Academic journal article
By Choudhary, Amod
Academy of Strategic Management Journal , Vol. 11, No. 1
For many well-known companies, years 2008-2009 stand out for wrong reasons. Only other period that may be comparable are the prominent graft cases involving senior managers of many companies during the dot-com years of early 2000's. During 2008, prominent financial firms like Bear Stearns and Merrill Lynch were forced to sell, while Lehman Brothers went bankrupt. In addition, other venerable firms like Citigroup and AIG found themselves on the brink of bankruptcy. Later in 2009, firms such as Toyota and BP found themselves in serious public relations and structural problems. The problems that engulfed these corporations were different from Enron, Tyco, Adelphia, WorldCom, and HealthSouth Corporation of early 2000s but the results were almost identical. Mainly, these organizations passed through severe crises from which some survived and others did not. The common denominator in all these crises was widespread perception by the stakeholders of deep mistrust in senior managers of these organizations.
Mission and Vision statements provide identity and roadmap of future for a corporation. This paper analyzes whether Mission Statements (which include the Vision, Values, Principles, and Credo of a corporation) should be redrafted such that during times of crisis, it can be used as roadmap for successfully navigating the troubled waters faced by senior managers.
This paper will analyze the problems faced by organizations due to lack of truthful communication with their stakeholders (mainly shareholders, media, and consumers), and provide some guidelines to redraft Mission Statements so that it becomes a guidance document during times of severe crisis.
The late 2009 and most of 2010 was an unforgettable one for Toyota and BP. Toyota was accused of either stalling or not being fully truthful about accidents allegedly caused by faulty accelerators in their automobiles. By fall of 2010, Toyota had recalled approximately 8.5 million cars and trucks that could speed up and lose control due to gas pedals jamming or being stuck under floor mats (Tabuchi, 2010). Toyota's problems worsened because the CEO only acknowledged the accidents associated with accelerators some six months after the alleged problems were reported to the company. For reasons unknown-most likely the fear of potential legal liability-Toyota chose to not acknowledge the accelerator problems earlier. The result was that by February 2010, Toyota's once great engineering reputation was replaced by that of a company that is untrustworthy and one that puts profits before safety.
In spring of 2010, BP's oil rig-Deepwater Horizon-caused an explosion of an oil well in Gulf of Mexico that is now considered the worst oil spill in history of United States (Goodman, 2010). After the accident, BP took inordinate time in taking responsibility for the oil explosion, and blamed its subcontractor for the explosion. Meanwhile, the oil leaked for a much longer period than anticipated. By the time the oil leak was stopped, BP replaced its chairman and its reputation as an environmental visionary was destroyed. The accident also cost BP billions of dollars in oil cleanup and lost shareholder value (Goodman, 2010).
In March 2008, Bear Stearns-an 85 year old investment firm-was forced to sell to J.P. Morgan Chase & Co., when within 72 hours Bear Stearns went from being liquid to illiquid (Kelly, 2009). When the Chief Executive of Bear Stearns announced the sale of Bear Stearns to J.P. Morgan Chase & Co., he stated it was the right thing to do. The assumption being that the Bear Stearns CEO meant that the sale was beneficial for shareholders, employees and the management under the difficult circumstances. Around the same time, Lehman Brothers went bankrupt, followed by acquisition of Merrill Lynch by Bank of America later in the year. All three of these venerable Wall Street firms were victims of so-called toxic mortgage-backed securities. …