Doing the right thing can be a costly investment

It is a widespread practice to study enforcement actions for clues on what a company or its leadership did wrong. It is not so much an exercise in schadenfreude as an opportunity to learn more about what went wrong, how a regulator uncovered the malfeasance and responded, and whether the whole affair might have been averted in the first place with better controls or policies.

The biggest question: Could it happen to me?

It may be just as important, for general advice and potentially benchmarking, to consider how things unfolded when a company had a spot-on reaction.

Consider how ABC/Disney responded to the now infamous (although not unpredictable) Twitter meltdown of sitcom star Roseanne Barr.

Upon learning that Barr had tweeted racist remarks about Valerie Jarrett, a one-time aide to President Obama, the crisis response was quickly put into action. Whereas there may certainly have been some thought given to a PR-led defusing, the reaction was instead quick, terse, and absolute.

There is a common challenge compliance officers face to keep rules applicable to all and punishments, as needed, even-handed and unprejudiced. A minimum-wage mailroom staffer should be treated no differently than a superstar sales phenom. Can most businesses, in full truthfulness, attest that no employee is above others, no matter their revenue production, when it comes to following rules?

“Roseanne’s Twitter statement is abhorrent, repugnant and inconsistent with our values, and we have decided to cancel her show,” said Channing Dungey, president of ABC Entertainment.

Some may bicker that the network took an unnecessary gamble in the first place by rebooting “Roseanne” given Barr’s past behavior. Her conspiracy-oozing Twitter account should have been all the due diligence needed to flag a dangerous hire.

The network, however, did put its money where its mouth was. Even with the aborted season ahead, “Roseanne” stars Sara Gilbert, Laurie Metcalf, and John Goodman will each still be paid, according to The Hollywood Reporter, $300,000 per episode for the 10 shows that will probably never air. ABC also stands to lose at least $60 million in advertising revenue, possibly even more when the benefits of building programming around a hit show are factored in.

There is a common challenge compliance officers face to keep rules applicable to all and punishments, as needed, even-handed and unprejudiced. A minimum-wage mailroom staffer should be treated no differently than a superstar sales phenom. Can most businesses, in full truthfulness, attest that no employee is above others, no matter their revenue production, when it comes to following rules?

ABC, for all its faults regarding this situation, deserves praise for taking forceful action against one of its top money makers.

Starbucks also deserves a pat on the back for crisis response done well.

On April 12, the coffee chain was thrust into a negative light when a worker at a Philadelphia shop called police about two black men allegedly loitering. It turns out they were waiting for a business associate.

The episode—given Starbuck’s reputation for WiFi hogging, table-clogging patrons—was quickly painted as a racist overreaction.

How did Starbucks respond? It closed more than 8,000 stores on the afternoon of May 29 to conduct racial sensitivity training for nearly 175,000 employees. A Bloomberg news report estimated the cost of those training sessions, in lost sales, was $16.7 million. 

The training program offered to employees was created under the guidance of national experts, including the NAACP Legal Defense and Education Fund; Demos; the Equal Justice Initiative; and former U.S. Attorney General Eric Holder.

One must wonder, however, what will be done for the more than 40 percent of locations that are not company-owned. Does compliance oversight work when nearly half of your domestic locations are outside the function’s reach? That is a scary prospect in an age of wildfire-spreading reputation risk.

Still, the fact remains: Rapid responses are the only way to beat speed-of-keyboard, social media-launched brand attacks.

Also, doing the right thing can be very costly, but the pain may be necessary. Telling directors and the C-suite the bad news is your uncomfortable, but crucial, job.