How an Already Damaged Reputation Got Worse and Worse

We’ve all witnessed how impaired corporate or brand image can undermine both consumer trust and financial performance. Recently, Target’s CEO was relieved of his duties because of the massive customer account security breach which occurred during his watch. The poster child of negative reputation, at least in the U.S., has been British Petroleum. BP’s then-president of U.S. operations was forced from office because of some ill-conceived and dismissive language, and BP’s corporate behavior since the Gulf of Mexico oil disaster has been of little help in image recovery.

We’ve all witnessed how impaired corporate or brand image can undermine both consumer trust and financial performance. Recently, Target’s CEO was relieved of his duties because of the massive customer account security breach which occurred during his watch. The poster child of negative reputation, at least in the U.S., has been British Petroleum. BP’s then-president of U.S. operations was forced from office because of some ill-conceived and dismissive language, and BP’s corporate behavior since the Gulf of Mexico oil disaster has been of little help in image recovery.

British Petroleum has recently “celebrated” four years of cleanup and payout in the Gulf by announcing the end of active cleanup of the 500 miles of coastline from Louisiana to Florida, the result of 87 consecutive days of oil pouring from the Deepwater Horizon rig of its Macondo Project. After dealing with issues over the health and economic impact by setting up a multibillion-dollar cleanup fund, conducting a massive image PR repair campaign, and paying huge federal fines, BP had originally agreed to keep its corporate cash register open for environmental and business claims as long as they were what the company termed as “legitimate.” Though this began as an eagerness to address and settle these damages as a way to manage its impaired reputation, it has now devolved into legal, and very public, name-calling between BP and claimants.

Not including Federal fines, BP’s payout to Gulf Region businesses and residents has thusfar totaled almost $10 billion. The sheer volume and financially cascading nature of these claims, it turns out, was way beyond BP’s reckoning; and the company began to openly challenge many of them as “nonexistent and artificially calculated” in court. In mid-2013, BP even took out full-page ads in The Wall Street Journal, The Washington Post, and The New York Times, claiming that attorneys were filing dubious and hyper-inflated claims on behalf of Gulf-area businesses. As stated by a BP spokesperson at the time, “The litigation is seeking to rectify the misinterpretations of the settlement that have led to inflated, exaggerated or wholly fictitious claims … will continue unabated.” Not exactly image-restoring language, and a direct slap at the federal judge who drafted the financial agreement.. By the Fall of 2013, BP’s attorneys were appealing one out of every five claims received.

BP was also receiving massive negative publicity due to both real and suspected improprieties among its legal staff involved in processing claims, with one lawyer fired for accepting fees from claimants and another lawyer resigning. The suspicions were so strong that the Freeh Group, a firm headed by former FBI director Louis Freeh, was brought in (by a consortium of attorneys and BP) to investigate. Numerous “inappropriate” actions by the claims department were uncovered in the investigation; and one sidebar result was that, following the publication of its report, the Freeh Group took a more visible and active role in overseeing claims.

One result of this outside claims takeover has been more rigorous inspection of individual claims, even taking back payments (which Freeh’s team was empowered to do), if the original payment was deemed excessive or illegitimate. BP has been public about its support of the added scrutiny; while area attorneys and local government and other civic officials have noted how this has stifled claims filings.

Still, even as BP has pulled back in the Gulf, and gotten people to stop filing, it has left continued sore feelings by claimants, and those whose claims are either under investigation or still yet to be resolved. An example of this is a shrimper from Slidell. After extensive documentation consisting of multiple years of tax returns, financial statements and shrimping reports showing the vast sums the Louisiana shrimper had lost over several seasons, directly as a result of the Deepwater Horizon spill, he was paid about 7 percent of what had been claimed. To keep his business going, he had to take out loans. He also refiled his claim, but BP delayed it by beginning yet another investigation into his filing papers. As he told the area press: “BP is giving me the runaround.” Is this really the way to reclaim trust and bring back its image?

Author: Michael Lowenstein

Michael Lowenstein, PhD, CMC, is thought leadership principal for Beyond Philosophy, a U.S.-based international customer management experience consultancy. He's an international conference keynoter and speaker, workshop facilitator and trainer, author and a contributor to two customer loyalty newsletters and portals. He has more than 30 years of management and consulting experience with expertise in customer and employee loyalty research, CEM, loyalty program and product/service development, customer win-back, service and channel quality, customer-driven corporate culture, human resource development, and strategic marketing and planning.

"Marketing Nuggets" will include observations regarding trends, and often study results, representing current, real-world issues of high importance to direct marketers. Those issues include omnichannel communication usage, mobile marketing, content, informal offline and online social communication, consumer behavior, message personalization, internal customer-centric processes and organization, strategic customer life cycle planning, proactive employee contribution, etc.

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