THE CASE FOR AND AGAINST FULL DISCLOSURE The Case for Full Disclosure

The research literature on crisis communication is replete with advice to practitioners that encourages them to be as candid as possible during an or-ganizational crisis. Coombs (1999), for example, urged crisis managers to be proactive, to get all the bad news out as quickly as possible, to be sensitive to public concerns, and to offer sympathetic messages to those who may be af-fected by the crisis. Similarly, Pines (1985) endorsed a proactive communi-cative strategy; for example, he counseled would-be crisis managers to

“retain control of the story” (p. 18)—something that can only be done by taking a public relations approach in which a company has a proactive mes-sage strategy that speaks directly to consumer and community concerns about the apologetic crisis.

There are a number of justifications for making the case that an organi-zation should practice full disclosure during a crisis and ensure that

infor-mation is issued as completely, accurately, and quickly as possible. Full disclosure does not mean telling every last detail; rather, it means that an organization’s communication should be characterized as open, forthcom-ing, and constructively revealing information, which may include offering an apology.

Certainly, it goes without saying that if an organization is facing a crisis not of its own making and is instead the victim of an external agent, a policy of full disclosure is a wise course of action. As discussed in chapter 1, such was the situation the makers of Tylenol found themselves in after a con-sumer terrorist laced Tylenol capsules with cyanide in 1982, causing seven deaths in the greater Chicago area (Fearn-Banks, 1996). Johnson & John-son, the parent company of McNeil Consumer Products Corporation (which was the maker of Tylenol), took a proactive stance to the crisis, and went out of its way to practice full disclosure, even to the point of providing reporters from 60 Minutes and Nightline with broad access to company officials and facilities.

Another such rationale is that an organization must be careful to fully dis-close information because, if it fails to, it risks alienating key stakeholder groups (Kauffman et al., 1994). Organizations have key constituents, such as employees and suppliers who support them throughout their existence.

Yet, these groups pale when measured against the influence of consumers who are angry with an organization during a crisis. Indeed, the potential costs of liability may be small when measured against the costs that irate consumers can level against an organization. The annals of corporate his-tory are replete with examples of organizations whose behavior was dramati-cally affected by the purchasing decisions or shunning of consumers. Exxon franchisees found themselves on the receiving end of such anger after the Exxon Valdez ran aground in Prince William Sound (Hearit, 1995a). Angry consumers cut up their Exxon gasoline charge cards and sent them back to the company en masse. Said another way, the marketplace is crowded and if customers are given reason to go elsewhere, they will; consequently, organi-zations caught in a crisis must demonstrate good faith with these groups by fully disclosing the details of their actions, even if less than flattering, and of-fer an apology. Such a stance, of course, privileges the long-term effects of corporate actions more than it does the more immediate legal concerns.

Another rationale for full disclosure is evidenced by the commonly ac-cepted belief that once an organizational crisis occurs, due to investigative journalists as well as political and judicial pressure, all of “the facts” will be revealed anyway, so an organization should seek to build goodwill and main-tain control of the crisis story (as much as is possible) by being the first to re-lease the information. Again, history provides examples of personal and private details that come out after intense mediated, political, and/or legal scrutiny: Captain Joseph Hazelwood’s arrest for drunken driving, President

Clinton’s willingness to engage in immoral behavior while on the telephone with a fellow head of state, or the release of a private company memo dem-onstrating that Dow Corning had concerns about the safety of silicone breast implants (Hilts, 1992).

The research literature for full disclosure also asserts that by coming clean and apologizing, corporate officers risk less damage to their company’s image. Bradford and Garrett (1995), in their discussion of message strategies employed by organizations during a crisis, found that the preferred message strategy desired by consumers is one of apology. In fact, they asserted that at-tempts to minimize, justify, or otherwise explain organizational actions with-out offering an accommodative apology tends to score worse in people’s perceptions than does even a strategy of silence. In other words, consumers expect conciliatory statements after wrongdoing; anything less and they draw negative conclusions about an organization and its ethics. Hence, it is wise for an organization, in terms of its organizational image, to practice full disclosure coupled with an apology.

