Bernie Banton an asbestos victim became an enemy for the JHI. He had verbal confrontations with the then health minister Tony Abbott as well as Joe Hockey, the then minister of Industrial Relations. Both confrontations received wide media coverage, Banton’s ability to capture public attention was vital to his cause. This is how the media played with people’s emotions, by placing this victim in the public eye and JHI did not respond and therefore suffered in credibility.
2004 REACTIVE PUBLIC RELATIONS
The key personnel of the company were a weakness to JHI; they were deficient in leading the organisation in managing the crisis. In 2004 a new public relations team was put together, however, this new team ignored the basic crisis communication tactics that should be used such as disseminating information and blaming others for their internal mistakes. Hearit (2005) said that “Most crises are not the result of an external psychopath but instead are self-generated, the result of internal screw ups on the part of the companies.”(p.2)
However, major weakness of JHI was their initiative in communicating with their stakeholders. One of McLoughlin’s (2000) guiding principles for successful risk communications is “share information with key stakeholders- don’t hide information even if it doesn’t necessarily support your position.”(p.34)
The ACTU website (2004) stated that JHI completely estranged themselves from the media for a change and communicated directly to their stakeholders through letters claiming they were only liable for “15 percent of future claims.” (Para 4) The company’s statements were however found to be ambiguous in many ways. The company was found to have sufficient funds that would cover the cost of all claims. It was obvious that the reputation of the company was at stake and needed to be restored in anyway possible.
EVALUATION
In 2004 JHI did not examine which key areas were susceptible to negative publicity and craft strategies/messages to manager these issues as opposed to 2001 where they implemented effective communication strategies, especially choosing not to utilise the media – the most key intervening public. This allowed the media to frame the public agenda and take control of the messages.
Covello (2004) an academic authority in this field identified seven cardinal rules of risk communication:
- Accept and involve the public as a legitimate partner
- Plan carefully and evaluate your efforts
- Listen to the public's specific concerns
- Be honest, frank and open
- Coordinate and collaborate with other credible sources
-
Meet the
- Speak clearly and with compassion(Para 6)
Regester and Larkin (2008) said that “Threats to reputation whether real or perceived, can destroy literally in hours or days, an image or brand developed and invested in over decades.”(p.2)
Banks (2002) also said that “effective crisis management crisis communications that not only can alleviate or eliminate the crisis, but also can sometimes bring the organisation a more positive reputation than it had before the crisis.”(p.1)
Barton (2001) identifies the common members of the crisis team as public relations, legal, security, operations, finance, and human resources. The whole concept of crisis management was thrown out the window in 2004 when JHI removed their whole public relations team.
Heath and O’Hair (2008) also said that
Effective crisis management begins with prevention and even mitigation. As the event occurs and unfolds, various attributions result as stakeholders work to make an account of what happens, who or what is responsible, and what may be done to patch things up.(p.3)
In the JHI case is was clear for the stakeholders to see that the internal team was at fault and that the company needed in anyway to pay out compensation to their victims. JHI’s errors inevitably led to their crisis management failure and as Howell and Miller (2006) said “the public relations role was relegated to a functionary mode, thereby losing its strategic input in organisational decision making.”(p.265)
FUTURE RECCOMMENDATIONS FOR JAMES HARDIE INDUSTRIES
In 2020 asbestos related illnesses are set to peak, JHI should now be looking at the failed strategy from 2004 and look at future inevitable events as prodromes, because these events can trigger a future crisis. JHI still have an opportunity to discuss these matters and when a crisis occurs they can act accordingly, and learn from their organisations past mistakes. Throughout the crisis in 2004, JHI had all their key publics and stakeholders turn against them, and walk away from the damage and wrongdoings the organisation had done. In many crisis situations, organisations have little time to react and respond, especially if it is a major disaster.
A full public apology and admitting fault and taking accountability for their wrong doings is a must for the future. As Banks (2006) suggests “The public is forgiving if measures are taken to prevent reoccurrence.” Especially with what has been predicted for future victims and even deaths, the fact that there have not been any apologies to date or even having admitted fault will be brought into light again when more and more victims come forward with asbestos related diseases.
It is about time that JHI show their publics and stakeholders that “YES” they have made many mistakes in the past. JHI need to be recognised as being accountable because they are at fault and it is the best policy to be adapted by them.
