Actions Dont Speak for Themselves

ASIANAS CRISIS RESPONSE:

EDITION 3

MonthlyAUGUST, 2013

03 Contents04060708101216

COVER STORY

CORPORATE & REPUTATION

CRISIS

DIgITAl & ENgAgEMENT

lITIgATION

PUBlIC AFFAIRS

VIDEO

Asianas Crisis Response: Actions Dont Speak For Themselves

Studies Show Companies Arent Ready To Respond To Their Next Data Breach

Paula Deen: Sorry Works But Only If You Say It

Jeff Bezos and The Washington Post: This Changes Everything

The OBannon Case: A Golden Opportunity For College Sports Programs

Generic Drug Makers Will Soon Face The Regulatory Music

Gene Grabowski On New Food Import Inspection Rules

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sianas public response to Saturdays crash in San Francisco is raising more than a few eyebrows.

Immediately after the crash, the carrier seemed to be making all the right moves. It apologized quickly and sincerely and even went as far as to state that the cause was not mechanical a rare demonstration of responsibility that drew praise from observers and pundits.

But since then, the companys statements have been few, far between, and largely relegated to Korean media outlets. The company hasnt made spokespersons available to U.S. reporters, despite the fact that the American public remains glued to the story. And even though rapid response is Rule One in the airline crisis playbook, it took three days for the carriers CEO to arrive on the scene.

Asianas decision to forego crisis communications counseling has also been noted. In response, Asiana says that now is not the time to focus on the airlines image. In response to that, I would argue that now is the only time to assert control over the disaster narrative before it spins beyond the airlines control. In this era of instant and lasting impressions, Asianas strategy is allowing others to drive and influence the conversation. Thats the last thing a company in crisis can allow.

One has to assume that Asiana is working hard behind the scenes to get to the bottom of what happened and implement measures that will help ensure a similar episode never again plays out. But the benefit of the doubt is not enough to satisfy wary air travelers focused on safety above all else. For evidence of that, just look at how the National Transportation Safety Board (NTSB) is communicating with its stakeholders.

We dont have to assume that the NTSB is on the job. We know it is. Three days ago, very few people in America could have picked NTSB Chairwoman Deborah Hersman out of lineup. Today, everyone knows her name. Thats because shes been a fixture on cable

and network news broadcasts, social and digital media, and in print.

The NTSB certainly has its hands full in these first days of its investigation, but it understands that a key part of its job is reassuring the American public that its doing all it can to prevent accidents like this in the future. As such, it ensures that regular media engagements inform us about new findings as they develop and comfort anxious air travelers in the process.

The NTSB understands that actions dont speak always speak for themselves. In crisis, someone needs to speak for them. While Asiana is limited in what it can communicate under NTSB rules, there are always messages of concern and action that can be deployed to help protect an airlines reputation as a responsible steward of passenger safety.

Right now, those messages are nowhere to be found. As a result, its Asiana that is coming off as the problem; and the NTSB that is coming off as the problem solver.

Ernest DelBuono is a Senior Vice President at LEVICK and Chair of the firms Crisis Practice. He is also a contributing author to LEVICK Daily.

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Asianas Crisis Response: Actions Dont Speak for Themselves

Ernest DelBuonoOriginally Published on LEVICK Daily

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The survey of 194 IT executives and professionals at companies whose gross annual revenues range from $100 million to $20 billion a year shows that more than two thirds of respondents have increased their focus on cyber security issues in response to the flood of media coverage generated by instances of data loss and theft. But at the same time, more than a third of those surveyed still report that they arent aware of any response plan their organization has developed or practiced.

given the rash of breaches weve seen in 2013 alone at companies, hospitals, government institutions colleges and universities, and even Twitter thats an astonishingly high figure. Today, data breaches are practically inevitable; and when organizations arent prepared ahead of time to assuage stakeholder anxiety, they pay a hefty price in terms of brand credibility and trust.

Outreach plans need to be in place so that affected parties can take immediate measures to protect themselves in the wake of a breach. The IT, legal, and communications teams need to work

together beforehand to ensure that accurate information about a potential breach can be shared with law enforcement and the general public without adding to the legal and brand liabilities at play. Organizations need to know the journalists and bloggers who cover data security issues in their industries and develop relationships with those influential voices before they are needed. Perhaps most important, all of the above exercises need to be updated regularly as notification laws, consumer expectations, and media scrutiny continue to evolve.

At a time when every organization is a potential target, more than a third of them arent ready to navigate the minefield that is data loss communications. At a time when preparedness is as important as prevention, that means theres a 33 percent chance that the next company to land in the spotlight will be caught with its pants down.

