Crisis of the Week: Will Odebrecht’s Act of Contrition Save its Reputation?

By BEN DIPIETRO
 
Jan 3, 2017 12:26 pm ET
 
The crisis this week involves Odebrecht SA, the Brazil-based construction company that last month signed an agreement with the U.S. Justice Department to pay between $2.6 billion and $4.5 billion to settle Foreign Corrupt Practices Act claims. The money will go to cover claims made by authorities in the U.S., Brazil and Switzerland related to charges against the company and some top executives for conspiring with other companies to overbill Brazilian state-owned oil companyPetroleo Brasileiro for contracts, and for bribing Petrobras executives and politicians.
 
On Dec. 1, weeks before the settlement was announced, Odebrecht issued a statement apologizing for its “participation in illicit business activities.” It approved a compliance policy on Dec. 20 and issuedanother statement when the settlement was announced on Dec. 21, again admitting wrongdoing and announcing a commitment to ethics, integrity and transparency.
 
Using only the statements made by the company, the experts break down how well the company handed this crisis.
 
Hugh Braithwaite, chief executive, Braithwaite Communications: “In crisis counseling, the apology should fit the incident. Odebrecht has certainly been unequivocal in its apologies, at least of late. The $4.5 billion settlement and several corporate executives getting jail time is certainly a dramatic statement in and of itself. It’s hard to say how much of the company’s response is influenced by its negotiations and settlement, but giving it the benefit of the doubt, its statements effectively acknowledge the concern. And its 10-point commitment to ethics offers a tangible action step to help audiences begin trusting again.
 
“However, the company’s response fails on the issue of tone. By speaking in the third person, saying ‘Odebrecht apologizes,’ its response can be seen as impersonal and its brand perceived as hiding behind the corporate wall. Sadly, this is a common practice in crisis communications. In cases of broken trust, the public needs to hear from a real person because remorse is a human emotion. A response authored by a faceless institution cannot effectively communicate emotion.
 
“It’s as if the company used a crisis template to make sure it checked every crisis box, without actually caring. Acknowledgement? Check. Apology? Check. Action? Check. Authenticity? Not quite.”
 
Nick Kalm, president, Reputation Partners: “Odebrecht’s statements are refreshingly direct, clear and contrite. Too many times, overly cautious lawyers and others water such statements down by using words such as ‘if,’ ‘may,’ ‘might’ and ‘hope,’ stripping them of most positive impact and making the company look as if it is still being evasive. Instead, Odebrecht uses words and phrases such as ‘complicit,’ ‘failure,’ ‘violated,’ ‘grave error’ and ‘earn back the public’s trust.’ These go a long way to show Odebrecht takes its participation in the largest anti-corruption settlement in history very seriously.
 
“However, Odebrecht should have gone even further. Since the scandal involved–and imprisoned–the company’s chief executive, it should not have omitted this key fact. While the company outlined the broad elements of its new ethics and transparency commitment, it appears silent on any specific changes being made to or in the boardroom, where the current scandal was known about and permitted. Odebrecht doesn’t spell out how its ethics commitment was developed–hopefully outside ethics experts helped–nor does it provide an easy opportunity to examine the specifics in detail. Correcting these oversights and issuing periodic report cards on its compliance would help.
 
“As one of the largest companies in Latin America, and as one of its statements hints, Odebrecht could go even further and serve as an active role model and thought leader in anti-corruption practices. That way, the company would rewrite its entry in the business history books to not only show it took responsibility but that it worked to change illegal business practices across the region.”
 
Matthew Horace, CNN law enforcement analyst, crisis management expert: “In what is widely seen as the most sprawling graft scheme ever exposed, Odebrecht struggles to manage crisis, reputation and future as landmark fines, global impact and lengthy prison sentences overshadow its messages of contrition. Contrition is a necessary role in crisis messaging. After a two-year global corruption investigation that landed its CEO in prison, saw the company cut off from public contracts for almost two years and led to declining revenues and a lower credit rating, Odebrecht has embarked on a proactive communications strategy of contrition, change, process improvement and pleas for public trust.
 
“On Dec. 1 Odebrecht issued a preemptive statement apologizing for its ‘participation in illicit business activities’ and announced a commitment to act with ethics, integrity and transparency. On Dec. 21 Odebrecht announced it had signed an agreement with the U.S. Justice Department. Pursuant to this announcement, Odebrecht continued its contrition by admitting wrongdoing and reinforced its renewed commitment to ethics…but these efforts may be too little too late…as the public’s trust in Oderbrecht’s business practices has eroded.
 
“Despite Odebrecht’s responsive messaging to crisis, anyone looking at this situation should view it is a huge risk that only time and adherence to best practices will overcome.”
 
Write to Ben DiPietro at ben.dipietro@wsj.com, and follow him on Twitter @BenDiPietro1.