All choices we make have consequences, no matter how big or small the choices are. And the deliberate and proactive management of choice is necessary for good leadership and crisis prevention. But when choices – no matter how seemingly inconsequential – are managed poorly, there can be grave consequences.

This was devastatingly the case on November 5, when a gunman named Devin Kelley entered a small church in Texas and massacred 26 parishioners, including a pregnant woman with her unborn baby, with an assault-style rifle. On November 6, the Air Force admitted that they failed to enter Kelley’s domestic violence court-martial into a federal database for firearms background checks, which would have prohibited him from buying guns.

(Photo source: The New York Times)

In 2012, Kelley violently assaulted his wife and toddler stepson while serving in logistics readiness at Holloman Air Force Base in New Mexico. This charge, under federal law, should have stopped him from legally purchasing the rifle he used in the massacre. An initial Air Force statement issued after the shooting said, “Initial information indicates that Kelley’s domestic violence offense was not entered into the National Criminal Information Center database by the Holloman Air Force Base Office of Special Investigations.”

To it’s credit, The Air Force immediately launched an investigation looking into whether other convictions had been improperly left unreported to the federal database. It was discovered that the administrative oversight that allowed Devin Kelley to purchase a gun was not “an isolated incident.” Air Force officials said on November 26 that dozens of other Air Force service members convicted of serious crimes were never reported to the federal gun background-check database, and acknowledged in a statement, “Although policies and procedures requiring reporting were in place, training and compliance measures were lacking.”

This massacre had highlighted an administrative issue of the Air Force, a seemingly inconsequential data entry neglect with dire consequences. The issue escalated a crisis response within the Air Force. Within a month of the massacre, a family who lost eight family members in the church shooting has filed a wrongful-death claim against Secretary of the Air Force, alleging that the Air Force’s negligence allowed the gunman to purchase firearms and “directly caused this horrific tragedy.” While the Air Force did not commit the tragic shootings, it may be liable as an indirect player.

This is not the first time an “indirect player” in a crisis has been accused of culpability. When the Deepwater Horizon drilling rig exploded and poured oil into the Gulf of Mexico, the then-CEO of BP Tony Hayward responded by saying “this was not our drilling rig… this was not our equipment.” Despite his efforts to cast the blame to Transocean, the owner of the rig, we now know that it was BP’s series of deliberate neglect to safety warnings and skimping on materials that created all the conditions to ultimately lead to the explosion. As the entity licensed to operate the rig, BP failed to meet its legal obligation of assuring its ability to contain a worse-case discharge of oil in the ocean.

(Tony Hayward, photo source: Getty)

The pattern here is that this type of crisis is mostly caused by the third party’s incremental, tiny negligence and mistakes. In contrast to regular two-party crises with a clear causality, such as Wells Fargo’s customer fraud, in the breakout of this type of crisis, the third party is completely caught off guard and unprepared, because it never occurred to them that their trivial missteps would one day center them in a huge crisis and the stakes are this high. The seemingly tiny, innocuous negligence of failing to enter the crimes into the database has, as in the Texas massacre, left the gun background checks impaired, and, consequently, granted Kelley the deadliest means of taking innocent lives.

The danger of committing small errors lies in the mentality that they do not matter. Due to that mentality, people commit even more small mistakes or repeat the old ones again and again. At the same time, those minor mistakes layer on top of each other and, finally, they fall, like the unstoppable dominoes. Unfortunately, in the world of crises, there’s no such thing as tiny mistakes; every detail counts.

With regard to crisis prevention, leaders would be better served simply by thinking about the potential significant consequences small things can lead to. Only in this way, can they hold each one of their choice accountable, no matter how insignificant it might seem.

Religions for Peace is the world’s largest and most representative multi-religious coalition, advancing common action among the world’s religious communities for peace. Logos Consulting Group has advised Religions for Peace as a pro bono publico client for more than 15 years, and Logos president Helio Fred Garcia has served on its Board of International Trustees for the past six years.

The global Religions for Peace network comprises a World Council of senior religious leaders from all regions of the world; six regional inter-religious councils and more than 90 national ones; and the Global Women of Faith Network and Global Interfaith Youth Network.

 

L to R: Bishop Gunnar Stalsett, Bishop Emeritus of Oslow, Church of Norway, and Honorary President of Religions for Peace; Metropolitan Emanuel Adamakis, Vice President, Conference of European Churches; Cardinal Raymundo Assis, Archbishop Emeritus of Aparecida, São Paulo, Brazil.

 

In mid-October 2017 Religions for Peace held its annual meeting of its World Council of religious leaders and its Board of International Trustees, as a strategy planning session for the next World Assembly of Religions for Peace, in 2019.

Dr. William H. Vendley, Secretary General of Religions for Peace, briefing the meeting on the current state of Religions for Peace.

 

The meeting was held in the American Academy in Rome, Italy.

The theme of the meeting was “Advancing a Moral Alliance Among the World’s Religions for an Integral Ecology,” using a phrase that Pope Francis coined in a recent encyclical on the environment, Laudato Si’. The meeting began with a private audience with His Holiness, Pope Francis, in the Vatican.

His Holiness addressing the Religions for Peace World Council of Religious Leaders and Board of International Trustees in the Vatican

 

In his address to the Religions for Peace World Council and Board, His Holiness said,

“I express my esteem and appreciation for the work of Religions for Peace. You provide a valuable service to both religion and peace, for religions are bound by their very nature to promote peace through justice, fraternity, disarmament, and care for creation.

There is a need for a common and cooperative effort on the part of religions in promoting an integral ecology. The religions have the wherewithal to further a moral covenant that can promote respect for the dignity of the human person and care for creation.

Thanks be to God, in various parts of the world we have any number of good examples of the power of inter-religious cooperation to oppose violent conflicts, to advance sustainable development and to protect the earth. Let us continue along this path.”

Logos president Helio Fred Garcia meeting His Holiness, Pope Francis at the beginning of the Religions for Peace Board meeting.

 

The Vatican played a central role in the meeting, through the offices of Cardinal Jean Louis Tauran, President of the Pontifical Council for Inter-Religious Dialogue, a part of the Roman Curia, the Vatican’s administrative body.

L to R: Sheikh Shaban Ramadhan Mubaje, Grand Mufti, Uganda Muslim Supreme Council; Cardinal Jean Louise Tauran, President, Pontifical Council for Interreligious Dialogue, the Vatican; Ayatollah Dr. Seyyed Mostafa Mohaghegh Damad, Dean, Department of Islamic Studies, Academy of Sciences, Iran; Bhai Sahib Mohinder Singh, Chairman, Guru Nanak Nishkam Sewak Jatha, UK, Kenya, India.

 

The two-day meeting featured substantive planning of critical issues to be addressed in the next World Assembly of Religions for Peace, held every seven to nine years, that brings together more than 2,000 religious leaders from all major faith communities in the world.

L to R: Dr. Jeffrey Sachs, Trustee, Professor, Columbia University, and Special Advisor, UN Secretary-General on Sustainable Development Goals; Sheikh Shaban Ramadhan Mubaje, Grand Mufti, Uganda Muslim Supreme Council;Bishop Gunnar Stalsett, Bishop Emeritus of Oslow, Church of Norway; Cardinal John Onaiyekan, Archbishop of Abuja, Nigeria; Religions for Peace Secretary General Dr. William Vendley; and Mrs. Christine Brown, Trustee, and Chair, Institute of Healthy Air, Water, and Soil, Louisville, Kentucky.

 

The planning meeting in mid-October, 2017 included working groups in three separate work streams:

  • Conflict transformation: the use of religious leadership and religious community to stop violence being conducted in the name of religion; to prevent conflicts from occurring in the first place; and to create social conditions for peace and stability in otherwise unstable parts of the world. Religions for Peace acknowledges the reality that religion is all-too-often being misused in support of violent threats to Peace – by extremists, by unscrupulous politicians, by the sensationalist media, and others. Through the years Religions for Peace has amassed a record of successful engagement in a number of conflict areas, including: Bosnia-Herzegovina, Kosovo, Sierra Leone, Liberia, Ethiopia, Eritrea, Kenya, Burundi, Somalia, Uganda, Rwanda, Democratic Republic of Congo, Uganda, South Africa, Sri Lanka, the Mano River and Great Lakes African sub-regions, Thailand, the Philippines, Myanmar, Iraq, Israel and Palestine, and Syria.

    Ayatollah Dr. Seyyed Mostafa Mohaghegh Damad, Dean, Department of Islamic Studies, Academy of Sciences, Iran, denouncing ISIS and others who hijack the identity of Islam to commit violence, and calling for all Islamic leaders to denounce violence in the name of Islam.

