levick weekly - nov 2 2012
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Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake Amgen’s Widespread Repercussions with Paul Ferrillo Initial Public Offerings with Alex Lynch Monster Needs to Wake Up & Smell the Coffee Communicating Difficult Decisions NACD Boardvision Blogs Worth Following LEVICK In the News http://levick.com/insightsTRANSCRIPT
EDITION 15
WeeklyNOvEmbEr 2, 2012
Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake
03 Contents040910
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HurriCane Sandy: A Shrill Lesson from the L’Aquila Earthquake
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amgen’S WideSpread reperCuSSionS with Paul Ferrillo
initial publiC offeringS with Alex Lynch
monSter needS to Wake up & Smell tHe Coffee
CommuniCating diffiCult deCiSionS NACD Boardvision
blogS Worth Following
leViCk In the News
CoVer image: In late October 2012 Hurricane Sandy affected at least 24 states in the United States, from Florida to New England, with tropical storm force winds stretching far inland and mountain snows in West Virginia. The cyclone brought a destructive storm surge to New York City on the evening of October 29, flooding numerous streets, tunnels and subway lines in Lower Manhattan and other areas of the city and cutting off electricity in many parts of the city and its suburbs. Extensive damage occurred in New Jersey, especially in the communities along the Jersey Shore.
Weekly
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ust before Hurricane Sandy struck
New York and New Jersey with full
force on October 29, there was a bit
of mild disagreement among a few
communications and media observers
as to the appropriateness of the public safety
warnings, New Jersey’s in particular.
In retrospect, that “mild disagreement” raises
issues of thunderous importance (pun in-
tended) as it now seems that hundreds of lives,
at least, hung in the balance. It also leads to
an odd but, we’d argue, fairly credible conclu-
sion: that the approach to the looming disaster
by public officials, at least in New Jersey, was
directly conditioned by extraordinary events
in Italy where, just a few days before Sandy,
six scientists and one government official were
sent to jail for not adequately preparing the
population ahead of the L’Aquila earthquake
that killed over 300 people.
On the Sunday afternoon preceding Sandy,
the National Weather Service (NWS) in Mount
Holly, N.J. provided an advisory designed to
spook and shock resistant evacuees. Shouting
in caps, the warning included language that
particularly caught the attention of communi-
cations professionals:
This language went dramatically beyond clear
simple communications. It was more than an
impassioned plea. Consider the use of the word
“remains” to instill a frightening visual impres-
sion, conjuring up disturbing physical images
of what will happen if you don’t comply.
The advisory continued on with powerfully
supportive messages in equally pointed upper-
case language. The storm was expected to
“slam” into the coast. Sandy is “potentially
historic,” injuries are “probably unavoidable,”
and so forth. The NWS concluded with advice
to “err on the side of caution.”
When we first read the warning, it seemed the
NWS was doing just that itself: erring on the
side of caution. As it turned out, there was no
erring about it at all, as the storm turned out to
be at least as bad, probably worse, than ex-
pected. As of this writing, there have been over
50 deaths and the protracted power outage is
back-breaking. (Rumors in New Jersey put full
recovery at up to two weeks.)
Commentators who, just before the storm,
were wondering if “the tone of the service’s
Sunday evening message was completely
appropriate” might reflect on what it really
J
if you are reluctant, think about your loved ones, think about the emergency responders who will be unable to reach you when you make the panicked phone call to be rescued, think about the rescue/recovery teams who will rescue you if you are injured or recover your remains if you do not survive.
Anton Oparin / Shutterstock.com
HurrICANE
Sandy:A Shrill Lesson from the L’Aquila Earthquake
richard S. levick, esq.
Originally Published on Forbes.com
Weekly
06
means to err on the side of caution in all
professional communications. Sometimes
it means being very guarded in tone; some-
times it means being extremely bold. In other
words, caution is not necessarily synonymous
with restraint.
We were particularly struck by one article
praising Mayor Michael Bloomberg for being
rather more congenial about the whole thing
than his counterparts in New Jersey. Bloom-
berg did discharge his duties strongly and
responsibly, likewise warning citizens that fail-
ure to evacuate threatens the lives of the first
responders. At the same time, the article quotes
him as suggesting that people “sit back, have a
sandwich from the fridge, watch television.”
Well, you couldn’t actually have a sandwich
or watch a ballgame in many areas of the city
because there was no power for either fridge
or TV. Bloomberg’s lighter tone certainly did
no harm, as his comments in no way left any-
one less prepared for the torrent to come. But
you do have to hand it to New Jersey Gov. Chris
Christie. The same guy who predicted that the
Denver Presidential debate would change the
dynamics of the race seems to have had the
best gut sense for the kind of communications
that would work most effectively here as well.
