Page 92 - Crisis Communication Practical PR Strategies

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5 The new dynamics

of financial crisis

How public companies

should prepare for the worst

Tim Wallace (United States)

Introduction

Several years ago, Nike Corporation faced a consumer boycott over
charges that management were employing underage and underpaid
Asian shoe workers. As street theatre, the protest was hugely suc-
cessful. Media from around the world reported on young people,
many of them inner city youths, returning their Nikes in huge piles in
front of retail locations in major cities globally. But as an economic
weapon the effect was negligible. Nike demonstrated to its analysts
and institutional investors that the boycott was having little material
impact on retail sales, and that the company’s projected financial
outlook remained largely unaffected.
It wasn’t long, nonetheless, before Nike faced a financial crisis. As
the protest gathered steam, Nike stock began to lose momentum. At its
nadir, the stock had plunged by one-third, representing billions of
dollars in lost value. It didn’t seem to matter to investors that the
company’s income statement was holding up. Before long, Nike was at
the negotiating table and its financial plight was widely seen as a major
reason why.
This story suggests some of the new dynamics of financial crisis. For
public companies (which are the focus of this chapter), crises that ini-
tially have little to do with the income statement have a tendency to
quickly assume financial implications. In fact, in a world of global
markets and instant communication, it might be said that for public