JHI need to develop an issues management plan in the immediate future so they can be ready to respond to any issues they are faced with for the years to come. JHI need to handle and manage future issues in an ethical manner and consider all their actions. They need to train their staff on how to deal with issues and crises, ensure they are all media trained and utilise the media so they are able to control messages instead of letting the media set the agenda.
JHI need to adopt a proactive stance towards future issues and keep open lines of communication between them and their stakeholders. The biggest mistake made in 2004 was when Chairman Hellicar closed all lines of communication and stated that the company would not make comment to any media coverage, only speak before the commission. The organisation should never say “no comment” to the media and always be open and show that the organisation has nothing to hide.
JHI need to make their stakeholders, especially the public see that what happened was a tragedy, they need to address their position relating to the asbestos issue both the currently and that in the past. JHI must now be sympathetic and let the media frame them as being that was to show they are humbled by their unethical and immoral ways of handling the asbestos issue and are now on board to meet the needs of their victims, this can be seen by “showing not telling.”
JHI have been said to have completed the first stage of their organisational move to Ireland, they have been described as implementing this move due to tax advantages and managerial rules and regulations. The current CEO of JHI Louis Gries said last year that in leaving the Netherlands the organisation could be spared far higher tax costs, but this move has been said to be very costly with a rough figure of around $85 million.
JHI’s ability to turn a profit might come as the number one priority with its victims and other key primary publics coming in second place, it seems like they are continuing to carry out the same goals and objectives as in the past. However, focusing on retaining a profit in the next quarter is something JHI need to make sure happens, otherwise they will not pay further instalments for the compensation fund that is set up for victims, the more profit they make the more they will be able to contribute to the fund, once again showing the public they are trying to compensate victims in everyway possible.
Mitroff (1987) said that “managers, consultants and researchers have traditionally focused on problems of financial performance and growth, but have paid little heed to the effective management of corporate crises.” (p.283)
James Hardie Industries can be seen here as being ‘traditional’ because their main focus has been on their financial profits and they have paid little attention to this asbestos crisis.
The agreement with JHI was that they would contribute a maximum of 35% of its annual free cash flow to the ‘Asbestos Injuries Compensation Fund.’ It is however seen that the ‘free cash flow’ of the organisation is being used on assets, renovations and even re-locating.
Although JHI has stressed to the public that their move will not affect their contributions to the compensation funds, there has been yet another downfall for victims after JHI announced they would not be able to contribute to the funds earlier this year.
JHI said that the collapse in the US building industry and their move to the Ireland will definitely affect their ability to contribute to the funds, their liabilities are more then their assets.
Janda (2009) quoted from JHI’s statement to Australian investors,
"If a contribution is due to the Asbestos Injuries Compensation Fund in the company's 2011 financial year, which is not yet known, the costs associated with the proposal [to move headquarters] will most likely reduce the amount of the company's contribution in that year.” (Para 8)
It can be seen that JHI needs to remain profitable in order for victims to receive compensation and the only way the organsiation will move forward from their mistakes is if they make these contributions. The cost of re-locating and setting up in another country seems very costly, JHI need to focus closely on addressing their victims rather than looking for tax advantages. JHI need to take on their responsibilities and face their victims, be sympathetic to their victims and stop prolonging their crisis.
According to the James Hardie Investor Relations media release issued on the 11th of February 2010
James Hardie today announced a US$29.8 million net operating profit, excluding asbestos, ASIC expenses and tax adjustments, for the quarter ended 31 December 2009. This represents an increase of 66% compared to the corresponding quarter of last year. The net operating result including asbestos, ASIC expenses and tax adjustments was a profit of US$14.9 million, compared to a profit of US$111.0 million for the corresponding quarter of last year. (Para 1)
James Hardie Industries have proven to be profitable to date. They have majorly increased their profits compared to the corresponding quarter of last year. They have shown to be improving their business results and this is something in the interest of all stakeholders of James Hardie Industries, especially the victims of asbestos. The more profitable James Hardie Industries are the more advantage claimants and stakeholders will have.