Christie is now winning plaudits for his “trade-
mark bluntness and aplomb” in handling the
storm emergency.
It may be a “trademark” approach, but his
strategy could only have been encouraged by
the six-year sentences handed down in Italy
because of “falsely reassuring” statements
before the 2009 L’Aquila earthquake. Close in
lev radin / Shutterstock.com
Anton Oparin / Shutterstock.com
Weekly
908
tone to Bloomberg’s attempted insouciance,
Bernardo De Bernardinis, then deputy chief
of Italy’s Civil Protection Department, had
advised residents to go home and have some
wine. “Absolutely a Montepulciano,” he added.
It was, in hindsight, a gratuitous comment that
enraged many Italians and helped convict De
Bernardinis. Were the court sentences fair? I
hardly think so. Did Christie face similar penal-
ties had he been anything less than blunt and
even scarifying? Of course not, but the gover-
nor reads the news. Just a day or two before
Sandy, the Italian debacle had to be, at the very
least, a reminder not to pull a single punch;
again, to err on the side of caution by being as
blustery as possible.
From a communications standpoint, the events
in Italy are all the more pertinent because
those convicted were not convicted for failing
to predict the earthquake. Earthquake predic-
tion is a difficult science to ever get right, as an
international commission on forecasting set up
after L’Aquila reminded us. An earthquake is a
potential “hazard…all the time,” said one com-
mission member.
On the other hand, there were tremors before
the L’Aquila quake. In similar past instances,
residents would typically sleep in their cars,
just to be sure. Here, according to the allega-
tion, the assurances by the scientists directly
led to people deciding it was all right to stay
indoors. The defendants are thus going to jail
for failing to communicate. It’s not reasonable
to have expected those tremors to incite the
kind of dire warnings that Sandy prompted in
New Jersey but something more was obviously
needed in Italy, if only a reminder that it’s not
really worth risking your life just because the
probability of disaster is very low.
Disaster planning is all about risk management
and risk management is often about com-
munications. To be sure, there are significant
lessons for business here, underscored by our
current public preoccupation with transpar-
ency and accountability. When you prepare for
problems, you must calibrate the communica-
tions. Sometimes you need to shout like Chris
Christie. Sometimes a prominent disclaimer
will suffice.
The one thing businesses can be sure of is
that, when there’s any possibility of a disaster
(e.g., product recall, insider trading arrest, you
name it), more than a bottle of Montepulciano
will be needed.
Richard S. Levick, Esq., President and CEO of LEVICK, repre-
sents countries and companies in the highest-stakes global
communications matters—from the Wall Street crisis and the
Gulf oil spill to Guantanamo Bay and the Catholic Church.
L
amgen’S WideSpread reperCuSSionS with paul ferrillo
In this LEVICK Daily video interview, we discuss the class certification issues raised by the Amgen
litigation with Paul Ferrillo, Senior Securities Litigator with Weil Gotshal & Manges, LLP. With
cases such as Amgen and Walmart bringing more clarity to class certification issues, companies
—and especially those in the public sphere—need to carefully consider how they share news
affecting the company and what to say when events don’t transpire as planned.
11
InItIal PublIc OfferIngswith Alex Lynch
Over the next several weeks, LEVICK Daily
will share selected interviews from our
recent NACD Directorship article entitled
“What’s Next? The Top Issues of 2013 and
Beyond.” Today, we feature a discussion
on initial public offerings (IPOs) with Alex
Lynch, a partner in Weil Gotshal’s Capital
Markets Practice.
Mr. Lynch focuses on the representation of
companies, particularly technology, health-
care, financial services, and other growth en-
terprises, as well as leading investment banks
and private equity firms. He has extensive
experience in equity capital markets transac-
tions, with a particular focus on initial public
offerings. He also advises boards on securities
and corporate governance matters.
At the conclusion of the interview, you can
find LEVICK’s own communications best
practices appended.
What is to be learned from the less than stellar IPOs issued by groupon and facebook in recent months? What are the lessons for companies outside the technology sector?
alexander lynch: The primary lessons from
the Groupon and Facebook IPOs are not only
applicable to technology companies but are
applicable to all companies looking to com-
plete an IPO.
First, listen to your advisors. IPO companies
should retain advisors who are experienced in
the IPO process and can help it avoid the many
pitfalls. One of the most common pitfalls is
gun-jumping or marketing the IPO outside of
the typical registration process. Gun-jumping
can delay your offering, result in liability, and
produce bad press during the roadshow. Many
of the gun-jumping issues in the Groupon IPO
could have been avoided if the standard advice
regarding publicity had been followed.
Second, when setting the valuation of the IPO,
leave some room for the stock to appreciate
and be mindful of who is being allocated stock.
