Legal Strategies for Avoiding Agita From Founders, Brand Ambassadors
Last week, Corporate Counsel ran a piece featuring CrisisResponsePro founder James F. Haggerty with some important advice for lawyers on how to avoid reputational problems that stem from bad behavior of company founders or other brand ambassadors. These are also good issues for communicators to know.
The article, by MP McQueen, cites several recent examples of founders causing problems. Papa John’s Pizza’s John Schnatter recently left the company because he allegedly repeated a racial slur. Movie mogul Harvey Weinstein (pictured) has been charged with sexual assault. Uber ex-CEO Travis Kalanick has had multiple infractions, including creating a debased corporate culture and chewing out a driver.
We can name still others involving those connected to a brand. Last year, CNN fired comedian Kathy Griffin from co-hosting its New Year’s Eve broadcast because of her graphic depiction of Donald Trump’s bloody head. A few years ago, NBC fired Brian Williams as anchor for making stuff up. And longtime spokesman Jared Fogle presented a problem for the Subway sandwich chain; he’s now in prison.
Haggerty points out there’s a reason to address crisis topics to in-house lawyers. “Increasingly, reputational issues are falling within the purview of general counsel because if there is a problem, it becomes a legal issue very quickly,” he said.
Increasingly, reputational issues are falling within the purview of general counsel because if there is a problem, it becomes a legal issue very quickly.
— CrisisResponsePro founder James F. Haggerty
We’ve seen that in spades. The Corporate Counsel piece explains two main legal ways to try to avoid these problems (in addition to simply doing due diligence on your hires). The two are: morals clauses and insurance.
Lawyers advise to have morals clauses in contracts that lay out behavior by a founder, brand ambassador, or product spokesperson that would lead to a contract’s untimely death. It matters what would trigger the morals clause — obviously sex harassment, but it could even be dating someone at the company.
The clauses should limit what executives can comment on and might even curtail their social-media use, Haggerty says. “There should be clauses about what other sponsorships and brands you can promote, but also rules about what you can say about political issues and others so there is no confusion about the parameters of public comment.”
Citing Bloomberg, the piece notes that contracts for seven mergers this year had “Weinstein clauses” requiring the seller to vouch for executives’ behavior, lest the deal be scuttled and a breakup fee triggered.
As for insurance, companies should know what policies they have and whether they cover such reputational issues as executives or brand ambassadors losing their minds and tweeting something stupid.
There is even something called “disgrace insurance,” which apparently ballooned in popularity after scandals involving professional athletes. And of course there’s crisis-management insurance and reputation-risk insurance. But in all cases, the policyholder needs to be clear on what’s covered.
Just as CrisisResponsePro constantly emphasizes the importance of planning for communicating a crisis, planning is important on the legal front. As Haggerty says, don’t fall into the superstitious trap of thinking that, just because you prepare for a crisis, you’ll cause it to come to be.
“There has always been a sense in corporate America that if I think and plan about a problem, it might happen. It is almost magical thinking,” he says. “They don’t confront an issue until it is ripe in the courts.”
And, as we know, in some cases that could be too late.
Photo Credit: Shutterstock
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