Jason Maloni is a Senior Vice President at LEVICK, Chair of the firms Litigation Practice, and Leader of the firms Data Security Team. He is also a contributing author to LEVICK Daily.

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DATA BREACHStudy Shows Companies Arent

Ready To Respond To Their Next

According to Protvitis 2013 IT Security and Privacy Survey, large and small companies are taking notice of the reputational hazards that accompany high-profile data breaches; but still arent doing enough to ensure an adequate public response should one occur.

Jason MaloniOriginally Published on LEVICK Daily

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gene grabowskiON NEw FOOD IMpORT INSpECTION RUlES

click on the image above to view the video.

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9here are those who will never forgive Paula Deen for her former trespasses. As her books continue to fly off the shelves, its apparent that there are

also those who will stick with her despite the revelation of disgusting, racist comments made years ago. When those statements first came to light last week, the rest of her audience was still up for grabs. But with each passing day of stubborn denial, that population shrinks dramatically. As broadcasters, retailers, and sponsors flee, it seems Ms. Deen never learned a key tenet of crisis communications today: Sorry works, but you actually have to say it.

While it was an ill-advised point to make on the Today Show last week, Ms. Deen did strike a chord when she said that anyone in the audience who had never said anything theyve regretted should pick up a rock and throw it at her head. After all, who among us has never uttered something stupid or hurtful? Ms. Deen was under oath and asked if she had ever used the N Word. She could have perjured herself (never a smart strategy), but instead was honest about mistakes she seems to regret. The problem is that she thinks she deserves points for that. But candidness is not repentance; and honesty is not an apology.

Now, unless I was reading Huckleberry Finn, or some similar reference, I have never used the N Word. Since childhood, I have been sensitive to the fact that diversity is one of our universes great gifts. But that said, I think many people like me could have found it in their hearts to forgive Paula Deen if she had only asked our forgiveness. I truly feel sorry for her, but I cant say Im impressed by her bumbling this past week (full disclosure, as a serious cook of healthy foods, I never would have bought her cook books, but I might have found her a better human being). Just look at the PgAs Sergio garcia. His racially insensitive comments directed toward Tiger Woods are already fading in the rear-view mirror. Why? Because he said he was sorry for a stupid mistake that he vows never to repeat again.

How difficult would it have been for Paula Deen

to face the same cameras she cooks in front of every day and simply say Im sorry; I hope you will forgive me sooner than I can forgive myself? How difficult would it have been to make an act of contrition that buttressed her apology with action? Instead, Ms. Deen forces upon us the there but for the grace of god go I narrative, rather than let us come to that conclusion naturally. Instead, she shows the most emotion when denying that she is a racist and making public calls for sponsors not to drop her and demonstrates that she cares more about her image and income than those who were offended by her comments. Instead, she has seemingly opted for a prolonged, tortured process that may never lead to true redemption.

All of this makes it easy for Smithfield Foods, Target, Wal-Mart, and others to cut ties with her brand, which some industry insiders already saw as a declining asset. It gives the Food Network an easy excuse to not renew her show, which has long been declining in the ratings. It even forces the hand of book publishers such as Random House, who are dropping what some call a guaranteed bestseller because Ms. Deen is simply too toxic.

If it were only TV and retailers that were running for cover, one could argue that this episode is being leveraged to paint cold business decisions as the right thing to do. But when publishers ignore Ms. Deens staggering numbers on Amazon.com, its clear her reputational nightmare hasnt been adequately addressed.

In the pantheon of celebrity sins we have pardoned in the past, Paula Deens is not the worst weve encountered. But before the public can embrace that fact, she has to say Im sorry and show she means it. Anything less and she can kiss all but her most die-hard fans goodbye.

Follow Richard Levick on Twitter and circle him on Google+, where he comments daily on the issues impacting corporate brands.

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pAUlA DEEN:Sorry Works, But Only If You Say It

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Jeff Bezos & The Washington Post:

THIS CHANGESEVERYTHING

Richard levickOriginally Published on LEVICK Daily

According to Protvitis 2013 IT Security and Privacy Survey, large and small companies are taking notice of the reputational hazards that accompany high-profile data breaches; but still arent doing enough to ensure an adequate public response should one occur.

The survey of 194 IT executives and professionals at companies whose gross annual revenues range from $100 million to $20 billion a year shows that more than two thirds of respondents have increased their focus on Jeff Bezos private purchase of The Washington Post might very well come to mark the moment when newspapers returned to relevance.