     

  • Sustainable development: equipping religious leaders and communities with the necessary resources and knowledge to address critical issues of health and well-being, education, climate action, and distribution of resources to reveal the potential inherent in all human communities. Extreme poverty threatens peace and human flourishing by depleting health, perpetuating existing inequalities, and jeopardizing access to basic human rights.

Jeffrey Sachs, Trustee, Professor, Columbia University and Special Advisor, UN Secretary-General on Sustainable Development Goals, addressing the challenges of sustainable development.

 

  • Protecting the earth: addressing climate change, safe drinking water, and other environmental challenges. Religions for Peace is faced with a clear moral imperative to respond to threats to the planet. For the world’s major religions, care for the earth is a religious obligation. Working with top climate scientists and development experts, Religions for Peace has developed and deployed climate sensitive advocacy and action training materials across its global networks as well as implemented multi religious initiatives in partnership with other concerned entities—especially the United Nations Sustainable Development Solutions Network and the Vatican.

Logos President Helio Fred Garcia presenting a strategic path for religious leaders and communities to protect the earth.

 

Each working group developed a statement of problem, a proposed path forward to engage the world’s religious communities, and actionable steps to take between now and the World Assembly to show the impact that multi-religious cooperation can have on each of these challenges.

L to R Religions for Peace International Co-Moderators, Dr. Vinu Aram, Director, Shanti Ashram, India; Rev. Kosho Niwano, President-Designate, Rissho Kossei-kai, Japan.

These recommendations will now become part of the work coordinated by Religions for Peace’s International Secretariat, based at the United Nations in New York, and will be implemented through the six regional and more than 90 national inter-religious councils in the Religions for Peace network over the next two years. Results from that work will form the policy agenda for tenth World Assembly of Religions for Peace in 2019.

The Religions for Peace World Council of Religious Leaders, Board of International Trustees, and invited civic and foundation leaders, at the American Academy in Rome

 

How Lyft’s new slogan capitalizes on the ethical shortcomings of its biggest competitor and why leaders need to pay attention

Lyft’s new slogan “It matters how you get there” prompts a natural and provocative follow-up question, what matters how you get there? The answer, is the integrity of the individuals, companies, or organizations consumers choose to be involved with. “You always have a choice,” begins actor Jeff Bridges in the televised version of the ad, “choose to ride with the right people, doing things for the right reasons, you’ll always end up in the right place.”

The slogan is a thinly veiled yet tactful jab at Lyft’s larger and ethically dubious competitor, Uber. 2017 was the year Uber fell from grace as the vaunted $70 billion ridesharing pioneer to the poster child for everything-wrong-with-Silicon-Valley-companies. Allegations of sexism and harassment (see former employee Susan Fowler’s astounding blog post), intellectual property theft (see Google’s lawsuit against Uber), and evasion of the authorities (see the Department of Justice’s investigation into its use of “Greyball” software) all make the list of Uber’s missteps for the calendar year, culminating in co-founder and CEO Travis Kalanick’s forced ouster in June under pressure from board members. Lyft, all the while, watched and waited silently in the wings. Until now that is.   

(Travis Kalanick, photo Source: Scottamyx.com)

Themes of right and wrong, good versus evil are as captivating as they are ingrained in the human experience because they force us to contemplate our identity, and ask which side am I on? Which side is (insert company/public figure/organization) on? Which side should I choose? Lyft’s emphasis on choice and choosing “right” not only speaks to the human preoccupation with where we fall on the spectrum between good and evil, it also elevates Lyft as the ethical superior to Uber, spelling dollar signs for Lyft and more defensive maneuvering for Uber.

Behaving ethically is not good for business only in terms of image, which is easily shattered when actions incongruent with stated values become public knowledge. Ethical integrity is and will continue to be a critical part of business’ ability to attract and retain top talent and customers, which are essential to survival. “They no longer look at it as just a paycheck,” CEO of Pepsi Indra Nooyi said recently in an interview with Fortune, of the sea change she’s observed in the needs and desires of today’s workforce. “We have to weave purpose into the core business model of the company.” The purpose Indra Nooyi speaks of is fundamentally linked to the fulfillment that comes with compliance with ethical standards. Clearly stated ethical standards give people the opportunity to live as they know they should, and fulfill the expectations set before them creating a sense of competence that is essential to happiness and productivity. As for consumers, the ability afforded by social media to say and do something about one’s concerns means people will continue to call out businesses and their leaders for ethical breaches, both real and perceived.   

What are ethics anyway, and why should leaders, businesses, and organizations care about them? Ethics are standards of behavior that inform how a society, or any group of people with common interests, should behave. Ethics are concerned with the actions people take, and the rightness or wrongness of those actions. Morals, which are related to but conceptually distinct from ethics, inform why a person chooses one action over another or believes one action to be better than another; morals are a person’s internal belief system of what is good and bad. It is possible however, for a person to perform an action that is against his or her internal belief system; morals are not obvious in the way a person’s actions are. Ethics are public; morals are private.

Companies and leaders would be wise to take a page from Lyft’s playbook on the following:

  • Capitalize on opportunities to share what you and your business are doing right. People instinctively want to identify with being “good” and “right” and will choose the product, service, or company that’s actions align with this desired self-concept.
  • When it comes to the competition, play the long game. To paraphrase Sun Tzu, the ancient Chinese military strategist, prudence is essential to victory over one’s enemy. After five years of being compared as the plucky number two to Uber’s domineering number one spot in the ridesharing sector, Lyft knew how and when to capitalize on their competitor’s missteps, without interference or immature gloating on their part.

If there is one thing to learn from Lyft’s clever and disciplined response to its competitor’s self-inflicted wounds, it is that genuinely maintaining the ethical high ground provides opportunity for lasting and substantial competitive advantage.

Well played, Lyft.      

(Fred teaching)

Logos Consulting Group is pleased to note that Logos President Helio Fred Garcia recently spoke as a guest lecturer at the U.S. Air Force Air War College, part of Air University, at Maxwell Air Force Base, Alabama.

Air War College is the senior U.S. Air Force professional military school. Annually, it prepares about 250 resident and over 5,000 nonresident senior students from all US military services, federal agencies, and 41 nations to lead in the strategic environment.

Garcia spoke on August 15, 2017 under the auspices of the U.S. Air Force Strategic Leadership Communication Program.

Garcia’s lecture, The Power of Communication as an Instrument of Policy, was based on the principles of his 2012 book, The Power of Communication: Skills to Build Trust, Inspire Loyalty, and Lead Effectively.

Garcia spoke initially to all 250 resident students, mostly U.S. Air Force colonels, plus equivalent ranks from the other U.S. armed services and air force colonels from allied nations.

He later spent time in a number of the students’ cohort groups, ranging from 10 to 20 students each, answering questions and discussing related topics.

Here is segment 1 of the guest lecture, the introduction, where Garcia introduces the topic of leadership and communication:

Here is segment 2, on the application of strategy to communication:

Here is segment 3, on communication and warfighting, based on the adaptation of the U.S. Marine Corps doctrinal publication called Warfighting, which Garcia adapted in his book The Power of Communication:

Here is segment 4, where Garcia lays out a leadership communication planning tool that Logos Consulting Group uses with clients to help them assure that their communication is aligned with strategy and likely to achieve their desired purpose:

In segment 5, his conclusion, Garcia brings together themes from the prior segments and fields questions from the audience:

You can see the complete lecture here:

This was Garcia’s second major presentation to the U.S. Air Force in the past year. In December, 2016, he was the civilian keynote speaker at the U.S. Air Force Global Public Affairs Summit in Washington, DC.

Garcia delivered an equivalent Power of Communication workshop on August 31, 2017 to the U.S. Marine Corps General Officer Warfighting Program at Marine Corps University in Quantico, Virginia.

Garcia has taught and advised elements of the U.S. and allied armed services for 26 years. He has worked primarily with the U.S. Marine Corps, and also with a number of joint commands. He is currently a contract lecturer at the U.S. Defense Information School.

 

Logos Institute is very pleased to announce the publication of a new book by Helio Fred Garcia,The Agony of Decision: Mental Readiness and Leadership in a Crisis, volume 1 of Logos Institute Best Practice Series. The book is also the first volume in our publishing imprint, Logos Institute for Crisis Management and Executive Leadership Press.

The book is now available for purchase here for individual or bulk orders. For a 15 percent discount, use the discount code QW9CFYKM. A Kindle edition is also available here on Amazon.

This book is about how leaders and the organizations they lead can maintain reputation, trust, confidence, financial and operational strength, and competitive advantage in a crisis.

