personal and professional ethics (Figure 6-7). Within an organization, public relations practitioners must be the standard bearers of corporate ethical initiatives. By the same token, public relations consultants must always counsel their clients in an ethical direction—toward accuracy and candor and away from lying and hiding the truth. The public relations department should be the seat of corporate ethics. At least four ethical theories are relevant to the practice of public relations. ■ The attorney/adversary model, developed by Jay Barney and Ralph Black, compares the legal profession to that of public relations in that (1) both are advocates in an adversarial climate and (2) both assume counterbalancing messages will be provided by adversaries. In this model, Barney and Black suggest practitioners have no obligation to consider the public interest or any other outside view beyond that of their client. FIGURE 6-7 Doing the right thing. The Council of Public Relations Firms board of directors revised its Code of Ethics in 2009 to exhort members to commit to the highest level of ethics. (Courtesy Council of Public Relations Firms) ■ The two-way communication model, developed by Jim Grunig, is based on collaboration, working jointly with different people, and allowing for both listening and give-and-take. In this model, Grunig suggests that the practitioner balances his or her role as a client advocate with one as social conscience for the larger public. ■ The enlightened self-interest model, developed by Sherry Baker, is based on the principle that businesses do well by doing good. In this model, Baker suggests that companies gain a competitive edge and are more respected in the marketplace if they behave ethically. ■ The responsible advocacy model, developed by Kathy Fitzpatrick and Candace Gauthier, is based on the ideal of professional responsibility. It postulates that practitioners’ first loyalty is to their clients, but they also have a responsibility to voice the opinions of organizational stakeholders. In this model, Fitzpatrick and Gauthier suggest that the practitioner’s greatest need for ethical guidance is in the reconciliation of being both a professional advocate and a social conscience. The PRSA has been a leader in the effort to foster a strong sense of professionalism among its membership, particularly in its new code of ethics. Its six core values underpin the desired behavior of any public relations professional. ■ Advocacy. The PRSA Code (see Appendix A) endorses the Fitzpatrick and Gauthier model in stating: “We serve the public interest by acting as responsible advocates for those we represent.” For example, public relations professionals must never reveal confidential or private client information, even if a journalist demands it. The only way such information might be revealed is after a thorough discussion with the client. ■ Honesty. For example, a client asking a public relations representative to “embellish” the performance the company expects to achieve should be told diplomatically, but firmly, no. Public relations people don’t lie. ■ Expertise. For example, a client in need of guidance as to whether to accept a sensitive interview invitation for a cable TV talk show must be carefully guided through the pros and cons by a skilled public relations practitioner. ■ Independence. For example, when everyone in the room—lawyer, human resources, treasurer, and president—agree with the CEO’s rock-headed scheme to disguise bad news, it is the public relations professional’s duty to strike an independent tone. ■ Loyalty. For example, if a competing client offers a practitioner more money to abandon his or her original employer, the public relations professional should understand that his or her loyalties must remain constant. ■ Fairness. For example, when a rude and obnoxious journalist demands information, a practitioner’s responsibility is to treat even the most obnoxious reporter with fairness. What these tenets indicate is that proper public relations practice is just the opposite of what many accuse public relations people of being—deceivers, obfuscators, con artists, spinners, or even liars. Rather, public relations people and practice ought to be “transparent.”22 Sadly, the practice hasn’t always lived up to these ethical principles. As a consequence, the field, even more sadly, regularly ranks toward the bottom on credibility surveys.23 Changing this view to one of a more ethical and honest practice is a great challenge for public relations leaders in the 21st century. Outside the Lines Defending a Dictator Public relations ethics are sometimes slippery. So it was in 2011, with the United States in recession and the world ablaze in the “Arab Spring,” with Middle East dictators clinging to power. To help in the task, the despots reached out to American public relations units to help cleanse their name back in the good, old U.S. of A. A slew of American public relations firms were hired by the world’s most repressive governments. Brown Lloyd James, Bell Pottinger, Potomac Square Group, Qorvis Communications, and former Bill Clinton aide Lanny Davis were just a few of the public relations names—most headquartered in Washington—called in to assist the image of ruthless tyrants, in exchange for significant fees. One organization, Monitor Group of Cambridge, Massachusetts, made up of Harvard academics and former diplomats, was asked to promote the beneficent deeds of Libyan dictator Colonel Moammar Gadaffi (Figure 6-8). This, the group did gladly to the tune of $3 million from the besieged dictator. A portion of that money was passed on by Monitor to leading academics and policymakers in the United States, in the form of honorariums, consultancy fees, and travel expenses. The former officials and Harvard professors accepted the blood money gladly and attempted to present the scary Gadaffi in a positive light. Alas for Monitor and its hired guns, the Libyan leader met an untimely demise at the hands—literally—of his less-than-admiring countrymen in October 2011. Monitor subsequently admitted its error in representing the brutal Libyan strongman but apparently didn’t give back any money.* FIGURE 6-8 Col. Goofball. Why would any self-respecting public relations firm represent this man? ’Cuz he was rich (until his loyal subjects caught up with him in 2011)! (Photo: Donatella Giagnori/ZUMA Press/Newscom) *For further information, see Rosanna Fiske, “Destroying America’s Reputation by Rebuilding Libya’s,” The Hill’s Congress Blog, August 15, 2011; and “U.S. Firm Monitor Group Admits Mistakes Over $3 Million Gadaffi Deal,” The Guardian, March 3, 2011. Last Word The scandals in government and business in the first two decades of the 21st century have placed a premium in every sector of society on acting ethically. More than half of the 3,000 workers who took part in a National Business Ethics Survey said they witnessed at least one type of ethical misconduct on their job.24 That’s disgraceful. As the CEO of Eaton Corporation, the manufacturing giant, put it, “There is no truer window into a corporation’s soul than its approach to ethics.”25 The same can be said for the practice of public relations. The success of public relations in the 21st century will depend largely on how the field responds to the issue of ethical conduct. Public relations professionals must have credibility in order to practice. They must be respected by the various publics with which they interact. This is as true overseas as it is in the United States. To be credible and to achieve respect, public relations professionals must be ethical. It is that simple. Stated another way, for public relations practice in general and individual public relations professionals in particular, credibility in the next few years will depend on how scrupulously they observe and apply the principles and practice of ethics in everything they do. Discussion Starters 1. How would you define ethics? 2. How would you describe the state of ethics in business, government, and journalism? 3. How important is the ethical component of the practice of public relations? 4. Why have corporations adopted corporate codes of conduct? 5. What is corporate social responsibility? 6. What were the ethical implications of Scott McClellan’s memoirs? 7. What are the pros and cons of the attorney/adversary public relations model compared to the enlightened self-interest model? 8. Is the public more tolerant or less tolerant of ethical violators today? Why? 9. What is the significance of the six ethical values that underscore the Public Relations Society of America Code of Ethics? 10. What are the ethical responsibilities of a public relations professional? Pick of the Literature Ethics in Public Relations 2nd ed. Patricia J. Parsons, Philadelphia, PA: Kogan Page Ltd., 2008 Excellent overview of the various aspects of ethics in the practice of public relations, authored by a distinguished professor at Mount St. Vincent University in Halifax, Nova Scotia, Canada. The bias of this book is that most public relations professionals conduct themselves with honesty and integrity, and that “spin” is the enemy (She’s right!). She writes that “recognizing, facing, and dealing with ethical dilemmas in everyday practice are the three most important aspects of ethics.” (Again, she’s right!) The book proposes an ethical framework for practitioners, beginning with history and definitions and evolving into moral relativism and situational ethics. In the process, she examines such germane aspects as ethics in media relations, whistle-blowing, ethics and client relations, ethics in decision-making, and a host of other issues. This is truly an exhaustive summary of an imperative topic in the practice of public relations. Case Study Doing the Right Thing by Making a “Hurd” Decision For decades, the Hewlett-Packard Company—or HP, as it was known—was one of Silicon Valley’s most respected technology companies. Its founders, Stanford classmates David Packard and William Hewlett, created their partnership in 1939 and built a worldwide computer colossus. Both Hewlett and Packard, after they retired, became well known as philanthropists, each of them the epitome of high ethics and propriety. The hugely successful company they developed was built on a platform of innovative competence complemented by an understated public profile and high moral fiber. All that began to change when in 1999, HP stunned the macho, high-tech world by recruiting an actual woman to be its CEO. Carly Fiorina, high-profile executive vice president of AT&T, was the surprise selection to take the Hewlett-Packard reins, becoming one of the most powerful women in business. Fiorina’s tenure was marked by a contentious merger with rival computer maker Compaq, dissension in the ranks, and a most un-HP-like parade of personal CEO publicity. Carly mania reigned in the media. Publicity about HP’s woman chief seemed to be all over the place. In 2005, having had enough fireworks, the Hewlett-Packard board ushered CEO Fiorina out the door. Fair-Haired Boy As Fiorina’s replacement, Hewlett-Packard chose Mark Hurd, a no-nonsense, 25-year computer industry veteran. Unlike his predecessor, Hurd proved himself a solid, low-key leader, well respected by Wall Street and the media, if not always by the people who worked for him. (He laid off 10% of the HP workforce shortly after being named CEO.) Hurd generally managed the company skillfully, regaining much of the credibility it had sacrificed in the Fiorina era. Hurd’s one slip was in 2006 when HP was embroiled in an embarrassing crisis that resulted from its board chair hiring spies to snoop on fellow HP board members, staff members, and journalists who covered the company. Upshot of the scandal was national publicity exposing the HP practices and the California Attorney General charging the HP board chair, Patricia Dunn, with four felonies for her role in the HP investigation into the unauthorized disclosure of company information. Throughout the crisis, CEO Hurd adopted a low profile. Ultimately, when the smoke cleared, he announced that the board chair had resigned, and he apologized profusely for HP’s violation of the privacy of directors and company employees. Not only did Hurd escape the board crisis relatively unscathed, he was named to add to his CEO title as the new HP chair. “A Close Personal Relationship” For five years, Hurd navigated Hewlett-Packard through steadily better years; the company appeared to be back on its profitable/ethical track. That’s why it was such a bolt from the blue on Friday, August 6, 2010, when it was announced that CEO Hurd had decided to resign. According to HP’s board, which made the announcement after the market closed, CEO Hurd resigned, technically, for “fudging on his expenses.” Less technically, but more importantly, Hurd was found to be having a two-year “close personal relationship” with a female contractor. Part of Hurd’s “relationship” with the contractor included dinners, often on business trips, for which the CEO charged the company but failed to report that he dined with his friend, the contractor. And so, because of these “expense irregularities,” the HP board fired the CEO. Not incidentally, the “contractor” in question happened to be a blonde bombshell, former aspiring B movie actress-turned seminar leader, featured in such cinematic properties as Intimate Obsession, Blood Dolls, and the immortal Body of Influence 2. Biting the Bullet In making its announcement about its well-regarded CEO, HP went to great lengths to acknowledge that after an extensive investigation, it found that he committed no violations of law but rather violated the Hewlett-Packard Code of Conduct. So the board had “no recourse” but to ask for and receive Hurd’s resignation. Hurd, himself, was candid in admitting that he had not always represented the corporation in the manner in which he should have (Figure 6-9). He said, “I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career…. I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time.” The HP board, also to its credit, acknowledged that getting rid of such a well-respected leader was a difficult decision. Said its lead independent director, “The board deliberated extensively on this matter. It recognizes the considerable value that Mark has contributed to HP over the past five years in establishing us as a leader in the industry…. This departure was not related in any way to the company’s operational performance or financial condition, both of which remain strong. The board recognizes that this change in leadership is unexpected news for everyone associated with HP.” HP’s critics were livid at the decision. FIGURE 6-9 Curtains for the CEO. Hewlett-Packard CEO Mark Hurd grimly stepped down in 2010, after an ethics scandal forced him to resign. (Photo: MANDEL NGAN/AFP/Getty Images/Newscom) ■ Larry Ellison, billionaire cofounder of software giant Oracle and a tennis buddy of Hurd’s, declared, “The HP Board just made the worst personnel decision since the idiots on the Apple Board fired Steve Jobs many years ago,” adding that the HP board capitulated to “cowardly corporate political correctness.” ■ Corporate governance watchdog Nell Minow took the board to task for failing “to make it clear enough to (Hurd) what their expectations were or this would not have happened.” After all, Minnow argued, the board is responsible for “making sure the CEO knows he will be held accountable.” ■ Finally, industry analysts in the financial community and the press joined in to pile on HP for getting rid of such a market-friendly CEO. The tech analyst at Sanford Bernstein & Co. said it was “difficult to view Hurd’s departure as anything but negative for HP.” Likewise, argued e-Week, a leading IT management journal, “The goal of any major tech company is to maximize shareholder value. The only way to do that is to reduce expenses, increase revenues, and ultimately see profits soar. When a CEO who has done as good a job as Hurd leaves, shareholders tend to get worried. And when that happens, they usually start selling off shares for fear of the next CEO ruining things.” Which is, of course, what happened immediately after Hurd’s departure from HP: its shares tumbled. But in short time, investors realized—even if industry analysts didn’t—that a successful company that actually stands for something is a good investment in the long run. Accordingly, HP shares soon regained the value they had lost. Taking the Ethical Road Hewlett-Packard’s critics had a point. The company’s board did have at least two other options, both employed time and again by organizations facing similar crises. ■ One, it could have looked the other way, quietly slapped the CEO on the wrists, and hoped nothing would be made public. ■ Two, HP could have announced Hurd’s resignation to “pursue personal business opportunities” and offered no further explanation. Hewlett-Packard chose neither of these two easier courses. The action it took reinforced that the company’s Code of Conduct wasn’t just a piece of paper that meant nothing; by contrast, it represented a mandatory pact to which every employee, regardless of rank, was a subject. In taking strong action against the highest ranking individual in the company, HP’s board remained true to the ethical framework established by its founders and demonstrated the three-step template to which all companies should subscribe in similar management crisis. While reasonable observers might disagree with aspects of the HP decision and response, they can’t quibble that the Hewlett-Packard board displayed admirable courage in taking a clearly unpopular action in order to safeguard the principles upon which the company was built. The board took the high road and distinguished itself. As to Mark Hurd, he landed on his feet, hired by none other than Larry Ellison as co-president and board member of Oracle Corporation. Oracle, as it turned out, also had a Corporate Code of Conduct which, among other things, stated the following: Our reputation and our success depend upon the personal commitment that each of us makes to uphold our values and practice ethical behavior in all of our business dealings. All of us, regardless of employment level, position, or geographic location, are expected to make this commitment daily, both individually and collectively, to uphold the standards of business conduct outlined in this Code. Which, as it turned out, was exactly what Hewlett-Packard’s Board did in firing Mark Hurd.* Questions 1. What other options did Hewlett-Packard have in dealing with Mark Hurd? 2. Do you think the board did the right thing? 3. Had HP decided to slap its CEO on the wrists for his infraction, what might have been the outcome for the company? *For further information, see Ashlee Vance, “H.P. Ousts Chief for Hiding Payments to Friend,” The Wall Street Journal, August 6, 2010. From the Top An Interview with Howard J. Rubenstein Howard J. Rubenstein, president of Rubenstein Associates since founding the firm in 1954, is one of the world’s most well-known and respected public relations counselors, advising some of the world’s most influential corporations, organizations, and opinion leaders. In addition to managing the day-to-day activities of his firm, Rubenstein is involved in numerous civic and philanthropic organizations. A Phi Beta Kappa graduate of the University of Pennsylvania, he finished first in his class in the night school division of St. John’s University School of Law, which subsequently awarded him an honorary Doctor of Law degree. As an attorney, he served as assistant counsel to the House of Representatives Judiciary Committee. How would you define the practice of public relations? Public relations is the art of conveying an idea or message to a wide variety of publics utilizing multiple forms of communications. It can be broadly applied and used to advance the interests of businesses, governments, and society in general. It can achieve objectives as narrow as promoting a product or as broad as creating a movement. The communications themselves can be targeted to the general public or to very select groups of individuals, conveyed via media or person to person. The tools employed encompass a wide array, from press releases, news conferences, special events, speaking engagements, webinars, blogs, and grassroots organizations down to a single conversation with one influential person. How important is communications for organizations in today’s society? Communications in its many forms creates and projects messages with the power to affect great change and achieve tremendous success, while a breakdown in communications can lead to dismal failure. Clearly, communications is critical for organizations as they seek public acceptance, support, and understanding of their activities. Communication today is a major focus for presidents, prime ministers, and legislators, as well as religious leaders, as they try to shape the directions of entire societies and world events. What are the key attributes that distinguish the best public relations professionals? Ethics, intelligence, and willingness to put in the time and hard work are core characteristics. Good PR professionals should have the ability to write well and speak effectively. The final attribute is creativity and imagination, combined with an understanding of reality and practicality. Professionals in the field should be able to stretch the envelope as far as technique and methodology go, without forgetting what they are trying to achieve. What is the key to interesting a journalist in a client’s story? There are many keys to piquing media interest. First, however, you must know the media outlet and understand what a news story is and what a reporter wants to see as the components of a story. You must target and reach out selectively, rather than just send out releases. Then, once you know where to go, find the human-interest angle, keep the pitch succinct, and offer what the reporter needs to cover the story. Forget the term spinmeister. Offer a story that is accurate, do it in an honorable and forthright way, and help the reporter do his or her job well. Above all, don’t waste reporters’ time with something that isn’t right for the publication or the beat the reporter covers. And don’t be nasty if your idea is rejected. You’ll likely want to approach that reporter again some day. Instead take that rejection as a sign that you need to refine the pitch or find a better fit for it. What inspired you, personally, to go into public relations? I was inspired to enter public relations by my father, who was a crime reporter with the New York Herald Tribune. From his perspective as a journalist, he believed that PR had the untapped potential to be a great career. Not only did he get me my first account, he explained to me the importance of ethics, honesty, and integrity in dealing with the press, conducting business, and communicating with the public. He taught me the importance of good writing, finding the news value in a story, and working hard to achieve coverage in the media. He was very supportive when I began my company with that single account at my new office, which was also known as my mother’s