There are those that see the move as a means to compete with Marc Zuckerberg, the Koch brothers, the Allbrittons, the Murdochs and others whose investments in media have enabled them to participate in and to some degree, shape the news. Others may see Bezos as simply adding another interesting investment to a portfolio already teaming with quirky projects.

But this is about more than a Bully Pulpit, and Bezos has more interest here than merely doing something interesting. The cross-pollination of a once-great paper and a digital giant like Amazon has potential too great to go unexplored. Put as succinctly as possible, it can digitize, personalize, globalize, and revitalize a paper that was not

just in decline; but that was scooped on its own sale by Politico, the Wall Street Journal, NPR, and the Washington Business Journal, among others, because it remains an Internet-generation behind a sea of new competitors.

login to Amazon.com and youre unlikely to see a single advertisement or link that isnt at least tangentially related to your lifestyle and interests. That individualized customer experience is a major element in Amazons success. Bring the same thinking to The Post and the natural result is a revolutionary online presence that features a different newspaper for every reader, uniquely tailored to each individual profile. Post readers may not even have to opt-in for such levels of customization; Amazons data management techniques will tell the paper which articles and, equally important, which advertisements they are most likely to engage. This wont just revolutionize news; it will change advertising as we knew it, just when we thought we were getting comfortable with the existing revolution.

And when it comes to advertising revenues, innovative customization is likely only the tip of the iceberg. With direct links to Amazons industry-leading e-commerce platform, The Posts book or product reviews and even articles that simply mention particular products or services could be transformed into myriad

points of sale. That would be a significant point of differentiation for marketers, and one that could generate the revenues needed to rebuild The Posts reputation for first-class reporting.

Combine that with the cutting-edge digital customization outlined above and the paper could once again become the worlds portal into one of its most powerful cities reversing a 30-year trend that has seen The Posts audience shrink to predominantly those inside or around the Beltway. It can do for politics and geopolitical power what the Financial Times, the Wall Street Journal, and the New York Times have done for business and finance. New innovations may even be a springboard to bigger budgets for investigative reporting; the ability to more comprehensively cover niche government beats; a renewed focus on foreign affairs; and the restoration of other standards that made The Post a global authority in the Watergate era.

Mr. Bezos likely recognizes that Katharine Weymouth was dealt a tough hand when she took the helm, but her tenure began with pay for play salons and was highlighted by a valentine in the New York Times the day before the sale was announced; a valentine that all but said save my job. Declining relevance, layoffs, and a digital vision that was lacking even by newspaper standards may not be a fair measure of her effectiveness in this toughest of eras for print journalism and she may still play a leading role at the paper. But as The Post sets itself to the task of creating the new, new media, its Jeff Bezos vision that will surely lead the way.

With no investors to answer to, proven digital strategies, innovative advertising platforms, and The Posts still stellar reputation for credibility in tow, he is just the leader needed to turn the paper around. Before all is said and done, he just might create the template that saves the Fourth Estate.

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A golden Opportunity For College Sports Programs

THE OBANNON CASE:

Richard levickOriginally Published on forbes.com

Its widely predicted that, if the plaintiffs prevail in the so-called OBannon case, it will radically transform the culture of college athletic programs and may even spell the end of amateur sports as we know it. As one blogger put it, it will blow the current model of revenue-sharing in major college athletics to kingdom come.The case in question dates back to 2009 when former college athletes spearhead by UClA basketball star Ed OBannon and Arizona State University quarterback Samuel Keller filed class actions against the NCAA, video game manufacturer Electronic Arts (EA), and Collegiate licensing Company, the leading collegiate trademark licensing/marketing firm, claiming their likenesses had been misappropriated without compensation.The forecasts are not fanciful. A pro-plaintiff outcome would force a major concession on the NCAA and possibly lead to further revenue-sharing across the board in the years ahead. At the very least, a plaintiffs win will breach the hitherto sacrosanct barrier against compensating athletes. Once breached, things could happen fast, as when free agency realigned the balance of power in professional sports overnight, creating successive generations of multi-millionaire utility infielders. If certified, the OBannon class would include thousands of claimants, including many star professionals, and exposure in the billions.Equally to the point, what happens if the defense ultimately prevails? The answer lies not just in the impact of this one case, but in the climate of public opinion that surrounds it. Win or lose, OBannon and his co-plaintiffs have given the NCAAs critics a powerfully invigorated voice. The Internet swelled that voice to a din. Joe Nocera has gone on full-scale attack in a series of articles. gregg Easterbrook is writing a book.Big Ten Conference commissioner Jim Delany has predicted the case will wind up before the U.S. Supreme Court. Yet the defendants have already flinched a mite.