Through Fred’s 30-plus years of professional involvement in thousands of crises affecting companies, governments, NGOs, and other organizations, he has discovered that the real value in resolving crises is not in excellent internal and external communication, nor in highest-quality tactical execution, however important they may be – and they are mighty important.

Rather, real value came from helping clients figure out and answer the bigger questions and then make the tough choices in a timely way. The execution would follow. So would the communication.

But people often misunderstand. That’s why Fred felt the necessity of writing this book — to help leaders think clearly, plan carefully, and execute effectively when facing high-stakes decisions. A wise man once said, the only meaningful way to escape the agony of decision is by thinking.

This book is for leaders of organizations who need to be good stewards of reputation, trust, and competitive advantage; and for those who advise those leaders, whether in public relations, law, or other business disciplines. We hope you find it helpful.

The Trump administration’s January 27th executive order banning refugees and certain legal immigrants from entering the United States galvanized businesses into action. Companies immediately affected by the ban, like airlines, scrambled to manage the impact on their customers. U.S.-based companies with global operations and diverse workforces, like Coca-Cola, Ford, Goldman Sachs, Google and Nike made forceful public statements opposing the ban. Technology and media companies expressed concern for their employees and operations. Starbucks announced plans to hire 10,000 refugees. Companies like Amazon and Microsoft joined the State of Washington’s successful lawsuit challenging the legality of the immigration ban. Apple and more than 125 other companies signed a brief defending the nationwide restraining order. Even companies that have not addressed the impact of the ban publicly are managing its fallout. From assisting affected employees to fielding inquiries from concerned employees and others, few large enterprises could avoid addressing the federal government’s sudden attempt to close U.S. borders to certain groups of people, targeting refugees and Muslims.

The immigration ban is the first of many ethical dilemmas companies will confront under this administration.

Trump signing order January 27The Trump administration brings unprecedented levels of uncertainty for businesses. The immigration ban is the first of many ethical dilemmas companies will confront under this administration. Trump’s controversial proposals include detaining and deporting all undocumented residents of the United States, including children; and creating a Muslim registry. Corporate boards, CEOs and their advisors are asking themselves how the most extreme Trump proposals would affect their company’s people, customers and communities, and how their company should respond. Companies prefer not to address these questions on the fly.

Well-managed companies anticipate risks to their business and plan accordingly. It is no surpsrise that some of the global brands moving quickly to defend the rights of their employees, customers and communities against harmful executive action on immigration in the United States have been working for years to integrate human rights considerations into their global operations. Nike, Starbucks, Coca-Cola, Google, Ford and Microsoft have all faced human rights challenges in the past – from child labor to complicity with abusive security forces to government censorship – and have drawn management lessons from their mistakes. Companies reacting to the immigration ban are pursuing many strategies used by companies seeking to meet their human rights responsibilities, but without articulating any conceptual framework for their actions.

The business and human rights movement provides a roadmap for managing business risks under Trump. Executives and managers looking for a conceptual framework to organize their responses to Trump’s policies, and road-tested tools to manage them, can apply the corporate responsibility to respect human rights to their United States operations.

The Corporate Responsibility to Respect Human Rights

The business and human rights movement provides a roadmap for managing business risks under Trump. 

UNGPs CoverBusiness and human rights” is a management discipline that has emerged over the past three decades. An international benchmark, the United Nations Guiding Principles on Business and Human Rights (2011) (PDF), reflects the working consensus among business, governments and civil society on what companies can do to meet their corporate responsibility to respect human rights. Specifically, companies must:

  • Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; and
  • Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

To meet this standard, companies have adopted human rights policies, are conducting due diligence to understand the human rights impacts of their operations and business relationships, and finding ways to prevent, mitigate and remedy adverse human rights impacts.

CablammetchMost attention has focused on the human rights impacts of multinationals outside their home countries, typically in places where corporate activity is connected to human rights violations – like child labor, human trafficking and torture – and where legal accountability for perpetrators and remedies for victims are lacking. The most familiar examples are sweatshops in global apparel supply chains and complicity with abusive security forces by oil and mining companies, but advocates have shined a spotlight on the human rights impacts of companies in sectors ranging from agriculture and consumer products to healthcare and technology.

Business and Human Rights under Trump

The business and human rights landscape in the United States shifted dramatically with the election of Donald Trump.

Dodd FrankThe business and human rights landscape in the United States shifted dramatically with the election of Donald Trump.

The prospect of stronger U.S. government action to protect individuals from corporate misconduct has vanished. One of the final initiatives of the Obama administration in December 2016 was the release of a U.S. National Action Plan on Responsible Business Conduct describing the federal policies and governmental expectations for the conduct of U.S corporations operating abroad, including their responsibility to respect human rights consistent with the UN Guiding Principles. Corporate accountability advocates are rightly concerned that the Trump administration will fail to consistently implement the laws and policies contained in the National Action Plan. The ideology and policy prescriptions of Trump’s advisors and cabinet, abetted by Republicans in Congress, means the likely weakening of protections for consumers, workers, and communities against corporate abuses under federal U.S. law, especially concerning the activities of U.S. companies abroad. Regulations of corporate conduct are more likely to be stripped than strengthened. (One exception may be the issue of tax avoidance, for which companies could face greater scrutiny if Trump’s rhetoric becomes policy.) The modest federal human rights reporting requirements enacted during the past decade, like the conflict mineral provisions of the Dodd-Frank Act, are already targeted for elimination. The Trump regime may even stop prosecuting companies for bribing foreign officials under the Foreign Corrupt Practice Act. Advocates will have to rely on other tools to promote corporate responsibility for human rights impacts.

TIMOTHY A. CLARY/AFP/Getty ImagesAbsent government enforcement, voluntary corporate action has become the backstop for meeting the corporate responsibility to respect human rights in the United States. The policy shift in Washington may be good news for business executives who subscribe to a “profits at all costs” business model. It is deeply troubling, however, for the business leaders, managers and employees who know that business success in the long run (beyond the next earnings cycle) is inextricably tied to meeting the expectations of customers, investors and employees that companies demonstrate corporate responsibility, their so-called “license to operate.” Leading companies, especially those companies that have integrated compliance and human rights standards into the way they do business, are unlikely to make bribery or human rights violations part of their business plans. Unethical executives will be less likely to get caught, but responsible companies will continue to comply with the spirit of the UN Guiding Principles. U.S. federal regulators may be instructed to look the other way when companies do harm, but the corporate responsibility spotlight now shines brighter than ever on business operations in the United States.

In a complete role reversal, business leaders may need to mobilize to hold the U.S. government accountable for protecting human rights and obeying the Constitution. U.S. companies face the real prospect of human rights violations connected to their operations much closer to home. Multinationals operating in the United States will be asked to demonstrate that they are respecting human rights whenever U.S. government policies fall short of international standards, and significantly, if government actions violate the United States Constitution. Businesses will also face pressure, as they are right now regarding the immigration ban, to deploy corporate resources as a check on the U.S. government.

Rights under Threat

The corporate responsibility spotlight now shines brighter than ever on business operations in the United States.

Internationally recognized human rights threatened by proposed actions of the Trump administration include the rights to non-discrimination; to recognition and equality before the law; to protection from arbitrary arrest and from interference with privacy; to personal security; to freedom of opinion and expression; to freedom of thought, conscience and religion; to political participation; and to freedom of association. These rights, defined under international law in the Universal Declaration of Human Rights and international human rights and labor treaties, are the focus of corporate efforts to manage their human rights impacts outside the United States. Other rights that have received less attention by most companies may now come into play, such as prohibitions of “propaganda for war” and “advocacy of national, racial or religious hatred that constitutes incitement to discrimination, hostility or violence” (ICCPR, Article 20), and the right of “ethnic, religious or linguistic minorities” to “enjoy their own culture, to profess and practice their own religions, or to use their own language.” (ICCPR, Article 27). The Trump campaign and administration have demonstrated a willingness to engage in such tactics in the United States, and to target minorities.

The Corporate Responsibility to Respect the U.S. Constitution

U.S. ConstitutionCompanies operating in the United States should consider the U.S. Constitution together with the international human rights instruments to define their potential human rights impacts. Most internationally recognized human rights are protected in some form under United States law at the federal, state and/or local level. The United States Constitution’s Bill of Rights, for example, enumerates rights including the free exercise of religion (First Amendment): the freedoms of speech, of the press, and of assembly (First Amendment); freedom from unreasonable searches and seizures (Fourth Amendment); the right to vote (Fifteenth, Nineteenth, Twenty-Fourth, Twenty-Sixth Amendments); and the rights to citizenship, due process and equal protection of the law (Fourteenth Amendment).