kitchen table! He encouraged me and always believed that public relations had a bright future. I remember him saying that public relations as a field was malleable, like clay, and could be formed to fit any idea that I had. As a result, I started out believing that if I was honest, thoughtful, and hard working, I could be successful, earn a living, and establish a good reputation in what was then a barely recognized field. That’s what happened, so I guess my father was right. What are the greatest challenges facing the practice of public relations? In every aspect of society, leaders seek public relations counsel. Because media scrutiny is so intense today, it takes a professional to understand and advise society’s leaders as to how best to respond and engage. As a result, PR people today are professionals with as much credibility and weight as lawyers, accountants, bankers, architects, or engineers. We alone offer the ability to design communications programs, judge their potential, and execute them to achieve results. That guarantees for PR professionals tremendous opportunity and a seat at the table at the highest levels. Yet for all that progress in the evolution of the profession, there are still too many people, especially in the general public, who hold public relations in low esteem. PR professionals are still viewed in many quarters as snake-oil salesmen, ready to stoop to conquer or employ deceptive tactics. The great challenge today is changing that perception and winning for the profession the respect that it deserves. The way to meet that challenge as an industry is through superb professional performance and continued adherence to the highest ethical and business standards. Public Relations Library Black, Jay, and Chris Roberts. Doing Ethics in Media. New York: Routledge, 2011. A discussion of the ethics that people in communication—journalism, public relations, advertising, marketing—ought to emulate. Fitzpatrick, Kathy, and Carolyn Bronstein (Eds.). Ethics in Public Relations: Responsible Advocacy. Thousand Oaks, CA: Sage Publications, Inc., 2006. A book all about “responsible advocacy,” representing clients and organizations. Hartley, Robert F. Business Ethics: Mistakes and Successes. New York: John Wiley & Sons, 2005. This book discusses all the notorious ethical cases of our time, from Ford’s Explorer and Firestone tires to WorldCom’s accounting fraud to “Chainsaw” Al Dunlap’s duplicity at Sunbeam. McClellan, Scott. What Happened. New York: Public Affairs, 2008. The prodigal son of the George W. Bush White House gives his side of the events that led him to turn on his former employer with this tell-all memoir. O’Leary, Rosemary. The Ethics of Dissent. Washington, DC: CQ Press, 2006. A lively treatise, focusing on ethical issues, problems, and downright abominations in government. Seymann, Marilyn, and Michael Rosenbaum. The Governance Game: Restoring Boardroom Excellence and Credibility in Corporate America. Mahwah, NJ: Aspatore, 2003. This book explores one of corporate America’s most prominent ethical vulnerabilities, the board of directors. The authors suggest what corporate boards can do to improve their performance in terms of management of the board and the ethical behavior of directors. They stress that corporate boards must go beyond making sure their companies are simply complying with existing laws and regulations. Stauber, John, and Sheldon Rampton. Trust Us, We’re Experts. New York: Penguin Putnam, 2001. The anti–public relations authors of Toxic Sludge Is Good for You are at it again. This time they explain—from their unique perspective—how “corporations and public relations firms have seized upon remarkable new ways of exploiting your trust to get you to buy what they have to sell.” Strap yourself in. Trevino, Linda K., and Katherine A. Nelson. Managing Business Ethics: Straight Talk About How to Do It Right, 3rd ed. New York: John Wiley & Sons, 2004. Discusses not only what business ethics are but also why business should care.

Chapter 7 The Law Chapter Objectives 1. To discuss the relationship between public relations professionals and lawyers and the importance to public relations practitioners of understanding the law. 2. To explore, in particular, the First Amendment, from which free speech emerges. 3. To discuss the various areas of the law relevant to public relations professionals, including defamation, disclosure, insider trading, copyright and Internet law. 4. To underscore the new importance in the 21st century of litigation public relations. FIGURE 7-1 Where’s the beef? Taco Bell used TV stars like Heidi Montag and Spencer Pratt to promote its good works and gave no ground when sued in 2011. (Photo: Tonya Wise/London Ent/Splash/Newscom) In the winter of 2011, Taco Bell was hot, and we’re not just talking about the enchiladas! In January, a disgruntled customer sued the restaurant chain on the grounds that its taco mixture contained more fiber than meat. As this is the day when no nuisance lawsuit goes unreported, news of the suit spread widely on the Internet. Soon, that intrepid reporter Stephen Colbert parodied the claim on his Comedy Central The Colbert Report. But Taco Bell, a chain known for its out-of-the-box thinking and public relations sophistication (Figure 7-1), struck back in a most unusual way: It publicized the lawsuit on Facebook and YouTube and with a full page ad, headlined, “Thank You for Suing Us.” The video and the ad proclaimed that Taco Bell’s taco mixture contained 88% beef—not the 35% the suit claimed—with ingredients such as water, oats, spices, and cocoa powder added to provide flavor, texture, and moisture. The company’s counterintuitive viral and public rebuttal effectively squelched publicity about the negative legal action.1 In recent years, as public relations has gained stature, the practice has become more aggressive in communicating during legal cases—although generally not as “aggressively” as Taco Bell—and with and through lawyers. Indeed, there has always been a natural tension between public relations practitioners and lawyers. Ideally, public relations counselors and lawyers should work together to achieve a client’s desired outcomes. And this is often the case. But there is also a fundamental difference in legal versus public relations advice. ■ Lawyers correctly advise clients on what they must do, within the letter of legal requirements, to defend themselves in a court of law. ■ Public relations advisors counsel clients on not what they must do but what they should do to defend themselves in a different court—the court of public opinion. FIGURE 7-2 Where are my lawyers?!? Among the most innovative and persuasive—and public relations conscious—nonprofit organizations is People for the Ethical Treatment of Animals, which has featured celebrities such as Charlize Theron and Pink to get across messages that gave their adversaries and the attorneys of their adversaries fits. (Courtesy of PETA) There is a vast difference between the two. In recent years, however, lawyers have moved increasingly to pursue the publicity turf traditionally manned by public relations professionals. Some lawyers have become ubiquitous—on radio and television and in the middle of press conferences—in using public relations techniques to further their clients’ and their own ends. In many ways, it makes sense that lawyers and public relations people should work in concert. Public relations and the law both begin with the First Amendment to the Constitution that guarantees freedom of speech in our society. But in the 21st century, ensuring freedom of speech is not as easy as it sounds. One question is, Where does one’s freedom start and another’s end (Figure 7-2)? Another question is, How much freedom of speech is appropriate—or advisable—in any given situation? And yet another question is, How does the freedom of the Internet impact on communications rights and responsibilities? Such are the dilemmas in the relationship between public relations principles and the law. Public Relations and the Law: An Uneasy Alliance While public relations professionals and lawyers have worked more closely in recent years, the legal and public relations professions have historically shared an uneasy alliance. Public relations practitioners must always understand the legal implications of any issue with which they become involved, and a firm’s legal position must always be the first consideration. From a legal point of view, normally the less an organization says prior to its day in court, the better. That way, the opposition can’t gain any new ammunition that will become part of the public record. A lawyer, the saying goes, tells you to say two things: “Say nothing, and say it slowly!” From a public relations standpoint, though, it may make sense to go public early on, especially if the organization’s integrity or credibility is being called into public question. In the summer of 2003, for example, when NBA star Kobe Bryant was accused of raping a woman at a Colorado hotel, on the advice of his lawyers and public relations counsel Bryant immediately held a press conference, with his wife at his side, to acknowledge he had erred but denied the charges. A year later, the sexual assault charge was dismissed, and by 2009, Kobe Bryant, his credibility restored, had led his Los Angeles Lakers to the NBA championship. By contrast, as we’ve seen, Martha Stewart listened to her lawyers’ exhortation to remain silent when charged with lying to federal prosecutors, and she wound up in Camp Cupcake (see Case Study in Chapter 4). The point is that legal advice and public relations advice may indeed be different. In an organization, a smart manager will carefully weigh both legal and public relations counsel before making a decision. It also should be noted that law and ethics are interrelated. The Public Relations Society of America’s Code of Professional Standards (see Appendix A) notes that many activities that are unethical are also illegal. However, there are instances in which something is perfectly legal but unethical and other instances in which things might be illegal but otherwise ethical. Thus, when a public relations professional reflects on what course to take in a particular situation, he or she must analyze not only the legal ramifications but also the ethical considerations.2 This chapter examines the relationship between the law and public relations and the more prominent role the law plays in public relations practice and vice versa. The discussion introduces the legal concerns of public relations professionals today: First Amendment considerations, insider trading, disclosure law, ethics law, privacy law, copyright law, and the laws concerning censorship of the Internet—issues that have become primary concerns for public relations practitioners in the 21st century. Public Relations and the First Amendment Any discussion of law and public relations should start with the First Amendment, which states: “Congress shall make no law … abridging the freedom of speech or the press.” The First Amendment is the cornerstone of free speech in our society: This is what distinguishes democratic nations from many others. Recent years have seen a blizzard of problems and challenges regarding the First Amendment. ■ In 2005, The New York Times reporter Judith Miller was jailed for failing to disclose her sources in the outing of CIA agent Valerie Plame, wife of a former ambassador and enemy of the Bush administration. Miller pleaded that under the First Amendment, she had a right to protect her sources. But the court disagreed.3 ■ In 2006, when an obscure Danish newspaper published cartoons depicting the prophet Muhammad in a tasteless way, Muslims protested around the world, resulting in destruction, injuries, and deaths. While the Western world considered the cartoons—as offensive as they were—examples of “freedom of expression,” much of the Muslim world was outraged. Two years later, a Danish anti-Koran film triggered a renewal of Muslim outrage. ■ In 2008, a former USA Today reporter faced fines and imprisonment, in a suit by former Army scientist Steven Hatfill, when she was ordered to reveal her sources about the anthrax attacks on America, which killed five people in 2001. Hatfill had been labeled a “person of interest” in the attacks but was never charged. Ultimately, the government wound up paying him $4.6 million for accusing him undeservedly. And the threats against the reporter were dropped.4 ■ In 2010, WikiLeaks, an international online organization that billed itself as a “publisher of private, secret and classified media from anonymous news sources, leaks and whistleblowers,” shocked the diplomatic world by collaborating with international newspapers to publish secret U.S. State Department diplomatic cables. WikiLeaks’ strange founder, an Australian computer programmer/hacker named Julian Assange, defiantly defended the “public’s right to know” (Figure 7-3).5 As these cases suggest, interpreting the First Amendment, especially in the Internet age, is no simple matter. One person’s definition of obscenity or divulging state secrets may be someone else’s definition of art or freedom of expression. Because the First Amendment lies at the heart of the communications business, defending it is a frontline responsibility of the public relations profession. FIGURE 7-3 Hacker or hero? WikiLeaks founder Julian Assange, citing his First Amendment rights, disclosed online secrets angering diplomats and generals. In 2013, he continued to fight charges against extradition from the UK to Sweden on sexual assault charges. (Photo: FACUNDO ARRIZABALAGA/EPA/Newscom) Public Relations and Defamation Law The laws that govern a person’s privacy have significant implications for journalists and other communicators, such as public relations professionals, particularly laws that touch on libel and slander—commonly known as defamation laws—by the media. Defamation is the umbrella term used to describe libel—a printed falsehood—and slander—an oral falsehood. For defamation to be proved, a plaintiff must convince the court that certain requirements have been met, including the following: 1. The falsehood was communicated through print, broadcast, or other electronic means. 2. The person who is the subject of the falsehood was identified or easily identifiable. 3. The identified person has suffered injury—in the form of monetary losses, reputational loss, or mental suffering.6 Generally, the privacy of an ordinary citizen is protected under the law. A citizen in the limelight, however, has a more difficult problem, especially in proving defamation of character through libel or slander. To prove such a charge, a public figure must show that the media acted with actual malice in their reporting. Actual malice in a public figure slander case means that statements have been published with the knowledge that they were false or with reckless disregard for whether the statements were false. In a landmark case in 1964, The New York Times v. Sullivan, the Supreme Court nullified a libel award of $500,000 to an Alabama police official, holding that no damages could be awarded “in actions brought by public officials against critics of their official conduct” unless there was proof of actual malice. And proving actual malice is a difficult task. Several historic libel cases have helped pave the case law precedent. ■ In 1992, The Wall Street Journal and its award-winning reporter Bryan Burrough were served with a $50 million libel suit by Harry L. Freeman, a former communications executive of American Express. The suit stemmed from the way Freeman was characterized in Burrough’s book, Vendetta: American Express and the Smearing of Edmund Safra.7 ■ In an earlier celebrated case, Israeli General Ariel Sharon brought a $50 million libel suit against Time magazine. The jury criticized Time for negligent journalism in reporting Sharon’s role in a massacre in a Palestinian refugee camp. However, the jury couldn’t conclude Time acted with “malice” and didn’t render a libel verdict. Sharon got nothing. ■ In 1996, Atlanta security guard Richard A. Jewell sued both NBC News and the Atlanta Journal-Constitution for reporting that he was the lead suspect in the Atlanta Olympic bombing, which led to two deaths. The reports caused a media feeding frenzy, which disrupted Jewell’s life and tarnished his name. A decade later, Jewell was cleared of any involvement in the bombing and reached a settlement with his media accusers, averting a libel lawsuit. The 21st-century proliferation of blogs, tweets, Facebook posts, and cable and radio talk shows, where hosts and guests say what they want regardless of factual accuracy or impact on a person’s life, has resulted in the definition of “defamation” becoming more complex and more global. FIGURE 7-4 Very nice. Actor Sacha Baron Cohen, aka Borat, won a defamation suit against him in 2008 after a random businessman-turned-extra claimed he suffered “public ridicule, degradation, and humiliation” for his unwitting and involuntary role in Cohen’s film. (Photo: GOLD/MILLER PRODUCTIONS/Album/Newscom) ■ In the United States, celebrities sue and are sued all the time on grounds of defamation. In 2008, when he was accused by his former trainer of taking steroids, baseball pitcher Roger Clemens sued for defamation. In 2012, Clemens was hauled into U.S. federal court and was exonerated. When a businessman sued for defamation against actor Sacha Baron Cohen for chasing him down Fifth Avenue in a movie in which Cohen’s alter ego, “Borat,” pretended to be a documentary producer, a judge tossed out the case on the grounds that the movie, “while vulgar,” was an attempt at ironic commentary (Figure 7-4).8 ■ In 2009, journalists were shocked when a federal appeals court in Boston ruled that even though the content of an email was true, the writer of that email could still be guilty of “libel.” The case involved a Staples, Inc., employee who padded his expense account and was fired. When Staples announced the firing and its cause to 1,500 employees, the company was sued, and the court found that even though the email’s content was true, Staples had shown “actual malice” in sending it. The ruling challenged the long-held belief that “truth is a defense against libel.”9 ■ In 2011, punk rocker and actress Courtney Love agreed to pay $430,000 to a fashion designer who claimed that the Hole lead singer had defamed her by posting multiple remarks on Twitter that the designer was a “drug-pushing prostitute with a history of assault and battery.”10 Ouch! Public relations practitioners must be aware of situations involving libel and slander. Many public relations professionals create, write, and edit internal print and online newsletters. In this context, they must be careful not to defame fellow employees or others in what they write. The same caution should be the rule for public relations professionals who make statements to the media on behalf of their organizations. Care must be the watchword in such public speech. Public Relations and Insider Trading Every public relations professional should know the laws that govern his or her organization and industry. With 100 million Americans participating in the securities markets, either directly or through private pension plans, nowhere in public relations practice is an understanding of the law more important than in the area of securities law. Every public company has an obligation to deal frankly, comprehensively, and immediately with any information that is considered material. A material announcement is one that might cause an investor to buy, hold, or sell a stock. The Securities and Exchange Commission (SEC)—through a series of court cases, consent decrees, complaints, and comments over the years—has painted a general portrait of disclosure requirements for practitioners, with which all practitioners in public companies should be familiar. The SEC’s mandate stems from the Securities Act of 1933 and the Securities Exchange Act of 1934, which attempted to protect the public from abuses in the issuance and sale of securities. The SEC’s overriding concern is that all investors have an opportunity to learn about material information as promptly as possible. Basically, a company is expected to release news that may affect its stock market price as quickly as possible. Through its general antifraud statute, Rule 10b-5 of the Securities and Exchange Act, the SEC strictly prohibits the dissemination of false or misleading information to investors. It also prohibits insider trading of securities on the basis of material information not disclosed to the public. In the first years of the 21st century, one celebrated insider trading case involved ImClone Systems’ CEO Sam Waksal, who, along with family members, unloaded ImClone stock after he learned that the Food and Drug Administration was about to reject a key ImClone drug. The stock was subsequently crushed, as was CEO Waksal, his family, his stockbroker, and his good friend Martha Stewart (see Case Study in Chapter 4)—all embroiled in an insider trading scandal.11 In 2011, billionaire hedge fund manager Raj Rajaratnam was sentenced to 11 years in jail and fined more than $150 million for using insider tips to buy stocks. One of those from whom he allegedly received tips was Rajat Gupta, a former McKinsey and Company CEO, Goldman Sachs director and White House state dinner guest, who was convicted of insider trading charges in 2012. Nor did journalists escape the accusation of insider trading convictions. In the late 1990s, a columnist at The Wall Street Journal was convicted of illegally using his newspaper column to give favorable opinions about companies in which a couple of his stockbroker friends had already invested heavily. He went to jail. In the early 2000s, wild-eyed stock picker James Cramer was accused by a former colleague of “pumping up stocks by feeding rumors” to friendly broadcasters at CNBC.12 Cramer denied the allegations, and when no charges were brought, Cramer became a popular program host at CNBC. As to public relations counselors, they, too, must be careful to act only on public information when trading securities. In 2008, for example, the public relations firm Brunswick suspended its Dow Chemical account executive when her husband traded on confidential news that Dow was considering an acquisition.13 Dow Chemical promptly dropped its relationship with Brunswick. Outside the Lines Criminal Attorneys—Literally “Let he who is without sin, throw the first stone.” Thus sayeth the Bible. And, of course, it is not nice to disparage those who have fallen on hard times. But, on the other hand, when a public relations person observes a pompous, sanctimonious, and self-righteous fat-cat lawyer finally getting his comeuppance, well…. Such was the case in 2008, when a number of the world’s most high-profile and public relations–savvy trial lawyers, aka plaintiff’s attorneys—all known for going after large companies in front-page class action suits, many of which reaped gargantuan settlements (mostly for themselves!)