Most recently, the NCAA severed ties to EA while Collegiate licensing asked the judge to strike all allegations pertaining to products other than video games and game broadcasts. Especially if the case settles, the NCAA will need to shore up its fortifications against future claims that go beyond video marketing product endorsements by athletes, for example, or competitive salary deals that were unthinkable a few years ago but are now deemed inevitable by critics like Nocera. Settlement may not be an option for the defense if we believe OBannon himself, who avers hes not interested in a financial award but rather in systemic change he intends to pursue to the end. Meanwhile, recent court decisions cant be encouraging to the defense. In late July, for example, EA was dealt a blow when the Ninth Circuit affirmed that the use of the likenesses was not shielded by the First Amendment. The athletes lawyer said that that defense was one of their strongest, so hes now moving for summary judgment in the underlying case.When, in May, the Third Circuit said in a case brought by former Rutgers University quarterback Ryan Hart that the defendants First Amendment rights do pertain but could be trumped by the plaintiff s intellectual property rights, the court was implicitly affirming that the athletes actually have such rights. Its a point that likely resonates with the vast majority of college sports fans.To be sure, the proverbial genie is out of the bottle in terms of public opinion, to a far greater extent than in past instances when the NCAA came under fire. On the one hand, scandals like Penn State have fueled perceptions that college sports in general are morally dysfunctional, while published articles are marshaling long lists of players and the specific injustices and abuses theyve purportedly suffered.Certainly, in its day-to-day business, from enforcement to apparel sales, it seems that of late the NCAA cannot do anything right,

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says Timothy liam Epstein, a partner at SmithAmundsen llC and Chair of that firms Sports Law Practice Group. As an example, Epstein notes the most recent controversy involving the now-disabled function on the NCAA online shop allowing customers to purchase a numbered, but not named, jersey of Heisman Trophy winner Johnny Manziel.On the other hand, as NCAA critics have strenuously argued, the public need not be swayed by schools crying poverty or by the argument that amateur status is necessary to maintain some sort of parity between

programs not when some colleges already pay their coaches millions while others can barely afford bus tickets for their recruiters.The argument that the public appreciates amateur status, and that that has a lot to do with why they watch college sports in the first place, has more validity than NCAA critics allow. Only 27% of respondents to a Marist poll believe college athletes deserve to be paid beyond their scholarships. Yet its a limited argument. More than anything

else, the public appreciates fairness and equitability. They are quite aware, thank you, that college sports is big business; that some folks enjoy lavish profits because of the unpaid labor of others. If they resent overpaid professional athletes, that too is a question of equitability. People want athletes to get what they deserve: no more, no less.The NCAAs problem is that its historic position has been compromised such that an ongoing groundswell of public opinion will likely encourage future litigation. Its one more example of how, in our society, some change can only be brought about by ambitious lawyers.In this instance, there may also be powerful agents of change once those lawyers clear the path namely, the schools themselves, some of which have reportedly questioned whether they even need the NCAA. Many of the bylaws that frustrate the wealthiest schools are based on the NCAAs legislating competitive fairness from what food schools can provide to student-athletes, to the amount of scholarships allowable on rosters, says Epstein.Perhaps the largest conferences will realize that they no longer need the NCAA to successfully function, he adds. They could break off into a new association, possibly adding significant staffing to conference offices to handle logistical functions currently performed at the NCAA National Office.At least the schools dont need to be NCAA mouthpieces. They can, as a communications strategy, underscore that they do not share the plantation mentality, a term thats been used to describe NCAA policy and practice.In this effort, theres no need to pick an injudicious public fight. To the contrary, the schools can seize on every opportunity that the NCAA itself provides. For example, NCAA president Mark Emmert has already allowed colleges to offer four-year scholarships that in effect end the current abuse by which coaches can summarily cut athletes from the

$27%BELIEVE COLLEGE ATHLETES DESERVE TO BE PAID BEYOND THEIR SCHOLARSHIPSroster on an annual basis. There are many ways for schools to differentiate themselves. Its not about perquisites; its about basic terms of engagement that directly affect college and professional careers. Jim Delany while no supporter of paying the athletes talks about limits on the time athletes spend on sports, for example, as well as lifetime educational support for athletes who drop out or go pro early, but decide to return to college. Simply by vigorously supporting such ideas or by proposing alternatives, schools take leadership positions that wont be lost on the recruits they so aggressively scout.Its a potentially transformative opportunity for which colleges throughout the country can thank Ed OBannon.

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Richard levickOriginally Published on forbes.com

Its one of our major healthcare issues.