Companies can add “US Constitutional rights” to human rights principles as another lens through which they manage the impacts of their operations in the United States.

Companies can add “US Constitutional rights” to human rights principles as another lens through which they manage the impacts of their operations in the United States. If federal, state or local authorities in the United States engage in systematic discrimination; target individuals or groups for harassment based on national origin or religion; curtail press freedoms; seek to arrest undocumented individuals; separate children from their families; or arbitrarily restrict the right to vote; their actions or omissions are likely to be both unconstitutional and violate international human rights.

Human Rights Impact Management

In the Trump era, companies must exercise due diligence to identify, prevent and mitigate the domestic human rights impacts of their operations and business relationships in the United States.

Due DiligenceCompanies can manage the risks of contributing or being connected to government actions that violate human and Constitutional rights using the same concepts and tools that apply a human rights lens to their non-U.S. operations. In the Trump era, companies must exercise due diligence to identify, prevent and mitigate the domestic human rights impacts of their operations and business relationships in the United States.

If U.S. government action violates rights, companies must take steps not to cause or contribute to any of the human rights impacts, and must be prepared to respond appropriately when any of these scenarios touch their people, products, or partners.

Companies should be prepared to do five things to manage their human rights impacts and meet their responsibilities to respect rights under Trump:

1.  Protect employees.

EmployeesWhen government actions threaten or harm employees, companies must act to support and protect them. The priority for companies in the wake of the immigration ban has been to identify affected employees, ensure their safety, and provide assistance, such as travel, legal and financial support. Providing employees with clear, accurate information about the immigration ban and its impact, so that individuals can take action to protect themselves and their families, is a first step companies can take to meet their responsibility to employees. Employees are the stakeholder group companies can help most directly, but businesses must also consider how to support and protect others connected to their particular business, such as customers, business partners and the communities where they operate.

2.  Avoid complicity.

Rally Against the Immigration Ban (32487627352)Companies must ensure that they are not contributing to rights violations in any way. A practical first step for businesses is to apply international standards for effective human rights due diligence, such as human rights impact assessments, to their corporate operations and business relationships in the United States. Airlines that refuse to allow passage to refugees in the wake of the immigration ban, for example, are at risk of complicity with violations of the right to seek asylum under international law. Particularly important will be corporate relationships with the U.S. government, its agencies and the Trump administration. CEOs serving as advisors to the Trump administration are already attracting extra scrutiny from customers and rights advocates. If the Trump administration were to attempt to detain all undocumented residents of the United Sates or to create a national registry based on religious belief, companies should not provide information nor supply products or services that would foreseeably contribute to rights violations.

Once a company understands how its operations, products or relationships are connected to potential or actual rights violations in the United States, the business must act to cease or prevent its own violation or contribution, and use its leverage to prevent and mitigate violations by others. Exercising leverage may take the form of challenging rights violations or opposing harmful policies. Companies connected to human rights violations committed by government security forces outside the United States have intervened with government authorities seeking to prevent the violations, promoted standard-setting and training initiatives to prevent future violations, and have ended business relationships to ensure they are not connected to violations. U.S. companies are beginning to use their leverage, individually and collectively, to prevent and mitigate the impact of the immigration ban. One can imagine scenarios in which companies refuse to provide goods or services to U.S. government agencies violating rights, or in the case of non-U.S. companies, pull out of the U.S. market altogether if the violations are sufficiently severe.

3.  Mitigate harmful impacts.

NondiscriminationWhen companies are unable to stop harmful policies and actions by others, they can seek to mitigate the negative impact on their employees, customers, business partners and communities. Companies have sought to comply with the spirit of international human rights standards outside the United States by protecting rights “within the factory walls.” Brands sourcing from factories in China, for example, where independent trade unions are banned, have promoted the creation of factory worker councils to bring concerns over working conditions to management. Businesses must consider ways to ensure that their U.S. workplaces provide safe spaces where individual rights are protected. Adopting workplace policies reinforcing a commitment to non-discrimination and prohibiting the harassment of any individual based on national origin or immigration status is one concrete way to meet the corporate responsibility to respect rights.

4.  Challenge rights violations.

Companies must obey the laws wherever they operate, yet the corporate responsibility to respect human rights goes beyond legal compliance. What is lawful may still violate an individual’s rights. Challenges arise for companies when local law or its enforcement conflicts with international standards. Companies must be prepared to challenge government actions that are unconstitutional or violate human rights.

Tech CompaniesIn countries where laws explicitly contradict international human rights standards, companies have found ways to minimize their connection to human rights violations by others. In China, Brazil and elsewhere, for example, foreign technology firms have insisted upon valid judicial orders before acquiescing to demands from government officials to turn over personally identifiable user information for questionable purposes. Companies may face similar situations in the United States if asked by law enforcement authorities to turn over personal information related to their employees’ or customers’ national origin, immigration status or religious beliefs. Businesses can exhaust all available legal processes, as Apple successfully refused to collaborate with the FBI to unlock encrypted iPhones, and challenge the legality of government actions in court, as some companies are now doing in opposition to the immigration ban. Companies can also communicate publicly about government actions that violate rights, using transparency to highlight actual and potential rights violations. Since 2009, for example, Google has published a “Transparency Report” with data on government requests to hand over user data, and how the company responds. Companies will need to be more transparent about what the U.S. government under Trump asks them to do, and the likely consequences of compliance.

5.  Oppose harmful policies.

Google CEOCompanies in diverse sectors are speaking out against the immigration ban. In response to government actions targeting Muslims, immigrants and refugees, companies are directing corporate resources toward organizations defending these groups and their rights. Multinational companies have learned that the corporate responsibility to respect human rights often requires advocating for governments to fulfill their own human rights obligations. Companies have criticized rights violations by governments around the world and opposed harmful government policies privately, publicly and in partnership with others through business associations, coalitions and advocacy networks. More businesses will need to become public rights advocates in the United States. 

Starbucks-refugee-cupCorporate advocacy is most effective when it reinforces company values. U.S. companies in recent years have publicly opposed state laws in the United States that would permit discrimination based on sexual preference. Since the election, U.S. companies have spoken out to let their stakeholders know where they stand on the most extreme Trump proposals.

When engaging in public advocacy on rights issues in the United States, companies will need to overcome any cultural reluctance to speak out publicly. This will seem even riskier because Trump has embraced the “naming and shaming” of individual companies to advance his political agenda. Companies at the center of the business and human rights movement, however, understand that customers, employees and investors often view corporate silence in the face of rights violations as tacit complicity.

Human rights impact management accounts for all of these strategies.

The discipline that accounts for all of these strategies is human rights impact management, an approach that more and more business leaders may now embrace to effectively manage the Trump administration. What is your company doing to meet its corporate responsibility to respect rights in the United States?

Anthony P. Ewing (aewing@logosconsulting.net) is a Senior Advisor at Logos Consulting Group and a Lecturer at Columbia Law School, where he teaches business and human rights.

by Helio Fred Garcia

This is my seventh in a series of guest blogs featuring my recently-graduated capstone (thesis) advisees in New York University’s Master’s in Public Relations and Corporate Communication.

Wall-Street-Reputation-NYU-Flag-2014-Sep (1)

See my earlier posts:

In this blog, Carolina Perez Sanz summarizes her capstone, focusing on the particular challenges women face in a workforce where men disproportionately fill the top positions.  This could apply to banking, engineering, or any other industry.

And Carolina develops insights that would apply to all similar sectors.

But her primary focus is public relations, where women are 70 percent of the workforce but only four percent of the leaders.

Carolina completed a PhD in applied linguistics at Instituto Universitario de Investigación Ortega y Gasset in Spain. She is also a certified speech therapist.  For her PhD she did extensive research into how female broadcasters use their voices when performing on the air.

Her dissertation, “Laryngeal Adjustments in the Voice of Female Broadcasters,” uses a technique called electroglottography to analyze the physiology of professional broadcasters’ larynxes when using their conversational speaking style and when using their professional speaking style. She showed that when speakers hyper-articulate, not only do they move their jaws, lips and tongues faster and more strongly, but also their larynxes.

She also writes her own blog, Power at Speech, that focuses on how voice and speech influence the perception of public figures’ personalities.

Carolina, who just received her M.S. in public relations and corporate communications from New York University’s School of Professional Studies, moved from science to social science, looking at women in leadership.

She takes into account cultural and personal biases, and also reflects on current insights on leadership generally.

She builds an interesting model based on trust at  three levels of leadership:

  • Being trusted to perform tasks
  • Being trusted to manage projects
  • Being trusted to lead people

She notes that many women find themselves stuck at the first or second level, and offers strategies to overcome this self-sabotage.