—were sentenced to prison for misdeeds. ■ Richard Scruggs, wealthy and flamboyant Mississippi attorney, received the maximum sentence of five years in prison for attempted bribery in suits against insurance companies, after Hurricane Katrina. ■ Melvyn Weiss, 72-year-old “dean” of the trial lawyers, got 30 months in the slammer and was ordered to pay $10 million for using kickbacks to gain advantage in class actions. ■ And William Lerach, Mr. Weiss’s partner and perhaps America’s highest profile plaintiff’s attorney, drew two years in federal prison for his role in helping pay $11 million in kickbacks to people who became plaintiffs in lawsuits targeting, among others, AT&T, Lucent, WorldCom, Microsoft, Prudential Insurance, and Enron (Figure 7-5). The sentencing of counselor Lerach, one of the more controversial and press-conscious of the breed, evoked particular glee from corporate executives. Said one unsympathetic CEO, “He’s getting what he deserves. I once likened Lerach to a low-life form, somewhat below pond scum. Thank goodness, he’s met my highest expectations.”* Whatever happened to following the good book? FIGURE 7-5 I object! When high-powered plaintiff’s attorney William Lerach was found guilty of providing kickbacks to witnesses, he was sentenced to hard time. (Photo: Steve Ueckert/Rapport Press/Newscom) *For further information, see Andrew Ross Sorkin, “Lerach Is Sentenced to 2 Years in Prison,” The New York Times (February 11, 2008). Public relations people are privy to all manner of confidential information. When they violate that confidentiality, they risk not only losing clients but also violating the law. Public Relations and Disclosure Law Besides cracking down on insider trading, the SEC has challenged corporations and public relations firms on the accuracy of information they disseminate for clients. Today, in an environment of mergers, takeovers, consolidations, and the incessant rumors that circulate around them, knowledge of disclosure law, a sensitivity to disclosure requirements, and a bias toward disclosing rather than withholding material information are important attributes of public relations officials. In the new millennium, with securities trading extending beyond the traditional 9:30 a.m.–4 p.m. stock market trading day and with instantaneous online trading a reality for millions of investors, the responsibilities on public relations people for full and fair and immediate disclosure have intensified. The SEC, in turn, has increased its focus on private meetings between companies and analysts, which are closed to the media and therefore to individual investors who rely on the media for financial information. To combat such selective disclosure, the SEC in 2000 adopted Regulation FD, or “fair disclosure.” Basically, Regulation FD requires companies to widely disseminate any material announcement. In the past, companies would share such material news with securities analysts or large investors, who then might act on it before the public found out. Under Regulation FD, even if a material announcement slips out to an analyst, the company is obligated to issue a news release within 24 hours “to provide broad, non-exclusionary disclosure information to the public.”14 In 2002, Regulation FD was bolstered by the passage of the Sarbanes-Oxley Act, sponsored by U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley. Sarbanes-Oxley came as a result of the large corporate financial scandals involving Enron, WorldCom, Global Crossing, and Arthur Andersen. Among other requirements, Sarbanes-Oxley mandated all publicly traded companies to increase financial disclosure and submit an annual report of the effectiveness of their internal accounting controls to the SEC, with criminal and civil penalties for noncompliance.15 Although many corporations, analysts, and investors complained that the combination of Regulation FD and Sarbanes-Oxley would have a costly, “chilling impact” on companies that previously were willing to communicate, Congress and the regulators were unwilling to yield. As the 21st century continued, with the world in recession, allegations against stock swindlers came fast and furious. The two most notorious, Bernard Madoff in New York and Robert Allen Stanford in Texas, who duped investors out of billions of dollars, underscored the vital need to strengthen disclosure law. And regulating financial markets was high on President Barack Obama’s agenda when he took office in 2009 and remained when he campaigned for reelection in 2012. Never since the Great Depression of the 1930s had the need been more apparent to ensure that all investors were provided full, fair, and immediate disclosure of “material” facts regarding their investments. Public Relations and Ethics Law The laws on ethical misconduct in society have gotten quite a workout over the last two decades. ■ In a celebrated case, translated into the 1999 movie The Insider, the late public relations counselor John Scanlon faced a grand jury subpoena stemming from his efforts to discredit Jeffrey Wigand, an internal critic of Scanlon’s cigarette client Brown & Williamson.16 ■ In the political public relations arena, the activities of lobbyists, in particular, have been closely watched by Congress since the imposition of the Federal Regulation of Lobbying Act of 1946. The late White House Deputy Chief of Staff Michael K. Deaver, a well-known public relations professional, was found guilty of perjury over his lobbying activities, fined $100,000, and sentenced to community service. In 2005, political public relations professional Michael Scanlon, an associate of crooked lobbyist Jack Abramoff, also was sentenced to hard time as a result of conspiracy to bribe public officials. ■ In 2012, Governor Nikki R. Haley of South Carolina was cleared of charges that she violated ethics rules when she was a state representative and lobbied on behalf of two businesses she worked for. PR Ethics Mini-Case Fall from Grace One other unnecessary phenomenon of the 21st century is the proliferation of lawyers on cable television. (Public relations people on cable, on the other hand, is fine.) Lawyers have become all too willing to dish out opinions to any cable interviewer who asks—whether or not they have any expertise in the specific or general subject matter at issue. The princess of them all is Nancy Grace (Figure 7-6). Grace, a former Georgia prosecutor once described by an appeals court as playing “fast and loose” with the facts, has used that very “attribute” to become a 21st-century TV star. Grace first came to media attention by using the murder of her college fiancé as a rallying cry to seek truth and justice. It was later revealed that Grace’s “recollections” of the facts of that case were a bit off. Among them, her fiancé was killed by a coworker, not a random stranger as Grace repeated; the coworker had no criminal record and admitted the crime, contrary to how Grace characterized him; and he filed no appeals after conviction, again contrary to Grace’s story. Grace, a staple on CNN’s rabid HLN (Headline News) has made mincemeat of America’s time-honored “guilty till proven innocent” standard. Grace’s one-woman judge and jury routine has, among other travesties of justice: ■ Claimed unequivocally that a drifter suspected in the Utah kidnapping of a teenager in 2002 “was guilty.” The drifter died in custody and later was posthumously exonerated, when two other individuals confessed to the crime. ■ Accused members of the 2006 Duke lacrosse team of “gang raping” a stripper. The more it became clear that the young men were innocent, the more she used her bully TV pulpit to persecute them. ■ Badgered unmercifully the mother of a missing two-year-old. The day the interview was scheduled to air, the woman killed herself. Relatives blamed her death on Grace’s over-the-top interview and sued. Grace settled with the woman’s estate. ■ Railed against the exoneration of Casey Anthony in 2011 in the death of her young daughter, Caylee. Said Grace of the court’s verdict, “It’s tough … when you think about all those days that Tot Mom went about partying as if Caylee had never existed…. The devil is dancing tonight.” ■ Wondered loudly in 2012 whether singer Whitney Houston’s death in a Hollywood bathtub might be the result of foul play, despite the Los Angeles Police Department’s repeated denials. Not only were Nancy Grace and her employers unrepentant for the verbal damage she had wrought, she—and they and the ratings—reveled and prospered in the notoriety. Grace was even drafted to appear on Law and Order and chosen in 2011 to compete on Dancing with the Stars, where she embarrassingly exposed a telltale nipple in a particularly vigorous quickstep. Grace, typically, was unfazed.* Questions 1. Have you any objection to Nancy Grace’s opinions in the ongoing legal cases cited here? 2. What were the public relations implications for Grace’s network, HLN, with respect to its outspoken lawyer? FIGURE 7-6 Dancing with the devil. Legal diva Nancy Grace struts her stuff on Dancing with the Stars in 2011. (Photo: Steve Ueckert/Rapport Press/Newscom) *For further information, see David Carr, “TV Justice Thrives on Fear,” The New York Times, May 22, 2011; and Stephen Hudak, “Josh Duckett Calls Settlement of Nancy Grace Lawsuit ‘A Blessing,’” Orlando Sentinel, November 9, 2010. In recent years, campaign finance reform to limit—if not eradicate—the acceptance by legislators of favors and money from wealthy interest groups intensified until 2010. In that year, the Supreme Court’s decision in the Citizens United v. FEC case held that the First Amendment prohibited the government from restricting independent political expenditures by corporations and unions, thus stemming the tide for campaign finance reform in the 2012 election. Consequently, the emergence of so-called Super PACs, political action committees that could accept unlimited contributions from individuals, unions, and corporations for the purpose of making independent expenditures, proliferated.17 Public Relations and Copyright Law One body of law that is particularly relevant to public relations professionals is copyright law and the protections it offers writers. Copyright law provides basic, automatic protection for writers, whether a manuscript is registered with the Copyright Office or even published. Under the Copyright Act of 1976, an “original work of authorship” has copyright protection from the moment the work is in “fixed” form. The word fixed means that the work is sufficiently permanent to permit it to be perceived, reproduced, or otherwise communicated.18 Copyright law gives the owner of the copyright the exclusive right to reproduce and authorize others to reproduce the work, prepare derivative works based on the copyrighted material, and perform and/or display the work publicly. That’s why the late Michael Jackson had to pay $47.5 million for the rights to the Beatles’ compositions to the duly sworn representatives and heirs of John, Paul, George, and Ringo. Copyright law is different from trademark law, which refers to a word, symbol, or slogan, used alone or in combination, that identifies a product or its sponsor—for example, the Nike swoosh. What courts have stated again and again is that for the purposes of criticism, news reporting, teaching, scholarship, or research, use of copyrighted material is not an infringement but rather constitutes fair use. Although precise definitions of fair use—like everything else in the law—is subject to interpretation, such factors as “the effect on the future market” of the copyrighted work in question or the “volume of quotation used” or even whether the “heart” of the material was ripped off are often considered.19 That’s why the Associated Press (AP), one of the nation’s largest news organizations, announced in 2008 that it had had it with bloggers copying its works and would impose strict guidelines on the blogosphere as to how much quoting and copying of AP stories would be tolerated. The AP dictum was aimed squarely at the vague doctrine of fair use.20 Over time, the Supreme Court has strengthened the copyright status of freelance artists and writers—many of whom are independent public relations practitioners—ruling that such professionals retain the right to copyright what they create “as long as they were not in a conventional employment relationship with the organization that commissioned their work.” As a result of this ruling, public relations professionals must carefully document the authorization that has been secured for using freelance material. In other words, when engaging a freelance professional, public relations people must know the law. Public Relations and Internet Law The Internet has introduced a new dimension to the law affecting free speech. The premise in American law is that “not all speech is created equal.”21 Rather, there is a hierarchy of speech, under Supreme Court precedents dating back many decades, that calibrates the degree of First Amendment protection with, among other tests, the particular medium of expression. For example, speech that would be perfectly acceptable if uttered in a public park could constitutionally be banned when broadcast from a sound truck. Dealing with the Internet has introduced new ramifications to this legal principal. Indeed, cyberlaw has brought into question many of the most revered communications law principles. Censorship In 1996, Congress passed the Communications Decency Act (CDA) as an amendment to a far-reaching telecommunications bill. The CDA introduced criminal penalties, including fines of as much as $250,000 and prison terms up to two years, for making “indecent” speech available to “a person under 18 years of age.” A Philadelphia court a few months later struck down the law, contending that such censorship would chill all discourse on the Internet.22 Then, in the summer of 1997, the Supreme Court, in a sweeping endorsement of free speech, declared the CDA unconstitutional. The decision, unanimous in most respects, marked the highest court’s first effort to extend the principles of the First Amendment into cyberspace and to confront the nature and the law of this new, powerful medium. In summarizing the Court’s finding, Justice John Paul Stevens said the Court considered the “goal of protecting children from indecent material as legitimate and important” but concluded that “the wholly unprecedented breadth of the law threatened to suppress far too much speech among adults and even between parents and children.”23 In 1998, Congress passed the Children’s Online Privacy Protection Act (COPPA), which details what a Website operator must include in a privacy policy, when and how to seek verifiable consent from a parent or guardian, and what responsibilities an operator has to protect children’s privacy and safety online including restrictions on the marketing to those under 13. While children under 13 can legally give out personal information with their parents’ permission, many Websites altogether disallow under-age children from using their services due to the amount of COPPA paperwork involved. The Federal Trade Commission enforces COPPA. In the 21st century, the most raging Internet censorship battles have been waged overseas, with nations such as China, Iran, Turkey, and others notorious for their Internet filters. In 2010, Google closed its search service in China because of the country’s harsh restrictions.24 Intellectual Property Few cyberlaw cases have drawn more headlines than the 2001 case against Napster, the popular application that allowed users to exchange music files. Because Napster ran the file-swapping through a central server, it was an easy target for legislation. In the end—for Napster—the protest, led by those heavy-metal defenders of the First Amendment, Metallica, and backed by the large music companies, convinced the Court that the company was infringing on copyright protections of intellectual property. Two years later, the recording industry waged all-out war on those who downloaded intellectual property without paying. On a broader level, intellectual piracy of everything from video games to music to software has become rampant, with estimates that 90% of virtually every form of intellectual property in China is pirated.25 In 2012, a pitched battle was waged in Congress on the piracy of intellectual property. On one side stood the Hollywood producers of records, books, and movies who fretted that the fruits of their labors were being stolen. On the other side stood Internet firms such as Google, Twitter, Facebook, and Reddit, which saw the Stop Online Piracy Act (SOPA) momentum as a threat to creativity. In the end, the might of the upstart Internet crowd proved too strong, and SOPA was defeated.26 The SOPA conflict was a harbinger of battles to come, with media companies on one side and Internet providers on the other. While a number of nations, including the United States, Japan, Canada, South Korea, and Australia, signed the Anti-Counterfeiting Trade Agreement, in July 2012, European legislators rejected the international treaty to crack down on digital piracy. While the United States vowed to put the treaty into effect, even without European Union involvement, the debate into international piracy of intellectual property was destined to continue.27 Cybersquatting Another complex issue is that of cybersquatting—grabbing domain names in bad faith, expressly for the purpose of tormenting or “shaking down” a rightful registrant. It costs an infiltrator about $35 to register a variation of a domain name. Companies from Wendy’s to General Motors to Walmart, politicians, celebrities, and athletes have all been beset by cybersquatters. Kmart Corporation successfully mounted a legal challenge to fight a rogue Website, Kmartsucks.com. Ultimately, the site was forced to change its name to Themartsucks.com. The basketball player Chris Bosh won a landmark ruling in 2010 that reclaimed his online identity and that of 800 other athletes and celebrities.28 Current trademark law prohibits a company from registering a name that exactly duplicates a registered trademark, but cybersquatters frequently register names that differ only slightly. They know that Web surfers will type in a variation of a company’s name when searching for its site. They then either attempt to sell the names or use the sites to disrupt the company’s commerce.29 E-Fraud Fraud is fraud, no matter where it is domiciled. And on the World Wide Web, where anyone who wants to can choose anonymity, strip in a logo, and pretend to be someone he or she is not, fraud runs rampant. (Just check your inbox for “inheritance gift” emails from Nigeria!) The problem is that e-crooks are not only difficult to stop but also difficult to define, at least in legal terms. Often it depends on companies policing the Internet themselves, frequently to go after former employees. For example: ■ Varian Medical Systems of Palo Alto won a $775,000 verdict against two former employees who posted 14,000 messages on 100 message boards accusing the firm of being homophobic and of discriminating against pregnant women. ■ A California court ruled against a fired Intel employee who sent emails to about 35,000 staffers, criticizing the company. ■ St. Paul–based insurer Travelers accused one former vice president of trying to sabotage the company with anonymous blog postings, charging, among other things, that one executive was little more than a “glorified secretary” and another “would stab his own mother in the back to make money.” Travelers took the case all the way to federal court.30 And then there’s “click fraud,” which threatens to disrupt the largest search engines. Search engines rank listings by the number of clicks they receive: the more clicks, the higher the ranking. Click fraud occurs when a concerted effort is initiated to register multiple clicks to drive specific listings higher in a search-ranking algorithm. Such fraudulent activity affects marketers, who advertise on a site and pay rates based on usage.31 Social Media The advent of social networking has introduced yet another legal dimension to the Internet. This is a particularly thorny issue in terms of employee relations. In 2010, the National Labor Relations Board accused a company of illegally firing an employee after she criticized her supervisor on her Facebook page. The Board argued that “whether it takes place on Facebook or at the water cooler, it was employees talking jointly about working conditions, in this case about their supervisor, and they have a right to do that.”32 Or do they? With organizations now sensitive to the potential use of social media to discuss employment matters, lawyers recommend that employers “review their Internet and social media policies to determine whether they are susceptible to an allegation that the policy would reasonably tend to chill employees in the exercise of their rights to discuss wages, working conditions and unionization.”33 Increasingly, universities and potential employers are seeking access to social media to monitor activities. The University of North Carolina at Chapel Hill, for example, adopted a student athlete policy that appointed a coach to be responsible “for having access to and regularly monitoring the content of team members’ social networking sites and postings.”34 These are but a few of the burgeoning legal issues that surround the World Wide Web. Litigation Public Relations In court cases, plaintiffs and defendants are often scrupulously warned by judges not to influence the ultimate verdict outside the courtroom. Forget it. In the 21st century, with the Internet, CNN, MSNBC, Fox News Channel, CNBC, Headline News, and talk radio incessantly jabbering about possible trials, upcoming trials, and current trials, there is little guarantee that any jury can be objective about any high-profile legal case. That’s why litigation public relations has become so important. Litigation public relations can best be defined as managing the media process during the course of any legal dispute so as to affect the outcome or its impact on the client’s overall reputation. Although court proceedings have certain rules and protocols, dealing in the public arena with a matter of litigation has no such strictures. The Sixth Amendment to the Constitution guarantees accused persons “a speedy and public trial, by an impartial jury,” but television commentary by knowledgeable—and in many cases, unknowledgeable—“experts” can help influence a potential jury for or against a defendant (Figure 7-7). As a consequence, communication has become central to the management of modern litigation.35 Smart lawyers understand that with the Internet and cable TV, in particular, being so pervasive, they have little choice but to engage in litigation public relations to provide their clients with every advantage. For example, in 2008, when three Duke lacrosse players were prosecuted for allegedly raping a stripper, supporters set up a Website to communicate views on the case, which ultimately fell apart. When several parents of the lacrosse players filed a countersuit against the university, they set up a blog to provide information to the public. In 2011, when International Monetary Fund President Dominique Strauss-Kahn was charged with rape by a New York City chambermaid, his surrogates engaged in a blistering publicity attack of the woman’s history and character. The case was dropped. FIGURE 7-7 Litigation public relations. The Institute for Justice (IJ) epitomized the best of litigation public relations when it publicized the story of Doreen Flynn, a mom with three young daughters, each of whom would need a bone marrow transplant to survive. IJ challenged the prohibition on compensating bone-marrow donors in the National Organ Transplant Act and won the case in 2012. (Courtesy of Institute for Justice, photo by Don Wilson) According to one counselor who works exclusively with litigation, there are seven keys to litigation visibility. 