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Lloyds List: ExxonMobil and the race to save face after the Alaskan oil spill

ExxonMobil and the race to save face after the Alaskan oil spill


James Brewer
Lloyds List; May 18, 2006

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WILL ExxonMobil ever shake itself free of the Exxon Valdez?

With a new chief executive at the helm, the giant company might just be able to do that. Rex Tillerson may have better luck than Lee Raymond, his predecessor.

Certainly, there were special factors that led to the tanker accident that polluted Prince William Sound, and it might be argued that it was unfortunate for the company that the disaster unfolded the way it did. Holding on to corporate reputation is much more than a matter of luck, however. It is a question of intangibles, very often: of vision, of vigilance, of emotional appeal.

ExxonMobil, earlier known as Exxon, has yet to live down the scorn it attracted over the 1989 oil spill in Alaska, which it claimed to have dealt with as expeditiously and compassionately as possible. It has spent more than $3bn on clean up work and settling lawsuits.

The disaster, in which the very large crude carrier spilled 11m gallons into Prince William Sound, ruined the livelihoods of many fishermen and killed thousands of seabirds, fish, sea otters and other creatures.

At one stage, it brought the mighty shipowners' protection and indemnity industry to the brink of break-up with the suggestion, later withdrawn, that the mutuals should provide the financial guarantees against oil spills.

In 2002, the world's biggest oil company won a $1bn reduction in the $5bn punitive damages, recalls author Ron Alsop in his important new book about image, deeds, action and reaction: The 18 Immutable Laws of Corporate Reputation.

In the short time since the book was drafted, ExxonMobil went back to court to ask for the punitive damages to be reduced to $25m, because of the vast sums of money the company has spent over the 16 years.

Mr Alsop warns: 'The reputation damage won't go away so easily. Defensiveness doesn't let old wounds heal.' He quotes a respondent to one opinion poll: 'Forget the public relations spinmeisters. Paying up would be the first step in convincing me that you actually care about the environment.'

A dilemma is that companies have to be cautious about apologising, which can imply admission of wrongdoing, and foment agitation among another constituency: the shareholders. That was something that some of the largest insurance broking houses, and insurers, had to handle with aplomb when New York attorney-general Eliot Spitzer attempted to put them in the dock over the commissions and bid-rigging scandal.

One of the laws adduced by Mr Alsop for managing reputation is 'convey a compelling corporate vision' and that is the route travelled by BP, which put its name on the line to a greater degree than, for instance, Shell, by launching its Beyond Petroleum campaign, which attempted to position it clearly as an environmentally friendly company in the forefront of alternative technology.

According to Mr Alsop, BP understands that vision is one of the most essential ingredients in the reputation recipe, for a visionary company inspires confidence. BP, like the other oil majors, is under regular fire from Greenpeace and other activists for its huge appetite for oil projects, and a series of refinery accidents has hardly helped. Like retailer Body Shop and ice cream producer Ben ' Jerry's Homemade, BP goes on surviving attacks on its credibility, and there is more than the fate of individual companies at stake.

Mr Alsop demonstrates with numerous examples from dozens of industries how fleeting is the concept of reputation, and how the misdeeds of one company can taint an entire industry, even (the book is written from a US perspective) the whole of corporate America.

This is sobering and essential reading for all executives, especially the ominous Law 18 in Mr Alsop's list: If all else fails, change your (corporate) name.

The 18 Immutable Laws of Corporate Reputation. 0749445718. Price GBP12.99. Published by Kogan Page.

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