Concern for consumers is not the only justification for full disclosure. To fully disclose the facts and apologize is to preserve the relationship with the victims of the wrongdoing. To apologize is to remove the insult from the in-jury (Cohen, 1999). There are many examples of clients who win huge in-jury awards, and, on hearing the award, have remarked, “All I really wanted was an apology, and only when they would not apologize did I decide to sue.” By apologizing, an individual or an organization is able to remove some of the hurt. Conversely, to not apologize is seen as a denial of respect to the victims;

this adds more hurt to an already difficult situation. A subsequent virtue of full disclosure followed by an apology, then, is that it functions to prevent more litigation (Cohen, 1999). By apologizing, an individual or an organiza-tion is able to turn a foe into a friend, or, at a minimum, reduce the hostility that a legal antagonist might feel.

This conciliatory or apologetic response is likely to create the conditions by which it is possible to reach a settlement (Cohen, 1999). If a company with significant resources has indeed committed a grievous harm in which there are clearly identifiable victims, then it is a nonsequitur to assume that an organization is likely to escape such a situation without having to face any significant financial expenditures. Consequently, to apologize often suc-ceeds in restoring the relationship such that negotiations can begin quickly in order to reach a private settlement and, thus, avoid costly litigation alto-gether. Goldberg, Green, and Sander (1987) described it this way: “[A]n apology alone is insufficient to resolve a dispute, but will so reduce tension and ease the relationship between the parties that the issues separating them are resolved with dispatch” (p. 221). An apology, then, functions to re-move much of the poisonous tone and attitude that might otherwise surround such negotiations.

If an organization takes a conciliatory approach and fully discloses the facts, its victims may choose not to pursue legal remedies. Cohen (1999) as-serts: “Taking the step to make a legal claim is often triggered by the injured party’s anger. An early apology can help defuse that anger and thereby pre-vent a legal dispute” (p. 1022). Said another way, although apologizing may be an invitation on the part of some to bring a lawsuit, so too may not apolo-gizing. Smart executives consider the calculus of the context of their wrong-doing, the needs and desires of the victims, the potential costs, and the degree to which an apology would potentially reduce the likelihood of legal action, and then make a calculated judgment that errs on the side of a conciliatory approach (Cohen, 1999).

There are other conditions that support full disclosure. Due to the pres-ence of liability insurance, for instance, some organizations can afford to re-spond (Kauffman et al., 1994). After the Exxon Valdez oil spill, for instance, it eventually came out that Exxon had a $4 billion insurance policy—which roughly equaled the amount of claims and damages it faced. With such a fact in mind, the company should have done more to take a more conciliatory approach to managing its communication after the spill. The converse is true as well. Can an organization afford not to respond? That is, does it threaten the organization’s very survival to not respond? The case of Arthur Andersen and its auditing work for Enron is instructive here, in that the company, out of liability concerns, chose to avoid a conciliatory response and negotiate a settlement with prosecutors; instead, the company ended up going to court and lost, and was eventually forced to forfeit its right to audit public companies after a guilty verdict.

Finally, as noted earlier, the costs of liability that organizations face are two types of judgments: compensatory and punitive (Davidson et al., 1998). The examples cited earlier of high jury awards were cases of high punitive damages in which juries sought to “teach a company a lesson” or wanted to “cause them pain just like they caused pain to the victims” due to a perceived lack of trition and repentance. By issuing an apology, a company is seen as more con-ciliatory and less callous. Hence, even if a case does make it to trial, the apology, although it may not have brought about a settlement, is likely to per-form in a positive way by reducing the likelihood of a high legal judgment against a company because it is seen to be apologetic (Cohen, 1999).

The Case Against Full Disclosure/Apology

Although the arguments for full disclosure are compelling, the arguments against full disclosure are equally persuasive. Whereas there are many rea-sons not to disclose information during a crisis, there is one that really is pri-mary and central to the position: Litigation brings with it huge costs to an

organization, costs that are in addition to the potentially huge financial considerations (Kauffman et al., 1994).

Implicit to all of the concerns with full disclosure is the issue of liability. To apologize and admit guilt is to assume responsibility and culpability. To do so in a context in which the apology is spoken to the victim puts the apologist in a situation in which he or she has all but admitted responsibility and now faces legal liability. Legally speaking, an apology alone can be used as evidence of guilt. Cohen noted that the federal rules of evidence normally exclude “hear-say” as evidence of guilt; the one exception is in the case of apologies for which

“an apology alone can be used as evidence against the defendant” (Cohen, 1999, p. 1029). A statement in which an individual or organization acknowl-edges guilt for an act and apologizes for it is indeed legally admissible.