1. Learn the process. All involved should be aware of the roadmap for the case and the milestones ahead, which may lend themselves to publicity. 2. Develop a message strategy. Think about what should be said at each stage of a trial to keep the press and public focused on the key messages of the client. 3. Settle fast. Settlement is probably the most potent litigation visibility management tool. The faster the settlement, the less litigation visibility there is likely to be. This is often a positive development. 4. Anticipate high-profile variables. Often in public cases everybody gets into the act—judges, commentators, jury selection experts, psychologists, and so on. Always anticipate all that could be said, conjectured, and argued about the case. Always try to be prepared for every inevitability. 5. Keep the focus positive. Ultimately, it’s a positive, productive attitude that leads to effective negotiations with the other side. So the less combative you can be—especially near settlement—the better. 6. Try settling again. Again, this ought to be the primary litigation visibility strategy—to end the agony and get it out of the papers. 7. Fight nicely. Wars are messy, expensive, and prone to producing casualties. It is much better to be positive. This will give both sides a greater chance of eventually settling.36 Last Word As our society becomes more contentious, fractious, and litigious, public relations must become more concerned with the law. On the one hand, because management must rely so heavily on legal advice and legal judgments, it is imperative that public relations people understand the laws that govern their organizations and industries. Public relations people must understand that their views may differ from those of an attorney. As a defense lawyer once described his role, “You should do what a client wants, period. That’s what you’re paid for.” By contrast, public relations people are paid to advise their clients what is “the right thing to do.” And they should never shrink from that obligation. On the other hand, public relations advisors must depend on “buy-in” from others in management. Lawyers are among the most influential of these associates. Therefore, knowing the law and forming an alliance with legal counselors must be a frontline objective for public relations professionals. Beyond the working relationship between public relations people and lawyers, the practice of public relations has, itself, wrestled with legal questions in recent years. The government has gone after firms that “deceptively advertised” online, through such tactics as posting fictitious online reviews of products or restaurants or similarly endorsing clients’ wares through blogs and Twitter.37 Increasingly, public relations practice is based on legal contracts: between agencies and clients, employers and employees, purchasers and vendors. All contracts—both written and oral—must be binding and enforceable. In recent years, controversy in the field has erupted over noncompete clauses, in which former employees are prohibited, within certain time parameters, from working for a competitor or pitching a former account. Time and again the courts have ruled in favor of public relations agencies and against former clients in noncompete cases. Likewise, legal challenges have been made relative to the markup of expenses that public relations agencies charge clients. Standard practice in the industry is to mark up by 15 to 20% of legitimate printing and advertising bills submitted to clients. Add to these the blurring of the lines between public relations advice on the one hand and legal advice on the other, and it becomes clear that the connection between public relations and the law will intensify dramatically in the 21st century. Discussion Starters 1. What is the difference between a public relations professional’s responsibility and a lawyer’s responsibility? 2. What have been recent challenges to the First Amendment? 3. How can someone prove that he or she has been libeled or slandered? 4. What is meant by the term insider trading? 5. What is the SEC’s overriding concern when considering disclosure? 6. How have Regulation FD and Sarbanes-Oxley changed the disclosure environment? 7. Whom does copyright law protect? 8. What are some of the dominant issues in laws affecting the Internet? 9. What are several general principles with respect to litigation public relations? 10. What general advice should a public relations professional consider in working with lawyers? Pick of the Literature Advertising and Public Relations Law, 2nd Edition Roy L. Moore, Carmen Maye and Erik L. Collins. New York: Routledge, 2011 This book offers an exhaustive examination of the First Amendment as it relates to the advertising and public relations businesses. It traces the history of the First Amendment and tracks the interpretation of the amendment through the decades. The real merit of this volume is in its discussion of New Media implications on free speech law in terms of both individuals and corporations. Libel, defamation, privacy, and related public relations–oriented statutes are discussed in depth. Copyright, patents and trademarks, Federal Trade Commission regulations, and others are explained. An excellent legal primer for public relations professionals. Case Study Amazon Shuts Free Speech Door on Pedophile Book There is no thornier issue for Internet providers than “free speech.” For Google, Facebook, Twitter, and the rest, conundrums involving free speech are omnipresent. ■ Is all speech “free”? ■ If not, where does free speech end? ■ What “sanctions” should be placed on groups such as WikiLeaks that publish secret documents? ■ And what about limits on pornography? In the winter of 2010, one of the Internet’s champions of “free speech,” Amazon.com, confronted such an issue, which quickly went viral and immersed the company in a messy public contretemps. Standing Its Ground In November, when pressed by journalists, Amazon didn’t flinch in defending its sale of a $4.79 self-published electronic book offering a guide to pedophilia. The author, Philip Greaves of Pueblo, Colorado, was a former nurse’s aide who described himself as a “rogue scholar with respect to the topics of religion, sexuality and politics.” Greaves also self-published four other books, including Our Gardens of Flesh and The Grand Book of the Godless. Amazon offered Greaves’s The Pedophile’s Guide to Love and Pleasure, which described itself as a guide for so-called pedosexuals, because, said the company, pulling it would amount to censorship. Over the years, Amazon’s CEO and founder Jeff Bezos had been one of those Internet stalwarts who argued against censoring Internet properties, on the grounds that the Internet was a safe haven for freedom of personal choice. Although CEO Bezos was off the radar screen when publicity for the pedophile book emerged, an Amazon representative defended the company’s decision to sell the book. Said he: Amazon believes it is censorship not to sell certain books simply because we or others believe their message is objectionable. Amazon does not support or promote hatred or criminal acts, however, we do support the right of every individual to make their own purchasing decisions. Several Amazon reviewers were repulsed by the company’s logic and decision. As a mother of a child who has been molested, shame on Amazon for allowing such garbage to be sold on its site. The author of this book is a predator and should never have been allowed to write or promote this trash that is called a book of information. How many children will be assaulted because of this. Amazon take it off your site. A few Amazon reviewers, however, hailed the company’s gutsy decision. This is the single best book ever written … if for no other reason than the horde of frothy-mouthed crusaders shouting for its utter annihilation. The subject matter is all but irrelevant, as I’m sure the very same people decrying someone willing to write outside of their moral comfort zone would be completely aghast at someone saying the same thing about a devout Christian book. In terms of the law, sexual activity with a minor is a federal crime and luring children across state lines for the purposes of either prostitution or sexual activity is also a violation of federal law. However, publishing a book that talks about pedophilia isn’t a crime. Losing Its Ground Perhaps heartened by the online publisher’s defense, author Greaves, in the wake of the national publicity, offered his own defense of his work. This is my attempt to make pedophile situations safer for those juveniles that find themselves involved in them, by establishing certain rules for these adults to follow. I hope to achieve this by appealing to the better nature of pedosexuals with hope that their doing so will result in less hatred and perhaps lighter sentences should they ever be caught. And that’s when Amazon reversed course. Although the company made no formal announcement, the very next day after Amazon’s defense and Greaves’s explanation, the book became inaccessible on Amazon’s site. In addition, Amazon removed author Greaves’s other titles as well. While Amazon steadfastly refused to elaborate on its next-day decision, other than saying the company “reserves the right to determine the appropriateness” of items sold on its site, author Greaves was unrepentant. Said he, “I wrote the book to establish guidelines so that people would behave in a manner that is non-injurious to each other.” Police in Greaves’s hometown, however, weren’t convinced. Said one, “When free speech fuels the motive for people on how to approach kids, how to find kids, how to touch kids and sexually abuse them, that’s just wrong.” A month after the Amazon controversy came to light, author Greaves was arrested in Polk County, Florida, for violating the state’s obscenity law that prohibits the “distribution of obscene material depicting minors engaged in conduct harmful to minors.” Legal experts questioned whether Greaves’s right to free speech would come into play. If prosecutors could charge Greaves for shipping his book, they asked, what would prevent booksellers from facing prosecution for selling Vladimir Nabokov’s Lolita, a novel about a pedophile? In April, Greaves pleaded “no contest” and got two years probation. Said the non-plussed author, “True pedophiles love children and would never hurt them” (Figure 7-8).* FIGURE 7-8 The author at (ar)rest. Philip Greaves. (Photo: PacificCoastNews/Newscom) Questions 1. Do you agree with Amazon’s first or second decision? 2. Where should Amazon draw the line on distributing books that contain questionable content? 3. What do you think of Amazon’s public relations posture in this case? *For further information, see Lauren Frayer, “Amazon Yanks Pedophilia E-Book Amid Boycott Talk,” AOL.COM, November 11, 2010; Mark Hachman, “Amazon Refuses to Pull Pro-Pedophilia E-Book,” PCMAG.COM, November 10, 2010; “Pedophilia Book Removed from Amazon, But Others Remain,” The Wall Street Journal, November 11, 2010; and Alan Pendergast, “Philip Greaves: Amazon Removes Other Titles by Pedophile’s Guide to Love and Pleasure Author,” Dever Westword Blog, November 12, 2010. From the Top An Interview with Robert Shapiro Robert Shapiro (right) and a former client. (Photo: Michael NELSON Agence France Presse/Newscom) Celebrity attorney Robert Shapiro, cofounder of LegalZoom, has represented many of Hollywood’s most famous and notorious defendants, from his tenure as a member of football great and accused murderer O. J. Simpson’s “dream team” to his defense of legendary record producer and convicted murderer Phil Spector. After his successful defense of O. J. Simpson, Shapiro offered the following insights into how a modern-day lawyer views public relations. How do you view a lawyer’s public relations responsibilities? When we are retained for those high-profile cases, we are instantly thrust into the role of a public relations person—a role for which the majority of us have no education, experience, or training. The lawyer’s role as spokesperson may be [as] equally important to the outcome of a case as the skills of an advocate in the courtroom. How important is the media to a trial? The importance and power of the media cannot be overemphasized. The first impression the public gets is usually the one that is most important. The wire services depend on immediate updates. Therefore, all calls should be returned as quickly as possible. “No comment” is the least appropriate and least productive response. Coming at the end of a lengthy story, it adds absolutely nothing and leaves the public with a negative impression. How important are relationships with the media in a trial setting? Initial relationships with legitimate members of the press are very important. Many times a lawyer will feel it is an intrusion to be constantly beset by seemingly meaningless questions that take up a tremendous amount of time. But the initial headlines of the arrest often make the sacred presumption of innocence a myth. In reality, we have the presumption of guilt. This is why dealing with the media is so important. How carefully should lawyers construct answers to reporters’ questions? Just as you would do in trial, anticipate the questions a reporter will pose. Think out your answers carefully…. Use great care in choosing your words. Keep your statements simple and concise. Pick and choose the questions you want to answer. You do not have to be concerned with whether the answer precisely addresses the question, since only the answer will be aired. What about dealing with the tabloids? My experience is that cooperating with tabloid reporters only gives them a legitimate source of information which can be misquoted or taken out of context and does little good for your client. My personal approach is not to cooperate with tabloid reporters. What about dealing with television? The television media, either consciously or unconsciously, create an atmosphere of chaos. Immediately upon arriving at the courthouse, you are surrounded by television crews. We have all seen people coming to court and trying to rush through the press with their heads down or covering them with newspapers or coats. Nothing looks worse. I always instruct my clients upon arrival at the courthouse to get out in a normal manner, to walk next to me in a slow and deliberate way, to have a look of confidence and acknowledge with a nod those who are familiar and supportive.* *Excerpted from Robert Shapiro, “Secrets of a Celebrity Lawyer,” Columbia Journalism Review (September/October 1994): 25–29. Copyright © 1994 Columbia Journalism Review. Reprinted by permission. Public Relations Library Bybee, Keith. Bench Press: The Collision of Courts, Politics and the Media. Stanford, CA: Stanford University Press, 2007. Coffey, Kendall. Spinning the Law. Amherst, NY: Prometheus Books, 2010. A famous attorney takes a spin at spinning, offering a media primer for barristers. Collins, Matthew. The Law of Defamation and the Internet. New York: Oxford University Press, 2005. Useful overview of evolving Internet law. Goldsmith, Jack, and Tim Wu. Who Controls the Internet? Illusions of a Borderless World. New York: Oxford University Press, 2008. Two legal scholars examine the reality of the laws that attempt to govern the Internet. Levick, Richard, and Larry Smith. Stop the Presses: The Crisis and Litigation PR Desk Reference (2nd ed.). Ann Arbor, MI: Watershed Press, 2008. Two agency veterans focus on litigation public relations in crisis situations. Good book.

10 Standards, Ethics, and Values Regulation of human conduct by standards rather than brute force or basic biological drive is the definition of civilization. Social conduct is regulated by five factors: • Tradition. How has the situation been viewed or handled in the past? • Public opinion. What is currently acceptable behavior to the majority of one’s peers? • Law. What is permissible and what is prohibited by legislation? • Morality. Generally connotes a spiritual or religious prohibition; immorality is a charge usually leveled in issues on which religious teachings have concentrated. • Ethics. Standards set by a profession, an organization, or oneself, based on conscience—what is right or fair to others as well as to oneself? Admittedly, these factors, as described, are attempts at pragmatic definitions. It would not be hard to get into an argument over the differences or the details. The point is that, however we use the words, there are forces that keep society functioning despite the strong pull of self-interest, ego, competitiveness, antisocial behavior, criminality, and other ills that could destroy it. THE ROLE OF CONSCIENCE Corporations and other formal organizations exist only on paper, and therefore have no conscience. Those who manage and make decisions for organizations may be guided by codes of ethics, but they are also influenced by their personal ethics. The difficulty in trying to pin down ethics in terms of standards or principles of conduct is that there is so little uniformity. Short of what is legal or illegal, the determination of what kinds of conduct are acceptable, in various kinds of circumstances, comes down to the individual or the group conscience. And among individuals or groups having differing functional roles, the threshold of conscience can be high or low, near or far. Consider the range of conscience that exists between a clergyman, prostitute, used-car dealer, illiterate, doctor of medicine, judge, or addicted derelict, to name but a few. Also, there are wide variations within each functional role, based on the personal makeup of the individual. The range varies from the person who feels that “anything in my own interest is right as long as I don’t go to jail,” to “anything that pricks my conscience is wrong, no matter what anyone else says or does.” Ethics Programs Are Big Business As evidenced by the cases you are about to read in this section, organizations today are finding it imperative to establish codes of ethics—and then to educate their members about them: two jobs for public relations. Ethics training and education have become hot topics as centers such as the Josephson Institute of Ethics in California, the Ethics Resource Center in Washington, D.C., and the Center for Business Ethics at Bentley College in Massachusetts, among many others, offer assistance to organizations to create ethics programs. In 1991, the Center for Business Ethics established the Ethics Officer Association. An ethics officer is in charge of creating and maintaining an organization’s ethics program. Currently the Association has 250 individual members representing more than 200 companies. Today 35–40 percent of major U.S. companies have an ethics officer, up from 15 to 20 percent 10 years ago. The 2000 National Business Ethics Survey conducted by the Ethics Resource Center shows that companies today are doing more in terms of their ethics programs, compared to 1994. More companies have written ethics standards, ethics training programs, and means for employees to get ethics advice. A majority of employees are positive about ethical standards in their organizations. As a result, employees say they are more satisfied with their organizations overall. Concern for ethics is an important reason, they say, for continuing to work there. What does this new emphasis on ethics mean for the practice of public relations? What many esteemed practitioners have been saying all along—without ethical behavior there is no credibility. And without credibility there is no business. An already distrustful public is wary of the motives of business, government, and even nonprofit agencies, as scandal after scandal surfaces about improprieties and mismanagement. A solid commitment to an ethics program by management and employees can help to gain, regain, or hold public trust and credibility, both internally and externally. Transparency and accountability are going to be matters of rising public concern around the world in the years ahead, according to Frank Vogl, a senior ethics advisor with the Ethics Resource Center and a communication professional. Then, too, most people tend to prescribe for others ethical standards of conduct that they do not practice themselves. Customs and changing times are significantly involved in ethics and standards. Gifts and favors of various kinds are accepted in many countries as part of the cost of doing, or expediting, business. U.S. businesses that are international in scope claim they must comply to compete. In this country, public attitude in general frowns on gifts and favors as thinly disguised forms of bribery or payoff. As another example, the dogma and ways of groups committed to strict standards and stern discipline are under assault. Consider the pressure on the Amish people as they see the luxuries and laxity of their neighbors. Or the differing practices of orthodox and reform Jews. Or the Catholic dogma, or the “Protestant work ethic” opposing a wave of permissiveness, liberation of the young, and psychiatric forgiveness for lapses in self-discipline. APPLICATION TO THE PRACTICE OF PUBLIC RELATIONS Any effort to bring these considerations down to the practical world of public relations finds generalizations fraught with exceptions. The practice of public relations has been codified for the 20,000 members of the Public Relations Society of American (PRSA) since 1950. In 2000, PRSA adopted a member code of ethics www.prsa.org/AboutPRSA/Ethics/CodeEnglish/. But more than 200,000 persons are engaged in activities identifiable as public relations, most without equivalent standards or discipline. That the public relations calling has been able to outgrow such labels as “flackery” and to rise above recurrent instances of news manipulation, cover-up, sugar coating, and some cases of deliberate deceit testifies eloquently to the potential power and promise of two-way communications and positive relationship building when the skills are turned to noble purposes. For most practitioners, the Golden Rule is seen as an ethical guide—even as a definition of public relations. If we do unto others as we would have them do unto us, harmonious public relationships will result. THE ASPIRATIONS AND CONCEPT ARE PURE Consider the following concept. If people would communicate more—and better—in a spirit of compromise and reconciliation, most problems in human relations would be solved. There would be understanding and peace. Lifestyles would include self-discipline and acceptance of responsibility, affluence with charity, possession