According to modest estimates, around three-quarters of prescription medication in the U.S. are generics. Some reports put that number at 84%, with predictions as high as 87% for the near future. Meanwhile, research firm IMS Health found that, in 2012, money spent on prescription drugs decreased by 1%. It was the first such drop since IMS started tracking numbers in 1957.

That the proliferation of generics has driven down total costs is hardly surprising but the implications remain significant. Both health insurers and the government obviously understand that generics serve their fundamental cost control agendas. Since the insurers are worried about their ability to manage the cost of new customers under Obamacare, they now have even more incentive to encourage the use of generics.

Its a boon for generic drug companieswell, sort of. While one part of the marketplace,

including the government, is hell bent on lower cost, concerns in and out of government over the safety of generic drugs increase alongside their popularity. In fact, 43% of those polled last year by the Consumer Reports National Research Center have persistent misgivings.

Enter the U.S. Food and Drug Administration. Earlier this month, it was reported that the FDA will issue a rule by September allowing generic drug companies to make changes in their labeling. Right now, only brand-name drug companies can update their safety information without FDA approval if they learn of a problem. generic companies cannot make such additions unless the FDA orders them to or the brand-name manufacturer has already done so.

But once the FDA Rule becomes law, the generic drug makers will run the same risks as the brand-name drug companies. They would face unprecedented liability if their warnings or other label information dont pass muster, and if their products injure consumers. Not surprisingly, consumer advocates were quite

vocal in their support for the FDAs proposed rule.

The FDAs move comes on the heels of multiple recent Supreme Court decisions barring lawsuits against generic drug makers. The Courts position is that, if the generic companies must by law use the same labels as the brand companies, they cannot then be sued for failure to warn, as long their labels have the exact same safety information as the brands. Critics of these decisions question the logic of allowing one company to be sued, and indemnifying another, for marketing the same product. But the FDA Rule could simply change the governing law and thereby moot the preemption of failure-to-warn claims upheld by SCOTUS.

On the other side of the argument, observers like Joseph Thomas, a partner at Ulmer & Berne, defend the disparity, pointing to differences in knowledge base that give the brand companies a decisive leg up in terms of R&D. Ostensibly, Big Pharma bears more responsibility and more risk because it has the resources to know more. Since Big Pharma has market exclusivity before patent expiration, their higher margins significantly offset the cost of resources necessary to pay for that greater responsibility.

Many generic companies also do not have the personnel today necessary to fully analyze the risk profile of a pharmaceutical product, Thomas advises us. The system was designed that way with the intention that generic companies could get products to market and keep them on the market inexpensively.

Creating a circumstance in which generic companies must hire scientists to evaluate incomplete data and speculate about labeling changes is not in anyones interest, adds Thomas, who has represented the generic drug industrys trade association, the generic Pharmaceutical Association (gPhA).

Yet theres a critical subtext here, which is all about public expectations. Predictably, as the generic industry expands, there will be something of a sea change in public attitude, of which the aforementioned Consumer Reports

survey result is just one harbinger. Until now, for example, the generic companies have been cast in an appealing heros role, the plucky underdogs who offer the public financially critical alternatives to Big Pharma.

As healthcare industry growth patterns persist, it will be hard for the generics to maintain that role. Now they are Big Pharma, as the FDAs proposed Rule implicitly confirms, and as the plaintiffs allegedly injured by generic drugs would likely agree. Meanwhile, consumer safety advocates are no longer just physicians or professors. Theyre anyone who happens to own a computer and wants to warn his or her Facebook communities that a particular drug, branded or generic, might be dangerous.

Indeed, if there were ever an industry that needs a social media strategy, heres one for sure and they need it now, before the discussion period on the new FDA rule begins. They need to know whats being said online, and they need to vigorously respond. They must tell a story thats about safety as well as value, even as the denizens of the social media begin to focus on specific companies and specific drugs.

They must grapple, as they havent had to in the past, with a lingering instinctual doubt embedded in the consciousness of the consumer public that a brand drug is at some level safer than a generic, especially when theres a life-critical medical problem. The power of a safety buy dies hard.

In any event, the generic drug companies should act and plan under the assumption that they will be regulated. For starters, they need to view the regulators in the same way as Big Pharma does: as partners, not just pains in the neck. The vanilla public statement issued by Ralph Neas, GPhAs President and CEO, seems a first safe step: Our members have a long history of working closely with FDA to ensure that Americans have access to safe affordable generic medicines, and we look forward to working with FDA on this important issue.

generic Drug Makers Will Soon Face The Regulatory Music

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