What’s the cost to corporations for bad choices ? The question comes back to mind for a couple of reasons. One is the much publicized decision that a 168 year old newspaper will close because of bad choices made during the watch of Rupert Murdoch, a media baron with both financial and political agendas. The ethics issues for his newspaper were long-simmering, and the company reportedly paid to settle some civil claims back in 2009. The issues remained in the public eye, and then recently exploded. Now the affair threatens to materially hurt the political chances of Britain’s current leadership because some of the acts occurred during the private career of a current government spokesperson, as described here in the NYT. In short, the claims are that the individual paid off Scotland Yard police officers for information, and allowed phone hacking to develop stories.
Another reminder arrived in May in the form of a $322 million verdict in asbestos litigation involving use of drilling mud – an asbestos-containing product using in oil drilling. The verdict included punitive damages of $300 million. The $ 300 million amount likely will be reduced on appeal under current law on punitive damages, as is briefly described here, and the verdict may be suspect for other reasons. But, regardless of what happens on appeal in a couple of years, the "ask" to settle those cases is now some multiple of the prior price. The defendants now face tough choices as to how they respond.
Plainly the cost varies for bad choices. it’s also plain that the cost of bad choices can be multiplied exponentially by public opinion and attention. The exponential loss (or gain) can emerge when public opinion crosses a "tipping point," to borrow the phrase and analysis made famous by author and observer Malcom Gladwell. How companies respond to crisis is crucial, as illustrated by Richard Levick’s latest book, The Communicators: Leadership in the Age of Crisis. Both books are well worth reading – and rereading – for anyone involved in "mass tort" litigation.