without greed or avarice, and personal integrity under rules of law and mutual respect. It is in this area that the public relations function has sought to fulfill its aspirations by exerting an ethical and moral force as well as technical skill and, by doing so, developing an identity and a professional discipline of its own. It has been a long road to travel, but the destination is getting closer: The body of knowledge has been codified; there is an accepted academic curriculum leading to a distinct, recognized public relations doctorate. Today, approximately 70 schools offer master’s degrees or a graduate emphasis in public relation. Four universities offer doctoral programs specifically in public relations. There is still no licensing of practitioners, but there is a Universal Accreditation Program formed in January 1998 by the PRSA and nine other public relations organizations. Members with at least five years of full-time paid professional PR experience must pass a written and oral exam to be accredited APR. In the past, practitioners have functioned generally as skilled communicators and persuaders on behalf of the organizations that employ them. Ethical standards have tended to be the reflections of the employers and clients served. Putting it another way, the public relations voice has generally emerged publicly more as an echo of an employer’s standards and interests than that of a professional discipline applied to the employer’s problems. The practitioner still may come on as narrowly organizational rather than broadly professional, but this situation is changing as both employers and the profession embrace a new wave of ethics. Today, public relations continues its struggle for broad recognition as advocates of understanding and public interest, qualified by academic discipline and professional accreditation. WHAT IS ACCEPTABLE ETHICALLY? • Is it acceptable for food companies, in the name of nutrition and education, to provide elementary schools with educational kits prominently featuring their labels, product photographs, slogans, and product recipes? • Is it acceptable for a county agency supported by taxpayers to spend money for a public relations firm to put out its news and promote its work? • Is it acceptable for a utility to include in the rates to customers the cost of donations it makes to charity, for which it gets credit as being generous? • Is it acceptable for soft drink, cereal, and other product manufacturers to shower television and movie prop people with free merchandise so that their products appear to be “standard” on television and in motion pictures? • Is it acceptable for big businesses to preach that their growth creates jobs, when many of them have doubled in sales over a 10-year period while their employment numbers remain what they were 10 years ago? • Is it acceptable for a corporation to hand out a news release at the outset of its annual meeting saying that its presentation was accorded a standing ovation? • Is it acceptable for television networks to tie in a tire-company blimp with their newscasts at sports events, giving the blimp owner free publicity? • Is it acceptable for a public relations counselor to send a client a flattering clipping with a note, “I knew you’d like to see this as soon as we got it,” as if the counselor had something to do with generating the publicity, though actually he or she had not? • Is it acceptable for an incumbent member of Congress to use perks of office such as staff paid by taxpayers, free mailings, pork barrel (including $25 million for grasshopper control back home), and PAC money to clobber any opposition and remain in office? • Is it acceptable for a public relations director to tell the public a lie on a matter of no real significance if the intent is to protect the privacy or reputation of his or her boss? • Is it acceptable to use fear in advertising to raise funds for poor people flooded out of their homes? To help cut down on the sale of tobacco? To sell a fire detection device? Insurance? • Is it acceptable for a Congressperson to accept a box of oranges from a grateful fruit grower in his district? An envelope with $20 in it? Season tickets to the Washington Redskins games? A television set? A new automobile? • Is it acceptable to announce publicly that an official has resigned “for personal reasons” when in fact he or she was fired for the good of the organization, or at the whim of a more powerful, jealous individual? “So what?” is often the reaction to such questions about ethics. This type of comment is the result of two different trains of thought: (1) I’d never do any of those things, or (2) I’d have to wait until I saw what else was involved before I decided what I would do.1 1For an interesting classroom exercise in professional ethics, see Lynne Masel-Walters, “Playing the Game: Ethics Situations for Public Relations Courses,” Public Relations Research and Education Journal 1, Winter, 1984, pp. 47–54. Case 10-1 The Danger of Organizational Culture Neglecting Ethics: Forest Laboratories and Celexa Contributed by Shannon A. Bowen, Ph.D., University of South Carolina It is not an overstatement to say that life and death decisions are made inside pharmaceutical firms every day. Pharmaceutical firms have a unique responsibility to engage in ethical public relations because their products help many people but also carry dangerous risks and side effects. Issues management, the process of problem solving and assessing risk in order to help communication managers prevent crises before they occur, is essential in a pharmaceutical company. Most of those types of issues include an ethical component. The products researched, developed, approved by the Food and Drug Administration (FDA), manufactured, and marketed are subject to intense issues management and ethical scrutiny. Marketing of these products is then subject to the highest ethical standards, based on honest and accurate information, so that consumers and their health-care providers can make informed decisions. Although many pharmaceutical companies recognize this enormous ethical responsibility and seek to adhere to the highest ethical standards, there are lapses. There are many pharmaceutical cases with settlements in the billions of dollars, such as those at Pfizer or Lilly, arising from bad marketing practices or exaggerated claims. However, Forest Laboratories provides what is perhaps one of the most illustrative cases in recent decades of a lack of consideration for the ethics of their decisions and a corporate culture that seems to disregard ethics. As discussed in the foreword of this chapter, a culture inside of an organization that values and discusses ethics is essential. This case highlights the importance of an organizational culture that values ethics, the importance of the involvement of public relations in the ultimate decisions of the organization, the need to build trust and credibility with stakeholders—as well as the importance of ethics to the financial bottom line. Prescriptions and FDA Regulation All prescription drugs marketed in the United States are required to gain approval from the FDA for use in treating a specific illness, and that illness then becomes the labeled use for the drug. Forest Laboratories got into the most trouble because it used a practice called “off-label marketing” in addition to providing illegal gifts to prescribers of its drug Celexa. Off-label use occurs when physicians use a drug for something other than what the FDA approved it for, and is legal when the drug is used at the discretion of the health-care provider. Marketing the drug for off-label uses is not legal, and most observers believe it is not ethical because it can lead to dangerous conditions of which the patient is not aware or informed about. Prescription medications are required to go through extensive testing and clinical trials to gain approval from the FDA for their on-label use. Any potential side effects or drug interactions are then documented and can be described to prescribers and patients. Using drugs off-label needs to be closely monitored by the health-care provider because the potential risks and side effects related to the off-label use have not been studied. Pediatric uses of medications must specifically be studied among children to gain FDA approval. The FDA guidelines indicate that only a physician can prescribe medication for a condition that is not “on the label.” It also indicates that it is illegal for pharmaceutical companies to promote prescriptions for off-label uses. The FDA also places gift bans on pharmaceutical company sales representatives so that health-care providers are not offered personal incentives to prescribe certain drugs. Who Is Forest Laboratories? Forest Laboratories, Inc., is a publicly traded pharmaceutical company based in New York City that researches, manufactures, and distributes prescription medications. The company’s annual sales are $4.4 billion (Hoover’s 2012), and it has subsidiaries in other countries that also report revenue individually. Forest ranks number 513 in the Fortune 1000. It is a large firm but not global on the scale of some others such as Johnson & Johnson. There are 108 executives in Forest’s New York headquarters, led by Chairman, President, and CEO Howard Solomon. Solomon’s annual salary is on file as $1,277,500, plus a $900,000 annual bonus. The CEO is the top leader of the day-to-day operations in an organization; when a person is also chairman and president, that individual is responsible for the entire organization. That responsibility is often said to be fiduciary, meaning bound to act in trust of others, especially in public policy and financial matters. Forest researchers invented the drug Celexa as a treatment for major depression, in the class of antidepressants called selective serotonin reuptake inhibitors (SSRIs). The FDA approved Celexa to treat major depression in adults as its on-label use in 1998. The drug was heralded as a breakthrough and set to break records in sales for Forest. In 2010, Celexa was among the most commonly prescribed SSRI in the United States, at roughly 28,000,000 prescriptions (Wikipedia). Celexa, whose chemical name is citalopram, is used throughout most of the world under various other brand names, promoted by Forest’s subsidiary firms. Impending Ethical Issues Although Forest did not conduct pediatric tests or clinical trials for Celexa in children or young adults, accusations began to circulate that it was promoting the drug off-label. Those reports indicated that Celexa was being marketed as an effective antidepressant for use in children and young adults in sales representatives’ meetings with health-care providers. Such an off-label use would be at the discretion of the health-care provider, but it is illegal for the pharmaceutical firm to promote it. If Forest was promoting the drug for pediatric use, was that deceptive? Was it ethical? Further, complaints to the FDA began to surface that Celexa representatives were also giving kickbacks to physicians who prescribed the drug, including tickets to sporting events, lavish dining, expensive entertainment-event tickets, and even vacations for high prescribers of Celexa. These physicians and health-care providers clearly violated their medical codes of ethics. But where were the ethics at Forest? Where was public relations —the part of an organization that many scholars conclude should be responsible for driving and implementing ethics in these situations? At this point, one would expect Forest to engage in issues management, to investigate and resolve these complaints. If no issues management took place, one would expect the public relations department to eventually implement a crisis-management plan to effectively and ethically handle the impending and widening crisis. No such actions were taken with regard to public relations. In fact, Forest only issued one news release related to the entire matter, and that release was compelled speech as part of a settlement with the government. Ethical Crisis The FDA took note of the rising number of complaints it received and began an investigation into Forest. The United States Department of Justice (DOJ) and Carmen Ortiz, the U.S. Attorney General for the District of Massachusetts (not the state only, but the federal judicial district), began civil and criminal proceedings against Forest for the off-label marketing charges, violations of gift bans and “anti-kickback laws,” and various other charges of deceptive practices. The investigations revealed that Forest was engaging in unethical and illegal practices. Findings revealed that Celexa was promoted off-label as a pediatric antidepressant. Its use in children or young adults had never been studied, documented, or approved by the FDA. Further, the investigation revealed that kickbacks were given to physicians who prescribed Celexa. The lack of ethics inside Forest was so severe that, according to news media reports, it was not able to mount a credible defense for the case. Some might ask at this point: What were the ethical and moral responsibilities of the Chairman, President, and CEO, Mr. Solomon? Was his fiduciary duty not only to stockholders but also to health-care providers and consumers? Where were ethics training and supervision for the pharmaceutical representatives who met with health-care providers? Who was responsible for endangering the pediatric patients who received Celexa, thinking it was a safe drug for them? Who authorized expenditures on entertainment and vacations as kickbacks for physicians? Who was responsible for the deceptions that took place? Perhaps most importantly from a public relations standpoint, where was the internal organizational culture of valuing ethics that should not have allowed these events to occur? Here is a summary of the events and their financial impact. Forest Case Timeline Date Event 1997 Forest filed a new drug application with FDA for Celexa 1998 Celexa approved by FDA as antidepressant medication in the United States and Puerto Rico 1999 Celexa sales of $90 million, 16.8% of Forest’s yearly sales 2003 Celexa sales peaked at $1.42 billion, 69. 4% of Forest’s yearly sales. Exclusive Celexa marketing rights extended by FDA 2004 Subpoena issued for documents related to Celexa marketing 2005 Release of generic forms of Celexa into the market 2006 FDA began investigation of anti-kickback and off-label promotion violation 2007 Celexa accounted for 0.8% of Forest’s yearly sales 2010 Forest pleads guilty to criminal and civil charges Media coverage of the Forest case was dense. More than 20 major media outlets covered the story, including The Wall Street Journal, BusinessWeek, the Fox news channel, The New York Times, NPR, Bloomberg, and Forbes. The national-level case quickly generated a media agenda focused primarily on the deceptive organizational culture at Forest, geared toward marketing above all else. The media widely quoted Ortiz, for the prosecution, who said, “Forest deliberately chose to pursue corporate profits over its obligations to the FDA and the American public.” It is hard to imagine an organization’s reputation being more damaged. Forest settled the cases with the DOJ and U.S. Attorney for the District of Massachusetts, pleading guilty and paying extensive financial penalties. The $313 million settlement included $88 million paid to the U.S. government; $66 million for civil settlements; $14 million in assets; and, a $150 million fine, no doubt for punitive purposes. Other penalties included entering into a corporate integrity agreement with the Department of Health and Human Services with a five-year agreement to have annual reviews of Forest’s ethics and marketing practices, and to notify health-care providers about the guilty plea. Forest did not issue any comments on all of the investigations other than stating that the CEO was relieved that the long-running investigation was over. The organization did nothing to accept responsibility or rebuild trust with publics. Forest Laboratories is an excellent case study for understanding the role of public relations within the top-level, strategic management of an organization. If Forest had been engaging in issues management, these problems could have been solved long before federal investigations, lawsuits, and millions of dollars in penalties ensued. The role of an ethical organizational culture is also highlighted in this case because the government investigation shows that Forest clearly did not understand the importance of ethics, training employees on ethics, or adhering to any particular ethical values system in its business practices. A large $313 million dollar fine paid for these ethical infractions seems to have not been enough to create a new culture of ethical behavior inside the organization. Was public relations counseling the CEO on the ethics of the Celexa situation? Doubtful. Although many CEOs caught in this type of corporate scandal claimed they were not aware that certain practices were taking place in their organizations, it is the ultimate responsibility of the CEO to be in control of the operations of the organization. Deceptive marketing practices clearly fall within the purview of the CEO. Even if there is no ethics officer at the helm and no public relations counsel to advise on ethics, the CEO is ultimately responsible for the behavior of the company. In this case, the investigation and fines show that Solomon failed in his fiduciary responsibility not only to the stockholders but also to all of the other stakeholders and publics of Forest, including employees, regulators, health-care providers, and patients. Although everyone in an organization should play the role of an ethics agent, an official ethics officer should advise the CEO on ethics. Even so, the final voice of ethical responsibility is that of the CEO. Finally, what is the role of public relations in this type of catastrophe? Should PR advise the CEO on ethical behavior as many scholars argue? In this case, it appears that public relations took a very limited role in supporting the marketing function and engaging in deceptive promotions. These activities clearly run counter to the ideal type of public relations in which relationships are based on trust and credibility with stakeholders and publics. That type of organizational culture would be supportive of being guided by ethics, and allow discussion of the ethical dilemmas in a way that supported resolving issues before they became crises. Questions for Discussion 1. To what extent did Forest consider its stakeholders when marketing Celexa? 2. If you had been the public relations officer at Forest when this crisis began to unfold, how could you have responded? 3. What would you identify as problematic within Forest’s organizational structure? Specifically, what was the role of the public relations function, and was that an effective use of public relations? Was there an ethics officer, or who was in charge of ethics at all? What was the “safety net” in case of problems? 4. If you were hired as a consultant to work with Forest on creating an issues management plan for the future, what types of things would you recommend? 5. What recommendations would you make to Forest to “institutionalize a corporate conscience” and ingrain the importance of ethics within its organization? 6. Who is ultimately responsible for the ethics of an organization? What role does the CEO play in both ethical and fiduciary responsibilities? References and Further Reading Bowen, S. A. (2008). “A State of Neglect: Public Relations as Corporate Conscience or Ethics Counsel.” Journal of Public Relations Research, 20(3), 271–296. Bowen, S. A. (2009). “What Communication Professionals Tell Us Regarding Dominant Coalition Access and Gaining Membership.” Journal of Applied Communication Research, 37(4), 427–452. Bowen, S. A. (2010). “Almost a Decade Later: Have We Learned Lessons from Inside the Crooked E, Enron?” Ethical Space: The International Journal of Communication Ethics, 7(1), 28–35. Bowen, S. A. (2010). “An Examination of Applied Ethics and Stakeholder Management on Top Corporate Web Sites.” Public Relations Journal, 4(1) Retrieved from: http://www.prsa.org/Intelligence/PRJournal/Vol4/Nol/. Bowen, S. A., and Heath, R. L. (2005). “Issues Management, Systems, and Rhetoric: Exploring the Distinction Between Ethical and Legal Guidelines at Enron.” Journal of Public Affairs, 5, 84–98. Grunig, J. E. (2001). “Two-Way Symmetrical Public Relations: Past, Present, and Future.” In R. L. Heath (Ed.), Handbook of Public Relations (pp. 11–30). Thousand Oaks, CA: Sage. Grunig, J. E., and Grunig, L. A. (1996, May). “Implications of Symmetry for a Theory of Ethics and Social Responsibility in Public Relations.” Paper presented at the meeting of the International Communication Association, Chicago. Grunig, J. E., and Repper, F. C. (1992). “Strategic Management, Publics, and Issues.” In J. E. Grunig (Ed.), Excellence in Public Relations and Communication Management (pp. 117–157). Hillsdale, NJ: Lawrence Erlbaum Associates. Grunig, L. A., Grunig, J. E., and Dozier, D. M. (2002). Excellent Public Relations and Effective Organizations: A Study of Communication Management in Three Countries. Mahwah, NJ: Lawrence Erlbaum. Hoover’s Online Handbook of Business. (2012). Forest Laboratories, Inc., Entry retrieved from: http://www.hoovers.com/company/Forest_Laboratories_Inc/rrshri-1.html Kendall, B. (2010). “Forest Labs to Pay $313 Million Penalty.” The Wall Street Journal, online business section. Retrieved from: http://online.wsj.com/article/SB10001424052748703743504575494190717156422.html Wikipedia. (2012). Antidepressant entry. Retrieved from: http://en.wikipedia.org/wiki/Antidepressant#cite_note-165 Case 10-2 Penn State University: Sandusky Matter Sullies School Reputation Ethical behavior has frequently been defined as “doing the right thing for the right reason.” The philosophy behind this definition is that doing the “right thing” is good, but to be truly ethical, one must do the right thing for the right reason. Thus, unethical actions can result from both behavior and motive. If one does “the right thing” for personal gain, has that person behaved in an ethical manner? If one does something unethical, yet attains a beneficial result, does that justify the action? Or, should everyone just follow Kant’s categorical imperative, “I am never to act otherwise than to will that my maxim should become universal law.” Those (and many other) questions began to surface in State College, Pennsylvania, in 2011 when a man who had been a popular assistant coach at Penn State was accused of multiple counts of abuse of young boys. Not only was the coach under attack from critics, so was the university, its iconic football coach, its president, and just about everyone connected with the situation. The primary question was, did PSU and its leaders do enough to (1) stop the abuses and (2) punish the accused coach? Or, in ethical terms, did PSU do the right thing? For the right reason? Or did it hide its head in the sand to protect its vaunted football program, and by extension, the university itself? The situation certainly looked bad. The grand jury report cited “52 counts related to alleged sexual abuse of 10 boys over 15 years.”