Her insights can help women in public relations and other fields reverse much of the marginalization they experience, and build more fruitful careers.

You can download the entire capstone here.


 

Female Leadership: How Women Can Inspire Trust and
Become Leaders in Male-Dominated Work Environments

by Carolina Perez Sanz, PhD, MS

Carolina Perez Sans, PhD, MS

Carolina Perez Sanz, PhD, MS

If being very good at what one did was the critical factor to becoming a leader, the business world would look very different. Competence is necessary, but certainly not enough to taking on the mantle of leadership.

In the highly feminized industry of public relations, the disproportionate numbers between female employees (70%) and female top leaders (4%) gives proof of this disparity. Women get the work done because they excel in competence and ability, but it is men who set the goals and strategies for the firms.

The reason is that inspiring trust, and not mastering skills, is the defining trait of leaders.

Trust Is Key

Trust happens (or does not) between two people in a relationship. It is complex and nuanced, and different factors on both sides of the relationship contribute to bolster or cripple it.

The trustor (the person who trusts) needs to be in a psychological state of trust. The context of the relationship, personal and social biases, and the reputation of the other party influence the trustor’s inclination – or lack of thereof – to trust.

Factors That Contribute to Trust

Factors That Contribute to Trust

The trustee (the person to be trusted) needs to appear trustworthy in the eyes of the trustor. To do so, he or she has to possess and display certain characteristics.

The typical features that boost trustworthiness are grouped into three categories: ability, integrity and benevolence.

Ability: “I Can”

Ability encompasses the capabilities that professionals have that allow them to perform the assigned tasks. It includes the knowledge, experience, expertise and skills that are in the realm of the work that needs to be done. The expression ‘I can’ symbolizes the Ability level of trust.

Gardeners prove ability with their knowledge about plants, soil and weather, their patience, or their photographic memory. For neurosurgeons, ability includes a steady hand, a deep knowledge of brain anatomy, or being able to concentrate for long periods.

Integrity: “I Will”

Integrity is built on behaviors such as keeping one’s word, being loyal to the other party and the relationship, and respecting a set of values that both parties adhere to. The Integrity level reflects an ‘I will’ attitude.

Mail carriers exhibit integrity when they deliver the mail in a timely fashion to the right recipients, or when they don’t disclose mailing information to other recipients or senders. Public relations professionals show integrity by not working for a client’s direct competitor, or by not sharing clients’ confidential information.

Benevolence: “I Care”

Benevolence entails being able to put the other party’s objectives ahead of our own, demonstrating good will towards the other party in a business relationship, and caring for them more than we care for ourselves.

But it doesn’t mean sacrifice for the sake of an abstract concept of goodness, or avoiding hurting other people’s feelings. In business contexts, being benevolent means to behave in ways that are best for our clients and/or company.  ‘I care’ summarizes the Benevolence level.

For advisors, benevolence entails speaking truth to power. They show benevolence because they act in the boss’s or client’s best interest and are ready to put their own position at risk. Attorneys demonstrate benevolence when they turn down cases that they cannot win.

3 levels of trust

The Competence – Trust Gap

The Three-Level Model of Trust provides an explanation for the imbalance between women’s participation in the workforce and their share of leadership. As Climb Leadership Consulting president Chuck Garcia very accurately told me, “Women strive for perfection, while men strive for progress.” In other words, women excel in the ability level.

Three Self-Sabotaging Mistakes

Perfectionism leads women to three common self-sabotaging mistakes that undermine their ability to inspire trust and hence, stifle their leadership potential.

  • Deference to authority
    When women’s most important objective is to deliver spotless, perfect work, they reflect that they expect that an authority figure will judge them and their work.Because they defer to a higher authority, they tend to hold back in meetings.Expecting (and fearing) to be judged, they prefer not to share an idea lest it be imperfect.And since they believe they need someone to validate their ideas, they are not assertive. Striving for perfection makes some women berate themselves for the mistakes they make.Again, their fear to be judged compels them to self-justify before someone starts pointing fingers at their mistake.
  • Inability to create and project a vision
    When they berate themselves for not being perfect, they show their inability to see errors as points in time and necessary steps for progress. They get stuck in what went wrong and why, which prevents them from looking to the future and finding the solution.Women apply only for jobs they feel they are perfect for.According to LeanIn.org, women don’t apply for jobs unless they meet 100% of the criteria, while men apply when they meet 60%. Besides insecurity, this habit reflects these women’s incapability to envisage their future selves. They can’t foresee how they will change and learn on the job because they consider only how they are now.
  • Lack of benevolence
    The perfectionist’s main objective is to be judged well. Benevolence, on the contrary, implies being able to erase oneself and work in the other party’s best interest.When women strive for perfection, they imply that they care about how they appear to others more than they care for others.

Bridging the Gap

While aiming at high quality standards is commendable, women need to get past the “worker ant” stage if they want to reach top leadership positions.

Showing authentic care for the objectives of others is what defines leaders.

When speaking in public, leaders care about the audience and help them connect. When leading teams, leaders care about the followers and help them thrive.

When leading a company, leaders embody its vision and help employees work strategically towards the ultimate goal.

#  #  #

You can download the entire capstone here.

Logos Consulting Group president Helio Fred Garcia co-authored an analysis of one of South Korea’s biggest crises of 2016 in Korea’s leading business journal, Dong-A Business Review.

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The analysis was co-authored with Dr. Hoh Kim, founder, head coach, and facilitator at THE LAB h in Seoul, Korea.

Dr. Hoh Kim, founder, The Lab h, Seoul

Dr. Hoh Kim, founder, The Lab h, Seoul

Dr.  Kim, former head of Edelman’s Korea office, is a certified trainer in the Cialdini Method developed by Dr. Robert Cialdini, and a certified coach in the Marshall Goldsmith Certified Stakeholder Centered Coaching method.  Dr. Kim is the primary author of the Dong-A Business Review analysis.

Their article examines the crises surrounding The Lotte Group, one of Korea’s leading industrial conglomerates.  Lotte Group consists of more than 60 business units and employs 60,000 people in such industries as hotels, beverages, candy manufacturing, fast food, retail, financial services, chemicals, electronics, IT, construction, publishing, and entertainment.

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In October Lotte Group’s Chairman, Shin Dong-bin, was indicted on tax evasion, embezzlement, and other charges.  His sister, Shin Young Ja, was arrested several months before for embezzlement and bribery.

Lotte Group is one of Korea’s chaebols, family run business conglomerates, a common form of business organization in Korea.

You can download the complete original Korean language version of the analysis here.

An English translation follows below:


Untitled

The Crisis Management of Lotte

‘A red team’ that challenges a corporation from within is necessary
in the era of ‘reputation management’

Co-authored by

Hoh Kim, Founder, Head Coach & Lead Facilitator, THE LAB h and
Helio Fred Garcia, President of Logos Consulting Group

Published at Dong-A Business Review (DBR), December 2016 Issue 2 (No. 215), pp. 90-94, in Korea

AUTHORS

  • Dr. Hoh Kim graduated from Hankuk university of foreign studies, where he majored in French literature and philosophy. He earned his master’s degree in PR at Marquette university and his Ph.D at Graduate School of Culture Technology, KAIST. He is one of the 19 Cialdini Method Certified Trainers (CMCT) approved and endorsed by Robert Cialdini, the author of Influence: The Psychology of Persuasion.  He has previously led the Korea office of Edelman, a global PR firm and written several books including Cool Apology (co-authored), Cool Survival Kits, Reputation Society (co-authored) and Why I Can’t Say No (all in Korean).
  • Dr. Helio Fred Garcia is the founder of Logos Consulting Group and has more than 35 years of experience in crisis management, executive coaching and consulting. He is an adjunct professor of management in NYU’s Stern School of Business Executive MBA program, where he teaches crisis management. He is the author of  The Power of Communication: Skills to Build Trust, Inspire Loyalty, and Lead Effectively, and is the co-author with John Doorley of  Reputation Management: The Key to Successful Public Relations and Corporate Communication, which was translated into Korean and published as Reputation Management Strategy in Korea by Alma Press in 2016.

 

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ABSTRACT

According to the book Reputation Management Strategy, the formula for reputation is ‘Reputation = (financial) performance + (organizational) behavior + (corporate) communication’. The Lotte crisis has largely been triggered by problems with its organizational behavior. First, ‘an owner risk’ has occurred in leadership behavior and second, in corporate behavior dealing with its customers and business partners, the company led people to believe that it is not an ethical company. Finally, Lotte has failed in communication because there has been a huge gap between its short-term responses, actual leadership behaviors and its nominal long-term vision.