Facebook priced its IPO at a rich valuation
and increased the number of shares sold in
the offering. IPO companies need to balance
between trying to maximize the price and the
size of the offering and selecting the right type
of IPO investors and letting those new inves-
tors enjoy some success. A rich valuation and
large deal size can reduce the demand for the
stock in the market after an IPO. In addition,
lev radin / Shutterstock.com
Richard S. Levick, Esq.Originally Published on LEVICK Daily
Weekly
12 13
allocating IPO shares to hedge funds and indi-
vidual investors rather than long-only mutual
funds can result in increased selling pressure
if things don’t go well. Remember, an IPO is not
the last time to the market.
What are the responsibilities of boards of directors in the IPO process?
Alexander Lynch: Directors have a number of
unique responsibilities in the IPO process. First
and foremost, directors have personal liabil-
ity for material misstatements and omissions
in the registration statement and prospectus.
Directors also personally sign the registration
statement. As a result, it is critical for directors
to give themselves the time necessary to read
and review the registration statement carefully
in advance of the initial filing and throughout
the process. They should then compare the dis-
closure to what they know about the business
and alert the IPO company’s advisors of any
disclosure issues.
Second, focus on accounting issues. Is the IPO
company ready to report on a quarterly basis?
Can it produce financial statements on a timely
basis? Are there any accounting policies that
need to be reconsidered? Do you have any ma-
terial weaknesses or significant deficiencies?
If so, how are they being remediated and will
they be remediated in advance of the IPO?
And third, make sure the IPO company is
ready to be public by asking the tough ques-
tions. Do you have the right management team
in place? Why is the IPO company going pub-
lic? Is the business model mature enough to
withstand investor scrutiny? If you don’t have
the right answers to these questions, the IPO
company is likely not ready to be public.
How can boards of directors best pre-pare themselves for the transition from private to public ownership?
Alexander Lynch: Remember, IPOs are the
beginning; not the end. An IPO will not be the
last time the IPO company accesses the mar-
ket. Preparation for life as a public company
is critical for success. Also, a well-executed
IPO provides a substantial amount of goodwill
and positive publicity, while a poorly executed
IPO can damage an IPO company’s reputation
for a long time. Accordingly, preparation by
the board is critical.
Be honest in your assessment of the IPO
company’s readiness to be a public company.
Make sure you have the right management
team in place. Confirm that you have the right
accountants and attorneys. Assess the chal-
The price at which you set your IPO communicates a lot about your value proposition. What happens to that price after the offering communicates even more. Boards need to maintain investor confidence by allowing room for the share price to grow.
The IPO is the beginning, not the end. It is not only a financial event, but a corporate branding opportunity. Boards need to ensure that newly-public companies communicate their value just as aggressively post-IPO as they do in the critical months leading up to it.
Boards need to be ready for circumstances in which high IPO trading volume creates glitches in the system that cost investors’ money and has a negative impact on trust in the system. Companies need to be ready with statements that can forestall chaos and confusion under all anticipated contingencies.
BEST COMMUNICATIONS PRACTICES:
1.
2.
3.
lenges faced by the IPO company and ensure
that they are manageable. Make any necessary
changes to the business, management or advi-
sors before the IPO process to avoid having
to make these changes during the IPO when
public scrutiny is most intense.
In connection with considering an IPO, I
advise boards and management teams to
act like they run a public company before
being public.
Richard S. Levick, Esq., President and CEO of LEVICK, repre-
sents countries and companies in the highest-stakes global
communications matters—from the Wall Street crisis and the
Gulf oil spill to Guantanamo Bay and the Catholic Church.
This post is excerpted from Richard Levick’s recent NACD
Directorship feature “What’s Next? The Top Issues of 2013 and
Beyond.” To read the full article and learn more about the most
significant issues impacting boardrooms today, click here.
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monSter needs to
Wake up & Smell
tHe Coffeegene grabowski
Originally Published on LEVICK Daily
Weekly
16 17
he U.S. Food and Drug Administra-
tion (FDA) is now investigating five
deaths and one non-lethal heart
attack that have been linked to Monster energy
drinks. The FDA inquiry came after Monster
Beverage Corp. was sued in California Superior
Court by the parents of a 14-year-old Maryland
girl who claim the company’s marquee product
caused their daughter’s cardiac arrest.
The actions are just the latest salvo against
Monster and other energy drink makers whose
products have caused increasing concern
among food and beverage safety advocates.
As the inquiries have grown, we’ve heard little
in response to allegations that consuming con-
centrated amounts of caffeine, sugar, and
other stimulants could have horrible conse-
quences—especially for children. All the while,
the market for these drinks has seemed to
expand exponentially.