(1) Jerry Sandusky, Hall of Fame assistant coach at PSU for years, was led off to jail. A few months later, Sandusky would be convicted of 45 counts of child sex abuse. Sandusky is expected to appeal the verdict. The Penn State board of trustees fired iconic football coach Joe Paterno (winner of 409 games, more than any other Division I football coach) and PSU President Graham Spanier. (Paterno would die of cancer shortly thereafter, January 22, 2012.)(2) Students and alumni were appalled and furious that Paterno was cashiered (via telephone call) on November 9, 2011, unwilling to believe he was guilty of a “failure of leadership.”(3) The serene campus in Happy Valley would never be the same. The Situation The storm that would sink Paterno and PSU began forming in 1998 when PSU police, along with State College, Pennsylvania, law enforcement, were notified of possible misconduct by Sandusky related to a minor boy in the PSU football team showers. A long report was filed, but no prosecution was forthcoming. The case was closed, at the request of PSU’s campus police commander. Sandusky, who admitted showering naked with and hugging one victim, was told to quit showering with little boys, and he said he would not do it again.(4) Could Penn State have acted differently at this juncture? Might it have made a difference? Sandusky, who was widely considered a successor to Paterno, should the coach ever retire, was told by Paterno (in May 1999) that he (Sandusky) would not be his successor. Sandusky “retired” from coaching and began devoting most of his time to a nonprofit organization he had helped establish. The Second Mile (TSM) was a charity founded by Sandusky in 1977 to reach out to “children who need additional support and who would benefit from positive human contact....(5) “Through The Second Mile,” the grand jury report said, “Sandusky had access to hundreds of boys, many of whom were vulnerable because of their social situation.”(6) (Sandusky would resign from TSM in September 2010. The agency would close its doors in 2012.) With Sandusky as its primary fundraiser, TSM would grow to a statewide organization, with some 100,000 children involved. All that would crumble with his arrest. Funding dried up; staff and clients withdrew. The grand jury report was damning and damaging. On November 11, 2011, TSM issued a statement: Although the allegations against Jerry Sandusky and the alleged incidents occurred outside Second Mile programs and events, this does not change the fact that the alleged sexual abuse involved Second Mile program children, nor does it lessen the terrible impact of sexual abuse on its victims.(5) The abuse situation came to a full boil in March 2002, when a graduate assistant football coach walked in on Sandusky allegedly engaging in intercourse with a preteen boy in a shower. The assistant left, and the next day told Paterno what he had seen. Paterno later told his superior, athletics director Tim Curley, who had been a PSU quarterback for Paterno in the 1970s. Neither Curley nor Paterno called police. A week and a half later, Curley called the assistant coach, who repeated his story for the athletics director and for Gary Schultz, the PSU vice-president who oversaw the PSU campus police. Two weeks later, Curley called the assistant coach to tell him that Sandusky’s keys had been confiscated and the incident had been reported to The Second Mile.(7) Curley told Sandusky that he could no longer bring little boys to campus, even though Sandusky was allowed continued access to facilities via his “emeritus” status, granted on his retirement in 1999.(7) Had Penn State missed an opportunity to bring the situation under control? Several Opportunities Missed It is clear that no one wanted to confront (1) the likelihood that children were being abused on the PSU campus, (2) Jerry Sandusky, or especially (3) Joe Paterno. Several opportunities arose for someone to have stepped up and taken action between the first incident reported in 1998 and the final straw which fell in 2011. • In 1998, Sandusky brought an 11-year- old boy home from a “workout” at PSU. The boy’s mother noticed his wet hair and became suspicious. The mother persuaded PSU police to “eavesdrop” on conversations she had with Sandusky about her son. She confronted Sandusky, and he responded, “I was wrong... I wish I were dead.” A detailed investigation of this incident ended with the county district attorney deciding there were no criminal charges to file. The PSU campus police closed the case at the direction of its director.(11) A psychologist reported in 1998 that Sandusky’s actions fit the profile of a pedophile, “but the university seemed to do nothing about Sandusky in the wake of that report in 1998.”(8) Paterno and Spanier both said they knew nothing of the incident. State welfare department investigator Gerald Lauro said later that he thought the 1998 allegation fell into “boundary” issues, not sexual assault. He theorized that the victim, at that point much older, told the 2009 grand jury “a much more explicit account.”(9) • In the fall of 2000, a PSU janitor observed Sandusky allegedly performing oral sex on a preteen boy in an assistant coach’s shower. The janitor told his fellow workers and his boss. One worker had seen Sandusky and a preteen boy leaving the showers, and the janitorial supervisor saw Sandusky and the boy in the parking lot around midnight. The janitor, new in his job, feared losing his position if he reported Sandusky, so no report was made.(10) Questions abound. 1. Why was Sandusky allowed to remain in society for three years while the grand jury completed its investigation? “The way (Corbett’s?) office handled the investigation raises inevitable and legitimate questions about why an alleged sexual predator was allowed to remain at large for nearly three years while the grand jury investigated. The question of politics cannot be avoided. It should also be noted that Corbett was running for governor in 2009 and 2010. Was he inclined to go the route of a lengthy grand-jury probe...because he didn’t want to alienate potential donors with Penn State ties?”(12) 2. What happened to the Centre County district attorney who dismissed the original 1998 case against Sandusky? He disappeared without a trace in 2005, eight months prior to his planned retirement. A district attorney for 20 years, he didn’t return from a road trip. His car was found beside a river. His laptop was recovered from the river. He was declared officially dead six years later. 3. Why didn’t Joe Paterno address Sandusky’s problems when they became known in 1998? Paterno, says Maureen Dowd, “must have decided that his reputation was more important than justice.”(7) Others agree. “The great JoePa (Paterno),... did nothing to stop Sandusky’s alleged depravity but kick it upstairs to superiors, when everyone knew Paterno had no superiors....”(12) 4. Was Paterno doing the right thing? For the right reason? Mitch Albom, a supporter of Paterno, said: “Sexual abuse was not a secret in 2002. A more concerned Paterno would have gone beyond telling his athletic director—even though Sandusky, at the time, was no longer on the Penn State staff. Do I believe Paterno could have been so wrapped up in football that he didn’t know much more? Maybe. Or maybe he didn’t want to know.” Paterno, himself, said after he was fired, “This is a tragedy. It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more.”(14) The Problem for Penn State Jerry Sandusky’s problem is obvious: He was convicted of molesting young boys. He will likely go to prison for a long time. Penn State’s problem isn’t so cut and dried. Its history is part of the problem. The university’s top administrators kept allowing Sandusky to invite some of those boys into campus sports buildings—locker rooms, showers, a sauna, and a swimming pool—where prosecutors now say he fondled, molested, and sexually assaulted some of the most vulnerable in the place known as Happy Valley. Too many, from the university president to department heads to janitors, knew of troubling behavior by this revered, longtime coach who founded a charity for children with hardscrabble backgrounds. But at this school whose sports programs vow “success with honor,” the circle of knowledge was kept very limited and very private. Year after year, Penn State missed opportunity after opportunity to stop Sandusky. Secrecy ruled, and the reaction to complaints of improper sexual behavior was to remain silent, minimize the complaints, or explain them away—all part of a deep-rooted reflex to protect the sacred football program.(15) Some of that attitude was reflected by students and alumni following Sandusky’s arrest and Paterno’s firing. At the first opportunity to elect new members of the Board of Trustees, the alumni (who elect trustees) selected a former Paterno player and a wealthy donor who was critical of the decision to fire Paterno, as two of the three new trustees.(16) “The alumni sent a message that they were dissatisfied with the Board’s decisions,” said the newly elected trustee. On the night of Paterno’s dismissal, students rioted, massing in front of his house near campus, in a show of support. Six months later, PSU trustees were moved to issue a statement underscoring its rationale for letting the long-time coach go. “The board decided to issue another statement now,” said trustee Keith Eckel, “because alumni had continued to ask questions.”(17) Going Forward Overcoming that culture is going to be the gist of PSU’s problem going forth. It won’t be easy, even with a commitment from new President Rodney Erickson to restore confidence and “rebuild our community.” Too much damage has been done. The U.S. Department of Education is investigating whether the university violated federal law by failing to report the alleged sexual assaults. Some donors are expected to pull back, at least in the short term. One football recruit has already changed his mind about attending Penn State next year. Moody’s Investors Service, Inc., warned that it might downgrade Penn State’s bond rating as it gauges the impact of possible lawsuits.(18) But there are some positive signs. The university was expecting its largest incoming class in six years in 2012, with a six-percent increase in acceptances, Erickson said. Applications for admissions increased more than two percent, another record.(19) President Erickson and the Board are also committed to more transparency. “I accepted this presidency with the intention that I would lead Penn State with a commitment to openness and communication,” Erickson said. That is the type of communication some said the board did not exhibit when it was needed most. Governor Corbett, who sits on the board, agrees. “Transparency is a big thing for me, and I think moving forward the board will have to sit down and face some difficult decisions.”(20) Perhaps the best sign is the hiring of two professional public relations firms. Penn State announced in April 2012 the hiring of Edelman and La Torre Communications, to help plan and execute the next step in Penn State’s recovery. It won’t be cheap. The college has committed $2.5 million for the first year, after already having spent $7.5 million on crisis communication related to Sandusky. Penn State says the firms will communicate with current and prospective students, alumni, faculty, staff, parents, and media as well as “support the university throughout upcoming litigation.”(21) The Public Relations Impact It is too early to predict what impact the public relations agencies can have on the PSU problem. The 46-year history with Paterno, the culture of secrecy, the lack of outrage by students and alumni over sexual abuse running rampant, are going to be difficult to change. Football put Penn State on the map. The college takes in some $70 million annually from its football program. Allowing it to drive moral decisions is a mistake. “Like the Roman Catholic Church,” says Maureen Dowd, “Penn State is an arrogant institution hiding behind its mystique.” “The Emperor Wears No Clothes” The familiar nursery story of the little boy who voices what no one else will drives at the core of why this scandal and others like it continue to occur. When organizations adopt a sycophantic worship of, in this case, a coach, or, in other cases, a CEO, telling on them is practically impossible. An employee will fear for his or her job and being cast out socially, and will speculate that maybe nothing wrong is going on if no one else is speaking out either. Whistle-blowers, though protected by federal law, know how difficult it can be to reintegrate in the same or even another organization afterwards. One of our most important jobs as public relations practitioners is to have our ear to the ground, to know what is going on that could harm the reputation of our organization and, if necessary, as the Quaker’s say, “speak truth to power” and do the right thing. The new leadership recognizes the value of transparency. It had the good judgment to bring in outside counsel. Time will tell if anyone listens to them. Will PSU be able to do the right thing? For the right reason? Questions for Discussion 1. How could this situation have been defused earlier or avoided? 2. What role did politics play in the many critical decisions made along the way? 3. Could Joe Paterno have stopped what was happening in 1998? How? 4. Why did PSU “kick the problem down the road” for so long? 5. What might The Second Mile have done to mitigate this mess? 6. After reading the grand jury presentation, what do you think of Penn State’s response? 7. Did anyone do the right thing? For any reason? Citations 1. Grand Jury-Pennsylvania Attorney General (www.attorneygeneral.gov/sandusky-grand-jury-presentment.pdf) 5/8/12 via ABC News. 2. Wikipedia, 2012 “Joe Paterno.” 3. USA Today. USA Today “Penn State Board: Paterno Fired for ‘Failure of Leadership’” March 13, 2012, p 2A. 4. The New York Times, Investigation of Sandusky in 1998 Raises Questions No. 13-Mitch Albom “Paterno’s Legacy is not the real issue today,” November 9, 2011. 5. TheSecondMile.org. 6. Grand Jury presentment, p. 1. 7. The New York Times, Maureen Dowd, “Personal Foul at Penn State,” November 8, 2011. 8. The New York Times, “Sandusky Investigation...,” March 24, 2012. 9. The New York Times,“Investigation of Sandusky in 1998...,” November 9, 2011. 10. Grand Jury report, p. 21. 11. Grand Jury report, p. 18. 12. The Daily Beast, November 21, 2011. 13. Mitch Albom, Detroit Free Press. November 10, 2011. 14. Mlive.com/sports. “Paterno Issues Statement...” 15. CBSSports.com. “Penn State Culture...” 16. Associated Press. USA Today “Debate Over Paterno’s Firing Not Over Yet” May 4, 2012. 17. USA Today.“Sandusky Defense to Seek Dismissal of Charges,” March 13, 2012, p. 2A. 18. Columbia Missourian, November 13, 2011. “Penn State Students, Alumni...” 19. The Boston Globe (Boston.com), “PSU President Says Admissions, Acceptances Up,” May 4, 2012. 20. ABC27.com, “Penn State Board of Trustees Moves Forward...,” January 20, 2012. 21. Fox Sports, April 25, 2012. Case 10-3 Corporate Social Responsibility and Ethics: Nike and Apple Face Similar Challenges a Decade Apart Corporations are no longer accountable to only their investors, nor can they base their success solely on high sales figures. A legacy of the social movements of the 1960s and a demand for political correctness now compels organizations to have practices in place that demonstrate their commitment to social responsibility.2 Corporate social responsibility can include embracing the issues of environmentalism, prohibiting testing of products on animals, human rights, or other social or political concerns affected or perceived to be affected by an organization’s policies. Corporations are now finding that stakeholders expect them to have an ethical, and not necessarily financial, interest in their policies and how those policies affect the rest of the world. It has become important to organizations to cultivate their socially responsible image. Socially responsible corporate practices and ethical standards are a reflection of each organization. Corporations have learned that being socially responsible is good for business, that their beneficence also benefits the company. Although some companies are following through on their commitments, others only project the appearance of being socially responsible. This discrepancy between a company’s environmental image and actions has been referred to as greenwashing. This term has earned an entry in the 10th edition of the Concise Oxford English Dictionary and is defined as “disinformation disseminated by an organization so as to present an environmentally responsible public image.” Mark Twain must have experienced early versions of greenwashing in his time when he said, “The secret of success is honesty and fair dealing—if you can fake these, you’ve got it made.” If an organization is accused of social irresponsibility or demonstrating unethical practices, it may not necessarily be doing anything illegal. Violating an Environmental Protection Agency regulation and discriminating against an employee are illegal acts. Selling fur products or making a corporate donation to Planned Parenthood are not illegal, but some may see these acts as unethical. Many companies have been boycotted based on their actions that are legal but perceived to be unethical by groups that disagree with specific actions. The German philosopher Immanuel Kant (1724–1804), in his works on ethics, wrote, “Act only on that maxim through which you can at the same time will that it should become a universal law.” Before a company advances a policy or produces a new product, it may want to address the issue of business ethics by asking the following questions: • Will anyone be damaged or compromised by our actions? • Will anyone gain an unfair advantage? • Is there anything inherently wrong with these actions? • If these practices reach the media, will we look bad? • Are we able to feel good about following these practices? Would we be happy applying the practices or policies to ourselves? 2Betsy Reed, “The Business of Social Responsibility,” May 1998; Jon Entube, “Corporate Ethics and Accountability.” Corporate Governance Web site (www.corpgov.net). In other words, should the Golden Rule also apply to business practices? Does there have to be a tradeoff between corporate social responsibility and making a profit? Finally, actions that an organization may take today—even when they are approved, supported, and welcomed by laws and mores of the day—can be interpreted in the future as bad behavior worthy of boycotts, lawsuits, and negative reputational chatter in the future. Our role as practitioners expands not only to interpret organizational behavior through the eyes of our stakeholders today but to how we will be perceived and treated in the future. Nike’s Problems Foreshadowed—Nike Forewarned Today Nike, Inc., is the world’s number-one shoe company and controls almost 19 percent of the U.S. shoe market. Nike employs approximately 35,000 worldwide corporate employees and about 950,000 people in Nike-contracted factories around the world. Revenues worldwide in 2011 were almost 21 billion dollars 1992 and an Early Code of Conduct In 1992, Nike was much like it is today—the biggest player in the market (with a 20 percent market share) and a half million people working in Nike-contracted factories around the world. To deal with contracted labor and bulletproof themselves against possible negative public opinion, Nike established its own code of conduct in 1992 to ensure that specific guidelines on wages and working conditions were followed at all of its facilities, including those under the supervision of subcontractors overseas. Nike began to receive negative coverage concerning its labor practices in the early 1990s. In 1992, Jeff Ballinger, who had spent four years in Indonesia helping workers to organize unions, returned to the United States with information on abusive labor practices in Nike factories in Indonesia. In 1993, CBS flew Ballinger back to Indonesia to narrate a story on the workers’ struggle for a living wage in those facilities. After the CBS report, Nike received a flurry of negative media coverage from the press in both the United States and the United Kingdom over the next two years. During this time, the company issued various press releases and statements asserting its commitment to the welfare of its workers and to improving factory conditions. Nike seemed to successfully endure the reactions to the bad press. After its stock price fell slightly at the end of 1993, it began a steady upswing starting in 1995. Between 1996 and 2006, Nike stock rose from about $55 to $80 per share, reaching more than $90 at one point. Nike shares gained 17 percent from 2005 to 2006. Someone Blows the Whistle on Nike In November 1997, a disgruntled Nike employee leaked a secret internal report to the Transnational Resource and Action Center, a San Francisco-based organization now known as Corporate Watch. Nike had hired the Ernst & Young accounting firm to audit the working conditions at one of its shoe manufacturing plants in Vietnam. The inspection report stated that workers were exposed to harmful levels of carcinogens because of poor air ventilation in the plant and that 77 percent of the employees had respiratory problems. The report also stated that employees were forced to work 65 hours a week, yet did not receive a living wage. This information seemed to contradict Nike’s earlier statements of commitment to the welfare of its workers. The Ernst & Young report was supplied to The New York Times, which then printed a story on it on November 8, 1997. Nike responded by pointing out that, soon after it had received the report, the problems were addressed and steps had been taken to improve the working conditions. However, this time, with the release of the Ernst & Young report, the damage was done. The problem of Nike’s apparent exploitation of its overseas employees, based on long hours and low pay, was now compounded by the issue of the unhealthy environmental condition of the factories. Six months later, Nike was presented with another hurdle. In April 1998, a lawsuit was filed by labor activist Marc Kasky against Nike in a California Superior Court alleging that Nike’s statements of protection of its workers amounted to false advertising under California’s consumer-protection laws.3 Under California’s broad consumer-protection laws, a plaintiff is not required to prove he or she has suffered personal injury—only that there was a likelihood of deception. The main question of the lawsuit was whether Nike’s public statements were considered advertising for the company and therefore subject to truth-in-advertising laws, or if they were simply public statements that are protected by the First Amendment. The California Court of Appeal agreed with Nike that the information in question was “corporate speech” and therefore protected by the First Amendment, saying, in effect, that Kasky could not proceed with a lawsuit on the merits of the case. The California Supreme Court, however, sided with Kasky, ruling that the intent of Nike’s speech was to advance its commercial interests and therefore was not protected by the First Amendment. Under this ruling, Kasky was permitted to proceed with his legal actions. Nike appealed to the U.S. Supreme Court, which initially agreed to hear the case. However, in June 2003, the Court decided to dismiss the “writ of certiorari, thereby refusing to decide the questions presented, at least for now” (Nike v. Kasky, U.S. Supreme Court). In September 2003, Nike and Kasky buried the legal hatchet. Nike agreed to donate $1.5 million to the Fair Labor Association, settling the legal battle without ever having the facts of the case go to trial (see the box “Nike v. Kasky: More at Stake Than Labor Issues”). Nike Puts Its Best Foot Forward Nike was now experiencing some financial repercussions—drops in stock prices and sales—from the coverage of their labor practices, which were viewed by many as exploitive and unethical. Nike was finally facing the fact that its policies did make it look bad in the press, were inherently wrong, and engendered a feeling of ill will. This time, the company took a more proactive approach. In May 1998, at the National Press Club in Washington, D.C., Chairman and CEO Philip Knight announced Nike’s new labor initiatives aimed at improving factory working conditions worldwide. The main elements of the initiatives are: • Increase the minimum age of new employees in the shoe factories to 18 years of age • Improve the air quality by using the standards enforced by the Occupational Safety and Health Administration (OSHA) • A commitment to a policy of open communications on corporate responsibility issues • A pledge to allow independent monitoring of its factories by nongovernmental organizations 3Josh Richman, “Greenwashing on Trial,” MoJo Wire (Mother Jones Magazine online), February 23, 2001. However, the initiatives do not address the issues of forced overtime and increasing earnings to a living wage. (Editor’s Note: Just what constitutes a “living wage” is at the heart of the debate over Nike’s business practices. Many U.S.