This article offers suggestions for Korean companies that are facing  challenges similar to Lotte’s.

For starters, companies need to get stakeholders to be involved so that they can constantly challenge the companies from the outside. Second, corporations need to have something like ‘a red team’ or ‘a devil’s advocate’ within the organization so that they can bring genuine change to corporate behavior.

ARTICLE

This year the Lotte Group experienced its worst crisis. Here are some questions we need to ask concerning the issue:

  • Q1. How did people first respond to the scandal? Did they say “No, Lotte would never do such a thing” Or did they say “I told you so”.
  • Q2. How would you respond if someone tells you that you are acting just like Lotte?  Would you feel flattered or offended or just regard the comment as neutral?
  • Q3. Lotte has made several promises to reform it. Which one impressed you the most? Do you really believe that the company will keep the promises?

We will explain later why these questions matter for Korean businesses in terms of crisis management. In the meantime we want readers to find the answers to the questions on their own.

For the most part, when we analyze a case, we take a careful look at it as if cameras zoom in. And then we figure out what the problem was and how the problem should have been solved. But in the case of Lotte, one of the authors (Dr. Hoh Kim) thought that when it came to solving the problems there was little Lotte could do in the short term. There were three reasons for this.

  • First, the core of the crisis lay in conflicts among three members of the founder’s family.
  • Second, the founder has failed to smoothly pass down the business to his children, which should have been done over the course of years or decades.
  • Third, it is only the founder and his family who could have prevented these problems.

In this article we’d like to talk about Lotte’s crisis management from a reputational perspective.

In the field of crisis management, there is something called issue index. The index refers to a list of potential issues that might occur to a company in the future. When we were reading news articles about the 2016 Lotte crisis, it almost felt like we were seeing the issue index of Korean conglomerates in general. Of course, how dangerous the problems are and how the issues affect the businesses can be different from company to company.

But it is worth looking into the Lotte case because so many Korean conglomerates share the same kinds problems as Lotte. Conflict over succession and slush funds are a good example.

The authors discussed how we could approach the Lotte case and decided to suggest a common tool that can be applied to other Korean chaebols. (Chaebols are large Korean business conglomerates, mostly family led.)

We believe that it would be helpful to develop ‘a mirror’ that other companies or business people could use to reflect themselves, not ‘a mere window’ through which other conglomerates may just watch and do nothing.  But a mirror to create self-awareness.

Also, with this analysis we’d like to present the last puzzle piece to Korean chaebols that can help them advance their management of crisis and reputation.

One Element in the Reputation Formula that
Most Korean Conglomerates are Missing:

The book Reputation Management Strategy that Dr. Garcia has co-written with John Doorley introduces a reputation formula as below:

Reputation =
(Financial) Performance + (Organizational) Behavior + (Corporate) Communication

The seriousness of the Lotte crisis lies not just in legal risks that it might face but also in a damage to its reputation.

The crisis facing Lotte at the moment is completely different from a crisis that a conglomerate might encounter when it fails to do well in its operations. The current Lotte crisis is highly likely to directly hurt its reputation. So in this case one of the most important crisis-management goals is to recover reputation.

What lessons can the reputation formula offer to Korean Chaebols as a whole as well as to Lotte?

The three elements in the formula are:

    1. Financial Performance
      • Long-Term Performance
      • Short-Term Performance
    2. Organizational Behavior
      • Leadership Behavior
      • Behavior Towards Others
      • Behavior Towards Society
    3. Corporate Communication
      • Tactical and Short-Term Communication v. Strategic & Long-Term Communication
      • External Communication v. Internal Communication

Financial performance, as an element that affects reputation, has two factors: long-term performance and short-term performance. Long-term performance can include profits of the last 10 years or long-term growth potential. Profit for the year is an example of short-term performance. In the case of Lotte, financial performance was not the major factor that affected its reputation.

When it comes to organizational behavior, there are three factors:

  • The first is leadership behavior.
    When the Lotte crisis took place, the behavior of the founder’s family was broadcast almost in real time and not just Lotte employees but also the public were able to learn about it. The conflict among the family members exposed various problems within the chaebol including opaque business practices and governance structure, and succession-related problems. And all these conflicts still remain unresolved. What is unique about founder’s family-related problems is the fact that both the crisis maker and the crisis manager are the founder and his family dynasty. This is a serious problem because it is almost impossible for the employees to take actions to solve the problem. All they can do is simply following orders from the founder’s family.
  • The second factor of organizational behavior is about consumers and business partners.
    This includes how satisfied consumers are with the products and services provided by Lotte and what its partners (vendors) think of working with Lotte.
  • The third factor is about corporate behavior towards society.
    So-called ‘Corporate Social Responsibility’ is a good example of this.  In October, Lotte’s Chairman, Shin Dong-bin, made a public apology and announced reform plans. In the plans, he adjusted the original growth target of increasing its sales to 200 trillion Won (Korean currency) by 2020 and of becoming Asia’s tenth largest company. He then shifted his focus to corporate social responsibility, particularly philanthropy, and said he would put more emphasis on meeting people’s expectation and promoting social values. He stopped short of detailing his plans for fulfilling corporate social responsibility.

In fact, what really matters when it comes to corporations’ social behavior is not philanthropic activities but how companies make profit.

As a matter of fact, in ISO 26000, an International Standard providing guidelines for social responsibility, the word ‘philanthropy’ is mentioned only once. According to the standard, how responsible a company is depends on how much the company contributes to things like human rights, labor practices, the environment, fair business practices, consumer issues and local communities. ISO asserts that corporate social responsibility is about how to make a profit, not about what to do with profit. In other words, to become socially responsible, a company needs to make profit in positive ways. Whether it engages in charitable activities or not is a minor issue. Korean chaebols need to do more in this regard.

Corporate communication, the last factor of the reputation formula, includes both tactical and short-term communication activities like press release and press conference, and strategic and long-term communication activities such as creating corporate missions, visions and values.

Another form of corporate communication includes communication with consumers and the public and communication with employees.  If you go to Lotte’s website(lotte.co.kr), you can find its management policies. The first policy is about transparency and it reads: “we shall promote transparency in our operation and financial performance by tightening self-monitoring systems and strengthening regulatory tools”.

The company also says that it shall put the idea into practice by establishing a system that helps its shareholders understand how the company is doing, by honestly sharing management-related information and decision making and by actively supporting the board of directors and creating a committee that promotes transparent business practices.

One of the core values of the company is responsibility and it reads: “we shall always honestly run the business and contribute to social development by fulfilling our social responsibility. And its action guidelines read: we shall not cover up our mistakes and immediately inform our mistakes and correct them; we shall execute our tasks according to legal, ethical and social standards.”

Lotte is being criticized because there are gaps between its corporate communication and organizational behavior, particularly its leadership behavior.  This Say-Do Gap is the key problem.

One could conclude that Lott’s statements of corporate vision, values and action guidelines are just meant to be framed and hung on the wall. One might also add that in reality no company takes these things seriously.

But stated values create expectations.  And trust rises when expectations are met; falls when expectations are not met.

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If corporate founders ignore the management policies and detailed action plans that they themselves have created, they will face a situation where it is almost impossible to exercise their leadership because they will lose the trust of those who matter to them.

This is the last piece in the reputation puzzle that Korean conglomerates need to improve. Korean chaebols have been able to show world-class business performance through innovation in their products and services. They also have heavily invested in advertising and promotion and have seen great improvement in their corporate communication.

However, they are rightly criticized for failing to make a meaningful change in their corporate behavior, particularly in their leadership and social behavior.  The founders and chief executives of chaebols create ‘great’ visions and values for their companies, but top management themselves often do not take these visions and values seriously. In today’s world, where it is easy to monitor corporate behavior and where stakeholders have easy access to information, organizational and leadership behaviors that haven’t been detected before now can greatly influence corporate reputation.

As we analyzed the Lotte case, we defined the gap among performance, behavior and communication as the fundamental cause for loss of Lotte’s reputation.

Korean chaebols as a whole often have gaps in their business, not just the gap between behavior and communication, but also between performance and communication and between performance and behavior.

So far, when Korean chaebols have faced a crisis as a result of their mistakes and wrongdoings made public, they have done all the same as if there is a formula for such situation: to issue an apology, hold a press conference, take a bow and make some promises.  But, few companies have kept their promises and now few consumers and citizens believe them.

One of the most important jobs of the public relations departments of large companies in Korea has been to stop scandals involving their founder’s family dynasty from spreading. This year Koreans saw massive protests against the government that have been symbolized as candles. In this circumstance one might wonder if Korean conglomerates will be able to continue to make profit (performance) and manage crises and their reputation in the way they have been doing for a long time. Will that be possible without changing their behavior?