Now, however, it seems the safety questions
have reached critical mass. On the day the
Maryland parents announced their lawsuit,
Monster’s share price dropped 16 percent. That
alone is evidence that the radio-silence strategy
simply isn’t going to work anymore. Monster
and others need to stop letting media critics,
concerned parents, lawmakers, regulators, and
plaintiffs’ attorneys tell their story for them.
Even if Monster wins costly court cases, more
are sure to follow unless the company takes
steps to head them off now.
As a start, the company needs to engage its crit-
ics in the digital venues that dominate prod-
uct perceptions today. Right now, Monster’s
website (screenshot left) is extremely dark,
mysterious, foreboding and in many places,
sexually themed. That’s perfect for attracting
the disaffected, rebellious teenagers to whom
the company markets. Unfortunately, about a
third of the visitors to its site now are parents,
lawyers, regulators and aides to crusading
lawmakers. Their prejudices and suspicions
are being reinforced by what they see. As such,
the site needs to consider showing some less-
threatening images and highlighting some posi-
tive information to meet the concerns of these
critical audiences.
At the same time, Monster needs to enlist some
expert support—whether they be food scien-
tists, nutritionists, researchers, or even success-
ful athletes and entertainers—that can attest to
the safety and efficacy of its product. Above all,
the company must repeatedly hammer home
the best fact on its side now: that a can of Mon-
ster contains less caffeine than a Starbucks’
House Venti.
t
Both the third party experts and the most
supportive facts need to be front and center in
company blog posts and during every effort
to engage the digital and traditional media
influencers who are now controlling Monster’s
story online and in the mainstream media.
If Monster tries to ride out a storm this
size without protecting itself better, it will
likely pay a very painful price in brand
damage and litigation costs. Until now, only
teens and 20-somethings were paying atten-
tion to Monster. Now it’s under the scrutiny of
frightened moms and dads, their lawyers, and
the FDA. That should be enough to energize
any company.
Gene Grabowski is an Executive Vice President at LEVICK
and a contributing author to LEVICK Daily.
L
Image public domain. monsterenergy.com
If Monster tries to ride out a storm this size without protecting itself better, it will likely pay a very painful price in brand damage and litigation costs.”
“
blogS worth following
THOugHT leaderSAmber Naslundbrasstackthinking.comAmber Naslund is a coauthor of The Now Revolution. The book discusses the impact of the social web and how businesses need to “adapt to the new era of instantaneous business.
Brian Halliganhubspot.com/company/management/brian-halliganHubSpot CEO and Founder.
Chris BroganChrisbrogan.comChris Brogan is an American author, journalist, marketing consultant, and frequent speaker about social media marketing.
David Meerman Scottdavidmeermanscott.com David Meerman Scott is an American online marketing strategist, and author of several books on marketing, most notably The New Rules of Marketing and PR with over 250,000 copies in print in more than 25 languages.
Guy Kawasakiguykawasaki.comGuy Kawasaki is a Silicon Valley venture capitalist, bestselling author, and Apple Fellow. He was one of the Apple employees originally responsible for marketing the Macintosh in 1984.
Jay Baerjaybaer.comJay Baer is coauthor of, “The Now Revolution: 7 Shifts to Make Your Business Faster, Smarter and More Social.
Rachel Botsmanrachelbotsman.comRachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration and sharing through network technologies.
Seth Godinsethgodin.typepad.com Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing.
INDuSTry blogS Holmes Reportholmesreport.comA source of news, knowledge, and career information for public relations professionals.
NACD Blogblog.nacdonline.orgThe National Association of Corporate Directors (NACD) blog provides insight on corporate governanceand leading board practices.
PR Weekprweekus.comPRWeek is a vital part of the PR and communications industries in the US, providing timely news, reviews, profiles, techniques, and ground-breaking research.
PR Daily Newsprdaily.comPR Daily provides public relations professionals, social media specialists and marketing communicators with a daily news feed.
BuSINESS related FastCompanyfastcompany.comFast Company is the world’s leading progressive business media brand, with a unique editorial focus on business, design, and technology.
ForbesForbes.comForbes is a leading source for reliable business news and financial information for the Worlds business leaders.
Mashablemashable.comSocial Media news blog covering cool new websites and social networks.
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naCd boardViSionCommunicating difficult decisions
In this edition of NACD BoardVision, we explore the communications options available to
corporate leaders in this challenging economic environment with Mary Ann Cloyd, a Leader in
the PwC Center for Board Governance, and Peter Gleason, the Managing Director and CFO for
the National Association of Corporate Directors. In an era of belt-tightening across the business
landscape, honesty and transparency are essential to ensuring that difficult decisions are not only
understood, but accepted and eventually embraced by employees, customers, and the full gamut
of corporate stakeholders.
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in tHe neWS
tHe urgenCyof noW.