-based manufacturing operations are moving jobs to countries such as China, Indonesia, and Singapore because the workers earn much less than those in similar jobs in the United States. Such countries often have nothing like the EPA, OSHA, and similar workplace watchdogs that can add to manufacturing costs. Union representation is much less likely in offshore factories as well. Although wages paid in these countries might be “normal” for the area, they frequently pale in comparison to wages in the United States.) In his speech, Philip Knight said, “These moves do more than just set industry standards. They reflect who we are as a company.” Both Sides Use the Internet As the Internet has become an everyday resource for more and more people, companies of all sizes now use it as a worldwide marketing and public relations tool. If a company wants to let people know what it has to offer by promoting itself globally, the Internet provides that outlet. The Internet is also an outlet for activism against corporations.4 The online attacks can take place on specific Web sites, in chat rooms, or on Web bulletin boards. Negative postings on the Internet are considered a serious public relations problem by companies because millions of people could potentially see those messages. Controversial information about a company, whether factual or not, can result in a public relations nightmare that could take years to resolve. Personal journals or Weblogs (blogs) also are of increasing concern to companies. A technorati.com search of “Nike” yielded 413,964 blog posts in 2007 with some reference to the company or its namesake brand. Nike’s Web site (www.nikebiz.com) became operational in 1996. The site contained a great range of information on the company, including a section entitled “Responsibility.” Within that section, Nike addressed the issues of global community, the environment, and diversity. In the section on labor, the company provided information on factory monitoring results and updates on working conditions at various factory locations. Today, the section still exists though an interested party would have to dig deep to find it on the Web site. 2001—The Three-Year Anniversary of Nike’s Labor Initiatives In May 2001, Nike, Inc., on the three-year anniversary of its new labor initiatives, issued a press release that reviewed the successes and challenges of its corporate responsibility. It noted that Nike was “working collaboratively alongside human rights groups and various NGOs” and that it had “increased wages more than 100 percent over the past several years for entry-level Indonesian footwear factory workers.” Despite these and other successes, the release also stated that “there is still progress to be made.” As Dusty Kidd, vice-president of corporate responsibility, put it, “As in every area of Nike’s business, there is no finish line, and improving the lives and working conditions of the workers who make Nike products is no exception.” Within 24 hours of the release of Nike’s statement, The Wall Street Journal reported, on May 16, 2001, that Global Exchange, a human-rights organization, had accused Nike of failing to follow through on many of its 1998 initiatives. In addition to other criticisms, Global Exchange said that the living-wage issue had still not been fully addressed and that Nike’s factory-monitoring resources were not truly independent of the company. Nike suspended releasing its “Corporate Responsibility Report” for three years, reintroducing it in 2005. 4Jamie Carrington, “Answering to the Internet,” The World Paper, October 2000. In recent years, Nike has continued to be a target of boycotts, media investigations, and international protest. A frequent complaint is that the company treats the labor problems as a public relations issue and not as a human rights issue in that it presents itself as a socially responsible corporation. Most any company would want to be viewed as doing the right thing, but how much should good intentions alone be rewarded? Nike contends it is improving conditions in its many plants, but acknowledges “there is no finish line” when it comes to human rights and humane working conditions. So the question remains: Who determines if the socially responsible steps a corporation has taken are enough? Déjà Vu Apple? Why Not? So, Apple computer, the darling of Silicon Valley and consumers everywhere, knew they had to deal with the ethical liability of working with contract employers overseas and their management styles and culture. Apple earned $12 billion in the second quarter of 2011 alone, selling 35.1 million iPhones, 11.8 million iPads, 4 million Macs, and 7.7 million iPods. Multiple Apple products populate most houses in America. The company was successful everywhere. One of the best known companies in the world, Apple had much to lose if human rights abuses occurred as a result of manufacturing their products. Nike v. Kasky: More at Stake than Labor Issues When Nike decided to settle the Nike v. Kasky lawsuit by donating $1.5 million to the Fair Labor Association (a labor-conditions watchdog group), it was the official end to a case that had (and has) immense ramifications for the public relations industry. Still unsettled, however, are the issues that brought the case to the U.S. Supreme Court in the first place: Can a company defend itself in the court of public opinion and have that speech fall under the Freedom-of-Speech clause of the First Amendment? The companion question is: Can anything (and everything) said by a profit-making company be construed as commercial speech (and unprotected), because of the assumption that everything a profit-making organization does is focused on a commercial purpose? In the Nike v. Kasky suit, the Supreme Court first decided to hear the case and determine if Nike was protected by the First Amendment when it mailed news releases; letters to the editors of papers, including The New York Times; brochures to retail customers; and letters to key colleges and others who had a stake in Nike’s business. After accepting briefs and hearing oral arguments, the Court “took the highly unusual step of deciding that the appeal had come to them prematurely and sent the case back to California” (Ken Paulson, executive director, First Amendment Center, September 28, 2003). That left the California Supreme Court decision intact, but did nothing to address the larger question that Paulson said “could have forever altered the free-speech rights of corporations....” Nike’s mailings—standard public relations tools—were based, in part, on a study of working conditions in Third World nations completed by Dr. Andrew Young in 1997. Dr. Young, a close associate of Dr. Martin Luther King during the 1960s civil rights movement, later served as U.S. Ambassador to the United Nations under President Jimmy Carter and was elected to two terms as mayor of Atlanta. It was this pedigree that made his report so credible—and worthy of broad distribution by Nike. Essentially, he found Nike’s contract shops to be at least up to standards in their countries and, in many cases, above standard. The report didn’t address wages, but rather focused on working conditions. Kasky’s 1998 suit was based on these actions and similar efforts by Nike to offer the public a different look at the so-called “sweatshop” issue. Nike, naturally, wanted a rosier view of its practices, but Kasky, a veteran activist with environmental and community-service groups, protested that Nike’s statements were misleading and, therefore, constituted false advertising. The California court agreed, and the U.S. Supreme Court did not disagree. “The clear winner here was Kasky and workers’ rights organizations,” said Paulson. “The list of losers is not limited to Nike. Every corporation doing business in California now has to think long and hard about any public statements concerning its company.” This is a major hurdle for the public relations profession, because perhaps the primary function of public relations is advocacy. We are supposed to be strong, ethical advocates for our employers and clients. If robbed of that function, then public relations, as a profession, loses one of its major strengths. Nike’s defense was bolstered by more than 40 briefs filed by such strange bedfellows as media corporations, chambers of commerce, and the American Civil Liberties Union. None wanted corporate speech to lose its First Amendment protection. The good news surrounding Nike v. Kasky is that the decision now in effect in that case applies only to California. California is well known for its interesting legal and political climate. At the time of the Kasky suit, the State of California permitted a private citizen to act as a de facto attorney general suing on behalf of people with whom no relationship was established and on matters in which the citizen had no personal standing. Those were the conditions of Kasky’s suit against Nike. He needed to show no personal loss or damage to bring action against Nike. Since that time, that avenue has been closed in California, but the state is still known for liberal interpretation of laws, especially those related to advertising and commercial speech. For example, the book The Beardstown Ladies’ Common-Sense Investment Guide claimed on a cover blurb that the amateur-investor ladies had realized investment gains exceeding 23 percent over a 10-year period. However, some independent math put the gains at less than 10 percent. In 1988, a class-action lawsuit was filed on behalf of all book buyers (some 800,000), but a New York court decided the cover-blurb copy was a summary of information contained in the book—and therefore protected by the First Amendment. A similar suit was filed in California, where the court decided the blurb constituted “commercial speech” and was therefore “false advertising.” The publisher settled the suit by offering a free book to those affected, but it spent more than $1 million in its defense.5 This Beardstown example illustrates that legal interpretations differ from state to state, which is why a California decision applies only to California. That is also why there is a U.S. Supreme Court. Laws of the land that apply generally need to be consistent. The same suit shouldn’t get polar opposite rulings in two states. The real danger of allowing Nike v. Kasky to stand lies in the “chilling effect” of such a lawsuit. Paulson quotes Quentin Riegel, vice-president of litigation for the National Association of Manufacturers, who said, “Companies will be pressured into cutting back their participation in and dialogues on important issues.” So-called “corporate speech” (also known as “political speech”) has been around since landmark cases such as First National Bank of Boston v. Bellotti (1978) and Bolger v. Young’s Drug Products (1983). In these cases, the Supreme Court ruled that corporations have First Amendment rights to free speech on issues of importance to society. The content of the speech, not the nature of the “speaker,” was determined to be paramount. Nike was looking to the courts to declare its defense part of the public debate on important issues. For now, that’s not happening. With the financial settlement, no determination as to the accuracy or validity of Nike’s statements will be made. Constitutional issues and financial expediency took that determination off the table. 5Available at writ.news.findlaw.com/ramasastry/20060202.html. Learning from other companies’ mistakes and having a corporate commitment to doing the right thing, Apple established contracts that delineated how its foreign workers would be treated. Contract employers would have to abide by the contract or not continue as Apple suppliers. According to the supplier contracts, “all of our suppliers [must] provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes. Our actions—from thorough site audits to industry-leading training programs—demonstrate this commitment.” Apple laid out an audit process that included regular and surprise inspections and a series of policies that, they claimed, were the toughest in the industry. Not relying just on their own standards, Apple adopted standards put in place by others, including the Electronic Industry Citizenship Coalition (EICC), an organization established in 2004 to promote common codes of conduct for the electronics and information and communications technology industry. The EICC code was developed using internationally recognized standards from the International Labor Organization and the United Nations. Apple said these standards in fact “go beyond in the areas of ending involuntary labor practices, eliminating underage labor, and preventing excessive working hours.” In January 2012, a blogger and theatrical performer of monologues by the name of Mike Daisey went on NPR’s This American Life and told “embellished or fabricated” stories of worker abuses at the plants of Apple contractors in China. Soon after, a reporter who questioned some of Daisey’s stories dug deep and found that his stories were false. Apple’s response was muted since the media that had reported the story actually did the work to refute it once it was out there. Most likely good relationships between Apple and the news media prompted a closer look at the Daisey reports. The uproar over Daisey’s fabrications by the media who reported it in the first place did more to vindicate Apple than all the protestations and facts that Apple could ever have produced. Forbes magazine blogger, Josh Barro, asked the obvious question, “Why didn’t Apple sue Daisey?” He answered his own question by surmising that Apple knew it wouldn’t serve its interests and would only be a rehash of the details already published. As it was, Daisey’s fans continued to support him and his shows regardless. And though the actual stories Daisey told were fabricated, it would not have stopped some from questioning the Chinese business practices that Apple tacitly supports by doing business in China, regardless of its honorable contracts with suppliers. Questions for Discussion Nike 1. Does Nike have a responsibility to monitor working conditions in plants owned and operated by contractors? Why? 2. Is “a low wage is better than no wage” a sound public relations strategy for Nike? Why? 3. What role did falling stock prices and dwindling sales play in Nike’s strategy and actions? 4. Is the working environment in a contract work site an operational or a public relations problem? Apple 1. What purpose would it have served for Apple to sue Mr. Daisey? 2. How do you believe the outcome might have been different if Apple did not have its contract in place prior to the controversy? 3. What are the ethical considerations of doing business in a country that treats its employees significantly differently from how we do in the United States, even if that treatment is in keeping with the culture of that country? 4. What pros and cons about suing Mr. Daisey would you have presented to Apple’s management? http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2011/index.html#select_financials http://nikeinc.com/pages/about-nike-inc http://www.statista.com/statistics/216821/forecast-for-nikes-global-market-share-in-athletic-foot-wear-until-2017/ http://www.dailyfinance.com/2011/04/08/growthpotential-for-nike-may-hinge-on-sports-apparel-market/ http://www.nikeresponsibility.com/report/content/chapter/labor http://www.apple.com/supplierresponsibility/auditing.html http://www.apple.com/supplierresponsibility/code-of-conduct http://www.forbes.com/sites/joshbarro/2012/03/17/why-didnt-apple-sue-mike-daisey/ http://news.cnet.com/8301–13579_3–57426193-37/apple-critic-mike-daisey-is-as-hot-as-ever/ Case 10-4 Dow Corning and Breast Implants: Dealing with the Perception of Deception The most popular cosmetic surgery of 2011 was breast augmentation, with 307,180 women getting saline or silicone implants. Those numbers clearly exceeded the runners up: nose jobs (243,772) and liposuction (204,782). The number of breast augmentations represents a marked turnaround for a procedure that once generated 19,000 lawsuits and bankrupted a major manufacturer: Dow Corning. After banning silicone implants for 14 years, the Food and Drug Administration (FDA) in 2006 gave the green light to silicone, based on long-term studies that showed no causal relationship between implants and the several medical problems prompting the law suits. Breast implants never really went away. In the midst of the FDA ban, women continued to receive implants—just not silicone. In 2000, for example, six years before the FDA reapproved silicone, women received 212,500 augmentations, according to statistics from the American Society of Plastic Surgeons. As recently as June 2011, the FDA was confirming the “relative safety” of silicone. For Dow Corning, the FDA approvals and confirmations represent too little too late. One of the biggest headaches for manufacturers continues to be the proliferation of product liability suits. Some companies are taking products off the market because of the risk of these suits, yet a number of the cases are filed with reason. What would be the responsible and ethical thing to do if a product has been implicated as defective or harmful, even if research may indicate the opposite? What can be done to make it up to those who may have been harmed or to allay the fears of those who perceive the product as harmful? In the early 1990s, Dow Corning was faced with a great number of angry women when silicone-gel breast implants (manufactured by Dow Corning and several others) were indicated as a possible cause of health problems the women were experiencing. This case examines how public perception of Dow Corning’s behavior evolved into a question of credibility for the organization. The company did have an ethics policy in place since 1976 that was guiding decision making, but the public perceived that it was making business and legal decisions without addressing the ethical issues around the continued use of its breast implants. History The history of breast implantation in the United States is a long one. Since 1962, women have been paying to have doctors surgically enhance their breast size, for various reasons, through the use of silicone-gel or saline solution implants encased in silicone envelopes. Many do it for self-esteem reasons (about 80 percent), and others want reconstructive surgery after having a mastectomy due to breast cancer (about 20 percent). Almost 2 million women have had breast implants to date. Silicone gel was the choice for many women because it seemed more “lifelike” after implantation. Saline solution implants (made of salt and water) were considered less risky for the body, but women chose them less often because they did not feel as natural and sometimes made “sloshing sounds.” Until 1991, the highest perceived risk from breast implantation was in the surgical procedure itself. (Like any device implanted into the body, it may have adverse effects in a small number of patients.) However, silicone’s effects on the human body’s autoimmune system were not known. An enormous amount of breast-implant testing had been done beginning in the 1950s, but when the issue arose in the 1990s there was a perception that there was little, if any, product testing completed. Despite the amount of research that had been done, breast implants were alleged to be the possible cause of serious medical problems, including immunological disorders, arthritis, infections, reduced mammogram effectiveness, and cancer. The possible risks of breast implants fall into two basic categories: those related directly to the breast (easy to observe) and those that may involve distant parts of the body (much harder to observe and difficult to measure). Some of the possible breast-related risks are: • Difficulty in detecting abnormalities in the breast when mammographic X-rays are taken • Breasts may harden—as a result of fibrous tissue growing around the implant—possibly causing discomfort and pain • Breakage of the envelope, causing the gel filling to be released Other risks are: • Migration of the gel filling throughout the body (with possible unpleasant cosmetic effects) • The perception that breast implants may cause autoimmune diseases Dow Coming’s Role Dow Corning Corporation, jointly owned by the Dow Chemical Company and Corning, Inc., had been one of the most visible manufacturers of silicone-gel breast implants, although implants represented less than one percent of the company’s sales prior to and at the start of the legal actions. Dow Corning came under fire in 1991 when Marianne Hopkins, who had received silicone-gel breast implants in 1976, brought suit—claiming the product was responsible for damage to her immune system. The alleged cause was silicone leakage. With this case, many questions began to surface about implants. One contributing factor to the uproar is that all medical devices were unregulated until 1976, 14 years after breast implantations had begun, so there was no standard of testing and regulation to follow. Devices in use before the regulations were considered “grandfathered,” which meant the manufacturers of those products were not required to provide the FDA with scientific evidence of safety and effectiveness. That stipulation in the law was based on the premise that more was known about the safety of a device that has been in use for some time than about one that had been newly developed. However, if questions arose over time that cast any doubt about a grandfathered device’s safety, the law gave the FDA the authority to go back and require that its manufacturer provide evidence to demonstrate that the device was safe and effective.6 In the 1980s, the FDA devices division did not have the budget or personnel to regulate medical devices adequately, and had adopted a lax attitude in testing and regulating new medical devices put on the market. Finally, in April 1991, with intensified publicity and court cases, implant manufacturers were ordered to prove that their silicone implants were safe. This regulatory action had been recommended by an FDA advisory panel a decade earlier, although it had not been enforced—a fact that damaged public perceptions. 