The Last Piece of Puzzle:
Will They Change Their Behavior?

The important question that conglomerates, founder’s families, and executives need to ask themselves is whether they are going to change their behavior.

The challenge that Lotte chairman Shin Dong-bin faces now is not to overcome this crisis but whether he changes the corporation’s behavior. If he doesn’t, the company might face another similar or worse crisis in the future.

What can businesses do to change their behavior? We get some ideas from a behavior-change model in the leadership field, not from the crisis-management field.

Dr. Marshall Goldsmith, the world’s leading leadership coach, says that stakeholder engagement is the most important factor in changing corporate behavior. So, for example, if one is to quit smoking, he needs to let his colleagues know about his decision. When around him are engaged they can watch to determine whether he changes his behavior.  As a result, he is more likely to become determined to change. This is part of why many people sign up and go to the gym, or team up with others to exercise. They aim to change their behavior by engaging stakeholders.

In October, Lotte chairman Shin announced reform plans and said that he will establish a watchdog committee that will be directly monitored by him and hire experts from outside. Will this committee be able to lead the conglomerate to change?

To succeed, the committee must be able to act like a red team.

A red team refers to a structure similar to a devil’s advocate — someone who is actually a member of the organization but monitors and points out problems from the opposite point of view in the interest of that organization.

If Lotte has such a committee just for appearance’s sake, the effort is highly likely to fail.

In the beginning of this article, we asked three questions. Now we’d like to explain why such questions matter and what our answers are.
In order for companies to change their behavior, nothing is more important than to figure out exactly how their stakeholders  think of them. In fact, many Koreans have negative perspectives of Korean conglomerates.

If the founders of big corporations or chief executives are to properly manage crises and reputation, they need to understand how those who matter to them view them. When a disaster takes place or when the end of the year is near, chaebols often donate hundreds of millions or even billions of Won (Korean currency) to those in need. They even encourage their employees to perform community services. So big companies often complain that they are unfairly criticized because they actually do many things for communities.

Here’s a question: If chaebols raise their donations by two to three times or perform more community service, will their stakeholders have a better view of them?

We don’t think so, because people’s fundamental ideas of chaebols are negative.  Many take conglomerates’ donations and community service for granted because they believe that chaebols must give some money for the poor at the end of the year because they have done so many bad things all the year round.

What kinds of strategies should conglomerates adopt to effectively manage their reputation and crises? And how should they put the strategies into practice?

In most cases, there are two types of behaviors that chaebols engage in facing a crisis. First, they engage in behaviors that make their negative image worse. Such behaviors include cover-up, lie, evasion of responsibility, denial and even blaming victims — just as recently happened when a daughter of Korean Air Line’s chairman threw a fit, angrily insisting that a plane she was on return to the gate of an airport. These kinds of behaviors reinforce consumers’ negative views of chaebols.

The other type of behavior is the ones that contrast sharply with people’s negative perspectives. For instance, the public  found it surprising when a daughter, not a son, of the founder’s family of a big company had joined the navy as a naval officer. The public knew that the decision was not made to improve the image of the company but still found it pleasantly surprising.

Also, when Korea was hit by the Middle East Respiratory Syndrome pandemic (MERS),  Samsung’s Vice Chairman JY Lee conceded his company’s fault and sincerely apologized to the public. This gave the public an opportunity to fix their negative perceptions towards chaebols because most people thought that chaebol owners would deny their responsibility when a crisis takes place.

Of course, if Korean conglomerates are to overcome crises and transform their image, they need to do more than just create a temporary surprising event. Corporate founder’s family must be determined and engage in consistent “surprising behaviors.”

Protesters holding candles are calling for change not just within the government. They are sending a strong signal that there must be a paradigm shift in chaebols’ management of crisis and reputation.

The public is calling for change in corporate behavior. We each have public relations experience and have long worked in crisis management and strategy communication consulting. The conclusion that we want to share with readers is clear: If one approaches crisis and reputation management from the perspective merely of public relations, one is bound to fail.

Food for Thought

      1. What kinds of images do publics have about my company? Apart from the products and services that my company provides, how do publics think of my company? Do they think of it as the one that coexists with, is mutually beneficial with and contributes to society? Or as evil? If the latter, why is that? What are your solutions to fix the image?
      1. It is difficult to improve corporate reputation merely by engaging in some corporate social responsibility efforts and philanthropy or by handing out some corporate leaflets. To get positive reputation, the entire company needs to make an effort to create social value, and this approach should be the center of  profit-making process. The reason why this approach matters is the reason why the CSV (creating shared value) strategy matters. Does my company take CSV seriously? Does it have a team that puts the idea into practice?

 

#  #  #


Note:

Reputation Management: The Key to Successful Public Relations and Corporate Communication, by John Doorley and Helio Fred Garcia, was originally published in 2007.  It is now in its Third Edition in English.  A Korean translation was published as Reputation Management Strategy in 2016.  A Chinese edition is scheduled to be published in early 2017.  A French language edition is now underway, due to be published in late 2017.

John Doorley is a Visiting Associate Professor at Elon University in Elon, North Carolina, and a Director in Mindful Reputation.  He is a founding academic director of New York University’s MS in Public Relations and Corporate Communication.

Dr. Hoh Kim and Helio Fred Garcia began working together in September, 2015 when Dr. Kim was the moderator and Mr. Garcia was a keynote speaker in the Chosun Issue Forum, a conference on crisis management in Korea sponsored by Chosunilbo, Korea’s leading newspaper.

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Dr. Hoh Kim, left, moderating a panel discussion at Chosun Issue Forum, Seoul, September, 2015

by Helio Fred Garcia

This is my sixth in a series of guest blogs featuring my recently-graduated capstone (thesis) advisees in New York University’s Master’s in Public Relations and Corporate Communication.

Wall-Street-Reputation-NYU-Flag-2014-Sep (1)

See my earlier posts:

In this blog, Nicky Honghao Ruan looks at the issue of brand loyalty, and makes a counter-intuitive discovery:  Sometimes, very strong brand loyalty can make companies’ crises worse than if they don’t have brand-loyal customers.

Nicky explores a range of crises affecting different kinds of organizations, and identifies the criteria of the organization, of the customers, and of the crisis that predict whether brand loyalty will help or hurt an organization in crisis.

Better yet, she provides a template that can help leaders and their advisors anticipate what will work and what will hurt, and to adapt accordingly.  Worth reading.

You can download the entire capstone here.

 


Brand Loyalty in Crisis:

How does strong brand loyalty affect a company during crisis under different circumstances?

by Nicky Honghao Ruan

Nicky Honghao Ruan

Nicky Honghao Ruan

Consumers are familiar with programs like “My Coke Rewards,” “Marriott Rewards” or “AAdvantage,” that help to contribute to a core marketing concept — brand loyalty.

Brand loyalty has long been endorsed by marketing experts as an intangible asset for a company or organization. Conventional wisdom suggests that strong brand loyalty can empower a company to overcome crises, but practitioners often overlook the potential risk of strong loyalty when the nature of the crisis changes. In some cases, strong brand loyalty does not shield a company from crisis, but can instead become a liability because the high expectations of loyal customers were not met.

Through case studies, in-depth interviews with crisis management experts, and public surveys, my capstone examines the interplay between crisis conditions and the role of strong brand loyalty, and identifies various causes for both helpful and harmful outcomes.

As a result, I developed a model for crisis management professionals to quickly evaluate whether to incorporate a brand’s loyalists as defense strategy, or instead to plan for ways to prevent the extra harm that could instead be created by loyalists.

Mapping the Template

Chart 1Brand loyalty is more likely to help a brand under conditions in the left column (green), and more likely to harm one under conditions in the right column (red).

At the same time, those criteria in the top row (darker color) would have stronger impact than those in the bottom row (lighter color).

The one that falls in the middle column is especially situational and could go either way.

When a crisis happens, a company would be involved with more than one of these conditions. Depending on the situation at the time, crisis management professionals would take the template and check what criteria the brand fulfills and which side it tends to lean on more.

Examples

When Strong Brand Loyalty Helps:   

Blue Bell’s Listeria Crisis

BlueBell Logo

In early 2015, U.S. ice cream maker Blue Bell announced several rounds of complicated recalls of its ice cream after listeria in its products infected five consumers and led to three deaths.

Although its crisis response was strongly criticized, Blue Bell’s strong loyalists remained highly tied with the brand.  The beloved Southern ice cream maker made it through the summer without having any product on shelves. During the time, fans continued to engage with the company on social media.

