| Review of: | Code Red in the Boardroom edited by W. Timothy Coombs |
|---|---|
| Reviewed By: | Laurence Barton |
| Reviewed in: | Journal of Contingencies and Crisis Management |
| Date accepted online: | 10/04/2008 |
| Published in print: | Volume 15, Issue 04, Pages 232-238 |
Book Reviews
Boardrooms aren't pretty places these days. They're empty most of the time - the average Board of Directors of a multinational company meets just four times a year - and we tend to think of them as engaged policy makers who are highly astute at understanding the nuances of the companies they are affiliated with.
That's largely a fantasy, as we know from recent scandals at German electronics giant Siemens, the Board of insurer Marsh McClennan and numerous charities around the world including the International Red Cross and the Roman Catholic Church, all of which have suffered embarrassment and financial distress due to a lack of governance, internal controls of smart crisis communications.
Professor Coombs, Associate Professor at Eastern Illinois University, has written a fast read that analyses the crisis from the perspective of the Board member as opposed to first responder or chief financial officer. It's a breath of fresh air, as this perspective has rarely been examined.
Coombs argues that organizations need to embed a 'crisis sensing network' into their DNA, arguing that unless management advises Board members that there are warning signs of potential crisis, also called a prodrome, it misses important opportunities to allocate resources - money, people, legal counsel and sympathy for victims - promptly.
'Prodromes rarely announce themselves to people in the organization: you need to actively search for them', Coombs notes. 'Think of the crisis-sensing network as prodrome radar ...The Titanic provides an excellent example of how not being systematic can allow a crisis to unfold'. The example is a sound historical one, and Coombs then amplifies upon this to explain how directors at McDonald's, Tyco, Wendy's Restaurants and others failed to adhere to the standards of watching the horizon for problems and listening when you are advised that 'icebergs' may be on your horizon.
Coombs work is best suited as a corporate read, not for classroom use. He keeps the cases referenced very brief and jumps from industry to industry, reminding the reader to be aware of environmental and legal standards. He correctly reminds the reader that relying on a crisis management plan (CMP) alone as a panacea is just not prudent:
'In some ways, crisis management as an add-on may be more dangerous than no crisis preparation at all. If management thinks a CMP will protect them from harm, they are mistaken. CMP's do not actively seek to prevent crises, they help orchestrate responses to a crisis. If the plan is not updated or practiced, the crisis response will be ineffective and could even worse the damage from the crisis. Crisis management as an add-on creates a false sense of security that could lead to an ineffective or harmful crisis response' (p. 7).
Bravo - but this needs to go further ...don't rely just on your CMP, have guidelines to understand when you must raise the flag and alert your Board members of a looming problem - that's the subtitle of the book. I was left waiting for a penetrating analysis on that dimension.
Although Code Red is an easy read, there are some limitations to this work. It's very American-focused and you'd be hard pressed to find cases outside of North America, a disappointment. He includes a section on the US Department of Homeland Security and a brief crisis plan template, but neither of these are applicable to any organization that has an international dimension; today, in an interdependent world, that's just about all of us.
Those issues aside, I suspect Coombs is onto something. We often look at leaders such as John Browne, former CEO of British Petroleum, and he becomes the instant target of criticism for personal choices that were seen as a violation of company codes of conduct, allegedly for lying under oath. That's the kind of case that is pertinent to any discussion of Boardroom DNA. What did the directors of BP know, when did they know it and what did they do about it?
Let's apply those same standards to Siemens, and Sony (battery recalls) and others ...and let's learn about the standards of when the CEO, director of Security or VP of crisis management decides that she or he is managing a crisis that merits notification to the Board. Now what do I do? That's the kind of book Coombs started ...it just needed to be more global in breadth, more detailed in its analysis and more inclusionary of non-profits, government agencies and others who worry about fiduciary standards.
Coombs has a real opportunity to extend this work in the next edition. Specifically, he'll want to look at how many organizations around the world have taken variations of Sarbanes-Oxley to change their governance rules because of embarrassment and litigation that emerged after various environmental, product and executive issues that caused real harm to companies.
Because SarBox, as it's known, directly tells directors that they cannot say 'I didn't know' and claim no culpability when a crisis emerges, the EU has raced to embrace many of those standards so that all of Europe is on the same page about the fact that directors are expected to be kept informed about risk - all kinds of risk. Even if they don't ask, management has a responsibility to tell them: this is where we are vulnerable.