6From “Background Information on the Possible Health Risks of Silicone Breast Implants,” released by the FDA December 1990 and revised February 1991. Credibility Problems In June 1991, Dow Corning documents surfaced in a Business Week article that implied that the implants might have been rushed to market without proper medical testing. Top management was reassuring the general public of the relative safety of its product, but internal memos (created by those not aware of research taking place or past research that had been conducted) were being passed around that seemed to indicate an awareness of animal studies that linked the implants to cancer and other illnesses. In addition, investigative reports dating back 25 years were brought to light indicating that implants could break or leak into patient’s bodies. (Those reports had been a matter of public record, but now received attention with this new public scrutiny.) The company appeared as if it had been covering up the reports and hiding the true facts. At first, Dow Corning attacked investigators. This action was interpreted as a lack of concern for the public interest and prompted many to criticize the company as lacking any code of corporate ethics, concerned only with covering itself legally. The reality was that the company did have a code of ethics in place.7 Some of the initial communication actions that it implemented to allay public misconceptions were: • Developing a packet of information that physicians could share with their patients that was user friendly and explained the research conducted by Dow Corning and others about the implants. It outlined the possible risks associated with silicone breast implants. • Company physicians and scientists scheduling technical presentations at medical meetings to discuss the scientific implications of implants. • Making public all proprietary information available to competitors by publicly releasing all the scientific studies used to support its premarket approval application for the implant. • Meeting directly with breast cancer support groups and representatives of other consumer groups, both for and against breast implants. Company Is Dealt Painful Legal Blow Judgment in the Marianne Hopkins case was handed down in December 1991. She was awarded $7.3 million in compensatory and punitive damages, and Dow Corning was found to have committed fraud and malice by failing to disclose evidence from its research on the implants. With this damaging judgment, public scrutiny intensified, and many questions were brought up in the media about the implants and what other information Dow Corning may have withheld. The company was taking the hard line in dealing with this issue in the media. Dow Corning was finding it difficult to appear sympathetic to the women who did have problems without undermining its legal strategy and admitting fault. It appeared to be a classic case of legal versus public relations. And it was not helped by CEO Lawrence A. Reed, who unfortunately was not adept in media situations. This deficiency reduced his ability to take command of this crisis or to stay ahead of the critics. Reed’s invisibility as a spokesperson confirmed the prevalent perception in the court of public opinion that the company was not concerned with the welfare of those who had received the implants.8 7Lee W. Baker, The Credibility Factor, Homewood, IL: Business One Irwin, 1992, p. 35. An informative book that emphasizes the importance of ethics in the practice of public relations by examining the mistakes and successes of organizations in varying ethical situations. 8Kevin McCauley, “Dow Corning Fumbles PR in Breast Implant Crisis,” O’Dwyer’s PR Services Report 6 (March 1992), p. 1. The task of presenting the Dow Corning “voice” to the public was passed around to many people until it rested on the shoulders of the vice-president in charge of health care, Robert T. Rylee, and others on his staff. There was no One Clear Voice responding to the public. Reed’s failure as a leader in the public eye was compared in the news media to the fumbling responses and lack of reaction from Exxon CEO Lawrence Rawl in handling the Exxon Valdez oil spill in 1989. At Dow Corning, spokespeople were taking a reactive stance and focusing on the fact that there was little or no scientific evidence proving that the implants caused these health problems—ignoring the fact that women had gotten the implants for emotional and cosmetic reasons and would predictably respond on an emotional plane. To deal with the barrage of questions from the public, Dow Corning set up an “implant information hotline” in July 1991. By the end of the year, that, too, was receiving criticism from the FDA and high-profile news media coverage. Callers to the hotline were being reassured by the operators about the safety of the implants, and Dow Corning was accused of overselling their safety. The company then agreed to send only printed information to callers. However, the operators of the hotlines were ultimately retrained to offer only factual information in order to allay any public misconceptions. More than 50,000 women called the hotline to obtain information. The FDA Takes Action On January 6, 1992, as public scrutiny intensified, FDA Commissioner David Kessler proposed a voluntary moratorium on the sale and use of silicone implants pending further investigation. Most all silicone-gel implant manufacturers complied. Dow Corning complied with the request, still claiming that the implants did not have a damaging effect on the body. However, public and media scrutiny did not abate; instead, it intensified. The Wall Street Journal and The New York Times ran articles giving Dow Corning failing marks for its handling of the crisis. The rising tide of lawsuits was threatening the corporation and further diminishing its already waning credibility. The New York Times stated that Dow Corning failed in the court of public opinion because it was ignoring how consumers respond to health threats: 1. Even a small number of people who feel they have been mistreated by a company or received a poor product can rally enough friends and allies to have a great negative impact on the company involved. 2. The number of defective or dangerous products often turns out to be higher than the company that manufactures them originally projects. With the publicity that the implants were receiving, many more complaints, both valid and invalid, were bound to surface. 3. Consumers who feel they have been deceived often become extremely upset. The information that leaked out over the years of litigation about the implants suggested that Dow Corning was trying to cover up information that may be damaging to its product without concern for the consumer.9 Media Coverage Intensifies Problem As the issue unfolded, Dow Corning began to track the media coverage of the controversy. While the news media were widely reporting on the situation as it developed, most of the coverage was incomplete and unbalanced. Women were clamoring for information because of the intense media scrutiny. To respond to the need for information, Dow Corning reached out to those concerned by taking the following communications actions: 9Barnaby J. Feder, “Dow Coming’s Failure in Public Opinion Test,” The New York Times, lanuary 29,1992, pp. D1-D2. • Became more responsive to the news media by distributing an 800-page book compiling memos, scientific studies, and related issues. • Gave a grant to the American Society for Plastic and Reconstructive Surgical Nurses to distribute educational materials to patients. • Proposed a national communications registry, a collaborative effort between the FDA, consumers, health professionals, and current and former breast-implant manufacturers to provide periodic newsletters to breast-implant recipients.10 Dow Corning Responds On February 10, 1992, Dow Corning began to take steps to repair its battered reputation. Lawrence Reed was replaced by Keith McKennon, a former Dow Chemical executive well known for his conciliatory abilities. McKennon had helped Dow steer itself out of potentially damaging public relations situations that involved the Agent Orange defoliant used in Vietnam. McKennon’s attitude was much more take-charge and less defensive, and from the start of his appointment he was the company voice on the issue. In the spirit of this new openness, McKennon gave almost 100 interviews on the controversy. In keeping with this new attitude, Dow Corning announced in March 1992 its plans to get out of the breast-implant-manufacturing business. In addition, it promised to spend $10 million on research into the safety of the implants and would contribute up to $1,200 per patient (depending on financial need) to remove the silicone-gel implants. While Dow Corning still maintained that the implants were safe, it was finally taking conciliatory actions that recognized the need for further research to satisfy the concerns of the FDA and those women possibly at risk. Dow Corning succeeded in removing some of the damaging attention from the information that had suddenly been brought into public view. Now the company focused on the positive actions it would take to make restitution to those women who felt they had been wronged. Rebuilding Its Credibility Dow Corning has succeeded in making small gains to win back public opinion. It is funding 30 laboratory and clinical safety tests and epidemiological studies on a global basis to establish the risks of the implants in the human body. Some women have been allowed to have the silicone implants if they agree to become part of a long-term study on the implants’ effects. Also, the International Breast Implant Registry was founded in 2002 under the auspices of the International Plastic, Reconstructive and Aesthetic Surgery Foundation to help monitor the women’s health. In September 1993, the company announced that a global settlement had been proposed, a $4.75 billion fund for breast-implant recipients, funded by the manufacturers, suppliers, doctors, and insurance companies involved in the implant industry. It would give women the opportunity to recover money for their injuries over the course of 30 years. Dow Corning would contribute up to $2 billion to the fund over that time period. The fund would pay for checkups for women with implants, removal of the devices, and treatment of varied illnesses. Other terms of the agreement were: 10Ralph C. Cook, Myron C. Harrison, and Robert R. LeVier, “The Breast Implant Controversy,” Arthritis and Rheumatism 37, February 1994, pp.1–14. A thoughtful article examining the medical issues and communication problems of the breast implant controversy, written by three Dow Corning scientists (available from the company, Midland, Michigan). • Recipients of any brand of breast implant would be included. • Claimants would not be required to prove that their breast implants caused their injuries. • Those who claimed the breast implants had caused damage to their health would be able to exclude themselves from the general settlement and then sue individually. • A recipient of breast implants who had sued a financially unstable company would be able to submit a claim to the fund.11 Continued Controversy In the wake of this financial settlement, the effects of silicone implants continue to be greatly disputed. The FDA has engaged in heated debates with the American Medical Association (AMA) about the level of risk posed by silicone breast implants. To date, the AMA has supported allowing all women the right to have breast implants once they have been informed of the risks. Former FDA Commissioner Kessler disagreed because he felt physicians were not being responsible about informing women of risks, in spite of the fact that the FDA panel that looked at the breast implant studies recommended the implants be kept on the market. He faulted physicians for using implants for 30 years without adequately discussing the risks with patients.12 In November 2006, the FDA removed its 14-year ban on silicone breast implants. Dow Corning is no longer in that business, but two companies—Mentor and Allergan—are expected to enter the market. The hometown paper of Dow Corning, the Midland Daily News, wrote the following on the day the announcement was made. Our View: Who’s Sorry Now? Something was missing in Friday’s announcement by the Food and Drug Administration that it was lifting a 14-year ban on silicone-gel breast implants: an apology to Midland’s Dow Corning Corp. That’s the least the agency could do, since it was the FDA’s ban on the implants in 1992 that sparked an onslaught of lawsuits—19,000 of them—and forced Dow Corning into Chapter 11 bankruptcy to keep the company afloat. Billions of dollars later, Dow Corning emerged from bankruptcy. Perhaps along with an apology, the FDA should have offered some help in paying those billions the company had to shell out to settle its legal claims. Isn’t that the least the FDA could do, since it played such a huge role in casting doubt about the silicone-gel implants the agency now is saying are safe? Dow Corning officials, in their response to the FDA announcement, took the high road, simply pointing out that this case shows “the critical need for science literacy and its importance in making informed decisions, as individuals, as government agencies, and as a society.” We’ll take it one step further. This case shows the problems that occur when a government agency becomes a pawn for a class-action-eager civil lawsuit system willing to take down an innocent company for the sake of the almighty buck. The FDA’s announcement Friday was welcome, but it was more than a decade overdue. Source: “FDA,” Midland Daily News, Midland, MI, November 21, 2006. 11“Dow Corning Nears Implant Settlement,” Associated Press story, as it appeared in Bangor Daily News, September 10, 1993. 12Christopher Connell, “Doctors Protest Curb on Breast Implants,” Associated Press story as it appeared in Bangor Daily News, December 1, 1993. One irony is that, as the multibillion-dollar settlement was established by the other implant manufacturers, and Dow Corning filed for Chapter 11 to avoid the onslaught of more than 19,000 lawsuits, new evidence has emerged that shows no causal link between the implants and the autoimmune diseases allegedly caused by them. Since no link was found between the implants and the diseases they have been accused of causing, should Dow Corning still have to pay close to $5 billion to emerge from Chapter 11? Should women still be allowed to file lawsuits against Dow Corning? What would be the ethical thing for Dow Corning to do in the future? These questions pose some interesting public relations problems. Questions for Discussion 1. Dow Corning fumbled this crisis because it found it difficult to initially show concern for the recipients of breast implants while still maintaining a legal stance that endorsed the safety of the product. What could the company have done differently to keep this issue from rising to the epic proportions it did in the public arena? Could the entire issue have been avoided through appropriate communications? 2. Can a company act unethically and maintain credibility? Why or why not? Can you think of examples one way or the other? Is it unethical to withdraw a product from the public when there is no proof of a problem, thus denying the public access to the product? 3. Several companies manufacture implants. It is surgeons who suggest them to women and perform the operations. Yet only Dow Corning drew unfavorable public reaction. Why? 4. Whose responsibility is it to inform women who are interested in having breast implants of the risks of the procedure? Why do you believe this? 5. What are the ethical implications now that scientific study has shown that the implants have not caused negative health effects? What are the implications for Dow Corning? 6. Does the ultimate vindication of Dow Corning and silicone implants change your perspective on this case? PROBLEM 10-A WHETHER TO BLOW THE WHISTLE You are nearing the end of your second year of employment as editor of the main publication for employees in one of the three largest nonprofit hospitals in the county. You have a good deal. Your boss, the director of public relations, a woman of about 35, listens to your ideas about the publication. You have converted it from a tabloid appearing once a month to a weekly newsletter with online headline updates as needed for need-to-know information. An audit shows that readers, including staff doctors and donors as well as employees, find the newsletter combined with the online information to be more dynamic than the earlier publication. They like it. The only intervention you have had from your boss was near the end of your first year. At that time, she told you to follow the hospital’s policy of getting three competitive printing bids annually and then to award the contract for the next year to one of the three. You noted that the current supplier’s bid was not the lowest. Your boss explained that she preferred the quality of the selected supplier and added that the printing firm had made generous financial contributions to the hospital. At that time, you followed the directions of your boss. The future looks bright to you. And why not? You are aware that your boss has her eyes on the next job up, as director of development, a position now occupied by a woman scheduled to retire in a few years. You can see yourself succeeding your boss at that time. Looking back, you consider your first two years to have been a period of learning the ropes and how the game goes in the hospital. During this period, the owner of the printing firm doing the newsletter has established a social relationship with you and your spouse, including taking you to dinner at their country club. You have also noticed that the printer has a close personal relationship with your boss and the hospital’s director of development. You know that they receive free tickets to entertainments and other gifts. When the director of development decided to buy a new car, the printer sent her to a dealer who gave her a fantastic discount. As for the public relations director, your boss, she was sponsored for membership in the printer’s “Executives Only” tennis club. Here you are, finishing up your second year. A few days ago, quite by coincidence, you overheard some disconcerting comments during a cocktail party. The comments indicated that your boss’s husband is the brother of the printer’s wife—this you didn’t know. Also, your boss apparently has had some sort of financial interest in the printing firm. Your director of development’s daughter, you heard, has worked at the printing firm as a typist-receptionist. Someone at the party said that she earned more than other clerical employees there, including those with greater skills and experience. Naturally, this information is upsetting to you, and, to make matters worse, this is the week the three competitive printing bids for next year’s contract have come in. You have looked at them. The present printer, whom you have again been told to favor, has submitted a bid 20 percent higher than the lowest of the three. You have every right to be upset and in a quandary. If you grant the business for the coming year, amounting to $60,000, to the highest bidder, and someone in the treasurer’s office questions it, you could be in big trouble. If you tell the present printer he has to submit a second bid at a figure 50 percent lower, you will be unethical in conduct and in contravention of the hospital’s stated policy. Beyond that, what if one of the other bidders found out and turned in a complaint to the consumer advocate in the state’s attorney general’s office? If you take the matter to your boss, you may have to confront her with what you have heard about an apparent conflict of interest on her part. Of course, an alternative would be to go over the boss’s head to the director of development. She, too, has accepted favors from the printer on a social basis. Maybe she would just as soon not get involved. On the other hand, perhaps she has been involved in helping the printer get work from other departments in the hospital. If so, where would that leave you? Then there is the hospital administrator. If you bypass both of your superiors in the structure, you will almost surely wind up with an unhappy working situation—or be out looking for a new position. Finally, if you do nothing, are you committed to a standard of honesty or business ethics that you cannot live with? Everything considered, what are you going to do—specifically, in what sequence, with what goals, and what personal strategy and tactics? PROBLEM 10-B WRITE THE TRUTH OR “MAKE US LOOK GOOD”? You’ve just been hired by a prestigious philanthropic organization that donates a lot of money to help the poor and the undereducated. You are joining a well-oiled public relations department where you report to the vice-president. You are excited by the chance to “serve,” to do something “meaningful” with your expertise. At the first all-departments meeting, you notice some derogatory comments being made about the people the organization serves. You overlook them and think that people are just being people. But then, as discussion comes up about where to focus the organization’s money, you notice the direction isn’t where the money is most needed but where the organization can get the most “bang for the buck” in terms of building its image. You’re beginning to have a dilemma. The organization does good deeds by giving out its money and helping others. But, inside, the culture stinks in the way it talks about its clients and how it aims to use its money. No one else there seems to share your view—or at least no one acknowledges that they do. Now your boss is asking you to write the news release announcing the organization’s newest funding project and wants you to “make us look good. The folks getting the money won’t mind if you make some of it up.” You want to just write the truth and let that speak for itself, but you’re afraid your boss might question your ability. You don’t want to get fired. What will you do?