Companies in Crisis - What not to do when it all goes wrong
Exxon Mobil and the Exxon Valdez
Many companies have faced a crisis during their history, whether due to external forces beyond their control,
through their own failings or management problems, or a combination of the two. Only a few, however, come to
personify corporate irresponsibility through one pivotal event. Such a one is Exxon's experience with the Exxon
Valdez.
What happened
In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards California. In spite of
the fact that the weather and sea conditions were favourable and the Bligh Reef clearly marked on the maps, the ship
ran aground and began spilling oil. Within a very short period of time, significant quantities of its 1,260,000 barrels
had entered the environment.
At the moment of the collision the third mate, who was not certified to take the tanker into those waters, was at the
helm. The probably cause was established that the Captain and many of the crew had been drinking alcohol in
considerable quantities.
What did the company do?
According to most observers, too little and too late. The action to contain the spill was slow to get going. Just as
significantly, the company completely refused to communicate openly and effectively. The Exxon Chairman,
Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly.
Shortly after the accident had taken place, and the world's media had piled in to begin extensive coverage, a
company spokesman pointed to the existence of procedures to cover the eventuality - procedures which the TV shots
showed were demonstrably failing. When asked in Rawl would be interviewed on TV, the response was that he had
no time for that kind of thing.
Meanwhile the operation on the ground was getting nowhere fast. Around 240,000 barrels had been spilled, with
another million still on the ship. During the first two days, when calm weather would have allowed it, little was done
to contain the spillage. This spillage spread out into a 12 square mile slick.
Then the bad weather struck, making further containment almost impossible.
After more than a week, the company was still giving no ground on the request for better communication. The media
clamour became so hostile that eventually Frank Iarossi, the Director of Exxon Shipping, flew to Valdez to hold a
press conference. It was not a success. Small pieces of good news claimed by the company were immediately
contradicted by the eyewitness accounts of the present journalists and fishermen.
John Devens, the Mayor of Valdez, commented that the community felt betrayed by Exxon's inadequate response to
the crisis, in contrast to the promises they had been quick to give of how they would react in exactly this eventuality.
Eventually, Rawl deigned to go onto television. He was interviewed live, and asked about the latest plans for the
clean-up. It turned out he had neglected to read these, and cited the fact that it was not the job of the chairman to
read such reports. He placed the blame for the crisis at the feet of the world's media. Exxon's catastrophe was
complete.
Cost and benefit
The consequences for Exxon of its two-pronged disaster - the spill and its environmental consequences, alongside its
disastrous communications - were enormous. The spill cost around $7bn, including the clean up costs. $5bn of this
was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility.
The damage to the company's reputation was even more important, and more difficult to quantify. However, Exxon
lost market share and slipped from being the largest oil company in the world to the third largest. The "Exxon
Valdez" entered the language as a shortcut for corporate arrogance and damage.
Conclusion
The features that made Exxon's handling of the crisis a failure included the following:
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The company failed to show that they had effective systems in place to deal with the crisis - and in
particular their ability to move quickly once the problem had occurred was not in evidence
They showed little leadership after the event in showing their commitment to ensuring such problems
would never happen again
They quite simply gave no evidence that they cared about what had happened. They appeared indifferent to
the environmental destruction.