There are other costs that come with litigation. One such cost is a chief ex-ecutive’s time. Time spent to prepare a response to a lawsuit is time that can-not be spent strategically responding to the varied needs of the marketplace.

Second, the presence of lawsuits often is accompanied by another form of at-tention, that from state and federal authorities investigating the allegations of wrongdoing. A third cost of litigation is the actual cost of preparing and re-sponding to allegations; attorneys’ fees at firms with top reputations run to hundreds of dollars an hour. Such fees add up quickly when a company hires entire teams of lawyers. A fourth reason for not fully disclosing all the facts of a case is that the more information that is disclosed, the more likely an organiza-tion is to be quesorganiza-tioned about it during “discovery.” In other words, disclosure of information about organizational wrongdoing is a direct invitation for fur-ther plaintiff inquiries on a particular or related problem.

The question of liability is undergirded by a compelling justification for not fully disclosing all that is known about a crisis: The fact of the matter is that before the law, a company’s legal responsibility is to its shareholders and not to the general public. Disclosing information that is damaging to share-holder interests is, in a sense, a violation of that legal responsibility (Epstein, 1972). Currently, there is no law or regulation that requires organizations to take into account the needs of other constituent groups. The law protects the rights of capital, not communities in which capital operates.

There are other persuasive reasons not to practice full disclosure. One such point is that there is no way to know when corporations have been successful by withholding information (Kauffman et al., 1994). Unques-tionably, given the large number of corporations and the multiplicity of acts they are capable of, it is not inconceivable that there are organizations who did not practice full disclosure and “got away with it.” Like a good con-spiracy theory, the lack of evidence is, in effect, support for the position (Hofstader, 1964).

Although such may be the case, there are other rationalizations for the position. One is that what a company discloses may end up shocking,

appall-ing, or angering key constituents (Kauffman et al., 1994). As noted in chap-ter 2, Ford Motor Company performed a cost/benefit analysis in which management compared the costs of providing a technological fix to the problem of the propensity of the Ford Pinto to explode in rear impact colli-sions to the costs of payments to victims and their families in the event of harm or death, and that Ford chose to offer payouts over a fix. The revela-tions of such a calculus caused considerable damage to Ford’s image for years (Kauffman et al., 1994). This choice brought about outrage among Ford owners and the general public. Similarly, in the 1930s through the 1960s the federal government conducted a series of experiments designed to test the long-term effects of syphilis on victims. The revelation that the government participated in a study that chose not to treat African-American men caused outrage among the African-American community, and in future years, cre-ated the basis for the belief among some African-Americans that the gov-ernment created crack cocaine in order to imprison or kill large numbers of African-American men (Harter, Stephens, & Japp, 2000).

An additional and correlated reason for not fully disclosing information is that of context. In an antitrust case, for example, a low-level staffer’s memo that speaks in hyperbole about dominating and controlling the market might be taken as representative of a company’s position as a whole. Or a mi-nority, although eventually correct position about a problem with a certain product can become “proof” that a company knew about the problem years before it was willing to deal with it.

Moreover, to come clean and apologize might be considered weakness on the part of some, and provide strategic opportunity for one’s opponents.

Such was the case with Senator Trent Lott. His serial apology for his remarks at Strom Thurmond’s 100th birthday party (that the country would have been better off if Thurmond had been elected), coupled with his poor record on civil rights issues, created a context in which he was weakened politically to the point where he eventually ended up losing his position as Senate Ma-jority Leader (Applebome, 2002). As well, Cohen (1999) referenced the case of the Liggett Tobacco Company, which revealed its past wrongdoings;

the result was that it laid itself open to the fury of rival tobacco companies.

The firm, which has a considerably smaller market share than its competi-tors, broke ranks in 1997 and admitted that smoking causes cancer. Because of this admission, other tobacco firms have attempted to isolate the company both legally and economically.

Finally, to open up and apologize may put an individual or organization in a position whereby it voids its insurance coverage. Most insurance company poli-cies are written in such a way that the apologist is faced with a “general duty of cooperation with the insurance company in the defense of a claim” (Cohen, 1999, p. 1025). Some even go so far as to prevent the apologist from taking on li-ability without the consent of the insurance company. Although the cases in

which an insurance company is likely to void a policy are limited, this is none-theless a legal concern for individuals and organizations to consider.