In fact, Blue Bell’s fiercely loyal consumers were waiting in long lines outside stores when the company finally came back to the market.

Chart 2

 Apple  iPhone 4’s “AntennaGate”

Apple Logo

Very soon after Apple released iPhone 4 on June 24, 2010, complaints about signal attenuation began to flood the web.

When faced with growing negative reviews, widespread criticism and potential lawsuits, Apple’s initial solution was to tell users to not hold their phones in certain way.

Critics argued that Apple’s crisis response broke all the rules: the company didn’t apologize immediately or take full responsibility. Despite all the negative publicity and critics, demand for iPhone 4 continued to exceed supply.

Chart 3

In the case of Blue Bell and iPhone 4, the brand was in the green more than in the red. Therefore, their strong brand loyalty helped the companies overcome the crisis.

 

When Strong Brand Loyalty Hurts:

The “New Coke” Launch

CocaCola Logo

Thirty years ago, Coca-Cola made its worst mistake when, without warning, it abandoned its original formula and replaced it with “New Coke.”

Long-standing customers felt betrayed.

Some deserted the brand for its biggest competitor Pepsi.

Ultimately, Coke’s strong brand loyalty led to one of the company’s largest PR crises, driven by a fierce reaction from fans who believed Coke was neglecting them.

After three months of justifying the unilateral withdrawal of its beloved Coke, and insisting that customers would prefer the new Coke, Coca-Cola brought the original back as Coke Classic.

Chart 4

Susan G. Komen and Planned Parenthood

SGK LogoOn January 31, 2012,  the Susan G Komen Foundation announced its decision to stop funding  Planned Parenthood.

The halt would affect breast cancer screening and treatment services — mostly provided to poor or uninsured women — at 19 of Planned Parenthood’s affiliates.

Within hours after the news broke, Komen was flooded by public outcry. During the next three days, the foundation saw significant lost in donation and the negative response it received was overwhelming.

After 72 hours of the initial decision, Komen Foundation announced that it would reverse the funding decision.  But the reversal didn’t stop the damage.

Long-standing Komen supporters who felt hurt and betrayed refuse to forgive the organization. Both event participation and revenue of the nation’s best known cancer foundation continued to drop.

Chart 5

Volkswagen’s Emissions Scandal

Volkswagen Logo

In  2015, the U.S. Environmental Protection Agency (EPA) found that German automaker Volkswagen Group (Volkswagen) had installed software in a number of cars sold in the U.S. that would provide artificially positive results  during emission tests.

Volkswagen later admitted that it had intentionally equipped its vehicles to cheat on emissions tests. For the first time in 13 years, Volkswagen’s sales in the U.S. declined 15% in November 2015.

Marketing and communication experts think that Volkswagen would be hard to forgive, especially by many of its loyal consumers.

The fact that the company voluntarily cheated on the public was worse than negligence or mistakes in testing procedure, which set itself apart from other auto recalls in the industry though some of them even linked to deaths.

Chart 6

Conclusion

The New Coke, Komen and Volkswagen crises saw far fewer conditions in the green compared to those in the red. Therefore strong brand loyalty in these cases created a backlash.

This model creates a shortcut for communication professionals to quickly evaluate their brand loyalty’s position and the likelihood that loyalty will help or hurt the organization navigate a crisis.

When a brand falls more into the green cells, instead of immediately pulling out everything, e.g. halting production or crafting the perfect apology, time and money could be better spent on gathering information and resources to fix the problem.

When a brand falls more into the red cells, the essence of response strategy should include gaining forgiveness from loyalists.

Perhaps more significant, the model can stimulate companies to take brand loyalty into serious consideration before making business decisions.

by Helio Fred Garcia

To my Students: A Fourth of July teachable moment on framing —  starting with why — and career management, on the 240th birthday of the United States of America.

On June 7, 1776, the Second Continental Congress, meeting in Philadelphia, voted to separate from England; our own Brexit.

It passed a resolution put forward by Richard Henry Lee of Virginia, declaring, in part: “These colonies are, and of right ought to be, free and independent states.”

The Declaration of Independence, by John Turnbull

The Declaration of Independence, by John Turnbull

Who Writes The First Draft?

On June 11 Congress named a committee, known as the Committee of Five,  to write the announcement.  That committee included John Adams of Massachusetts, Ben Franklin of Pennsylvania, Roger Sherman of Connecticut, Robert Livingston of New York, and Thomas Jefferson of Virginia.

The committee initially asked Adams to write the first draft.  But Adams, 41, considered himself a statesman and thought the work beneath him.  So he suggested that Jefferson, 33 and a rising star, take the first draft.

Writing the Declaration by JLG Ferris

Writing the Declaration by JLG Ferris

According to the biography John Adams: A Life by John Ferling, Jefferson was confused by Adams’ suggestion:

“Jefferson asked, “Why will you not? You ought to do it.”
To which Adams responded, “I will not – reasons enough.”

That didn’t satisfy Jefferson, who insisted,

“What can be your reasons?”
And Adams responded, “Reason first, you are a Virginian, and a Virginian ought to appear at the head of this business. Reason second, I am obnoxious, suspected, and unpopular. You are very much otherwise. Reason third, you can write ten times better than I can.”

Adams may or may not have been sincere.

Jefferson yielded.

“Well,” said Jefferson, “if you are decided, I will do as well as I can.”
Adams concluded, “Very well. When you have drawn it up, we will have a meeting.””

There is no evidence that such a meeting took place. There is evidence that Franklin, then in his 70s, edited Jefferson’s draft carefully.

Start With WHY

So Jefferson took on the task. But instead of simply listing the grievances against the King, Jefferson, who knew a lot about persuasion, decided to start with WHY — First, with a meta-WHY, why a Declaration of Independence, as opposed to simply an account of the vote? And second, the WHY of separation.

First, WHY the Declaration:  Jefferson wrote that in such circumstances,

“a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.”

A Decent Respect for the Opinions of Mankind

Think about that for a moment: A DECENT RESPECT for the opinions of mankind.  That’s the foundation of public relations — and of all civil government.  This usually-overlooked opening to the Declaration is in many ways as important as what follows.  It creates accountability and sets a standard — what reasonable people would appropriately expect a responsible provisional government to do when it decides to leave.

Second, WHY the separation: First principle: All are equal.  Second principle: Fundamental rights are life, liberty, and pursuit of happiness.  Third principle: Government exists to secure these rights.

Move to HOW

And then the HOW: When government fails to do so, it is the right of the people to alter or abolish that government.

Heady stuff.

Of course, it was more aspirational than normative, as Lincoln pointed out 87 years later. We’re still trying to get it right.

Finishing the Draft

Draft of the Declaration, with Franklin's and others' edits

Draft of the Declaration, with Franklin’s and others’ edits

Jefferson’s draft was powerful but wordy.  Franklin edited it; the Committee of Five submitted it; the Congress tweaked it more.

The Declaration was ratified on July 2, and published on July 4.

DOI Final

The Broadside Edition of the Declaration of Independence, published on July 5, 1776.

Note that of the 1,338 words of the Declaration, the first 1,180 are all about the WHY and the HOW.

The WHAT, the text of the actual resolution of the Congress, appears only in the last paragraph and consists of only 127 words:

“We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do.”

And the Declaration closes with the final 31 words:

“And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.”

Rivals and Friends

John Adams as the second President of the United States

John Adams as the second President of the United States

Adams never quite got over missing the chance to get credit for the Declaration.  He went on to become the first Vice President and second President; Jefferson to be the first Secretary of State and third President.

TJ

Thomas Jefferson as the third President of the United States

History continues to view Jefferson — with all his flaws and contradictions — more favorably than Adams.

The two were fierce political rivals until both left office; then they became fast friends, frequently corresponding with each other (as only former presidents can do).

But Adams continued to envy Jefferson.

And both died on the same day, exactly 50 years after the Declaration was published, on July 4, 1826, exactly 190 years ago today.

According to legend, Adams, on his deathbed and unaware that Jefferson had died several hours earlier, lamented that Jefferson would outlive him.

He uttered this deathbed regret:

“Jefferson Lives!”

Of course, he was right.

 

Below, for reference, the final version of the Declaration of Independence.

……………………………………..

IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.–Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
He has affected to render the Military independent of and superior to the Civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
For Quartering large bodies of armed troops among us:
For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
For cutting off our Trade with all parts of the world:
For imposing Taxes on us without our Consent:
For depriving us in many cases, of the benefits of Trial by Jury:
For transporting us beyond Seas to be tried for pretended offences
For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated Government here, by declaring us out of his Protection and waging War against us.
He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.