As can be seen from the above table and graph taken from the James Hardie Website (2010) their current market position is strong and their share price is still high considering the ongoing claims of victims and the asbestos related proceedings. This shows that James Hardie Industries still stands to be a market leader in Australia.
According to Bernstein (1996) number seven of his ten steps of crisis communication are ‘develop holding statements’
While full message development must await the outbreak of an actual crisis, "holding statements" — messages designed for use immediately after a crisis breaks — can be developed in advance to be used for a wide variety of scenarios to which the organization is perceived to be vulnerable, based on the assessment you conducted in Step 6 of this process.(Para 26)
James Hardie Industries can adapt to this step by using appropriate statement that can address the public, they should change their image and even though their financial results are at a peak they need to restore their reputation in some way and move out this asbestos crisis. They could adapt statements such as
"We have implemented our crisis response plan, which places the highest priority on the health and safety of our customers and staff.”
Another statement could be a sympathetic one to those asbestos victims;
"Our hearts and minds are with those who are affected by asbestos, and we hope that they are well."
Although these statements are far overdue, it would be a good turning point for James Hardie Industries because they will be seen as credible and finally admitting and taking responsibility for their actions.
It is important that James Hardie Industries adapt more public relations theories in the future. They need to focus on building strong relationships with their stakeholders and can do this by utilising the 5 C’s of crisis communication.
JHI need to show their publics that they care about the asbestos victims and empathise with how they have become affected by asbestos. This can be done by showing they sympathise with the victims, whether it is through press conferences, videos or any other tactic to target people’s emotions and once again show the caring aspect of JHI. Sympathy is the best policy in their case.
Something else that JHI could do especially at this point in time is set up a web page or have a page on their website for asbestos victims that allows people to share their stories and give them a chance to have a voice, this would make them look credible and a responsible organisation because they are putting others first.
JHI need to declare to show their publics commitment. They need to show that they are trying to solve the problem in this case they are trying to increase their profits so they are able to contribute to victim funds and need to reassure their publics that a crisis like this will never occur again because they have learnt from their mistake. They have to show their publics how they are contributing to funds. Once again “show not tell.”
JHI need to remain consistent especially through their messages, they must remain the same all the time and in JHI’s case they need to take control of their messages in the future and not let the media set their own agenda relating to their organisation. Their messages should always remain clear, simple and effective in getting their story across.
JHI need to show coherence with all their communication strategies. This worked well for them in 2001 when they had all their strategies timed. They need to continue to focus on having their communication in a reasonable manner.
Finally, JHI need to show their publics clarity in all issues put forth to the company. Company representatives should be able to clearly explain the company’s position in any issue and clarify their actions and why they chose to take those actions in particular.
If James Hardie Industries remain profitable and adapt more public relations theories and focus on re-building trust and the organisations reputation, they will appear credible with all their stakeholders and have a strong stance in the Australian market. James Hardie Industries are already proving to be profitable; all they can improve is their reputation after this crisis and in future ones.
Bibliography
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.
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Bernstein, J (1996) The 10 Steps Of Crisis Communications. Crisis Response, Prevention, Planning and Training. Retrieved March 3, 2010 from:
Coombs T (2007) Ongoing Crisis Communication: Planning, Managing, and Responding
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Fink S (2000) Crisis Management: Planning for the Inevitable
Hearit (2005) Crisis Management by Apology: Corporate Response to Allegations of Wrongdoing
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James Hardie Industries (2010) Investor Relations and Share Price. Retrieved April 4 2010 from:
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Appendix 1
James Hardie Media Release- 11th February 2010
11 February 2010
3rd quarter net operating profit US$29.8m
Nine month net operating profit US$109.3m
(Excluding asbestos, ASIC expenses and tax adjustments)
James Hardie today announced a US$29.8 million net operating profit, excluding asbestos, ASIC expenses and tax adjustments, for the quarter ended 31 December 2009. This represents an increase of 66% compared to the corresponding quarter of last year.
The net operating result including asbestos, ASIC expenses and tax adjustments was a profit of US$14.9 million, compared to a profit of US$111.0 million for the corresponding quarter of last year.
For the nine months to 31 December 2009, net operating profit excluding asbestos, ASIC expenses and tax adjustments increased 18% to US$109.3 million from US$92.8 million. Including asbestos, ASIC expenses and tax adjustments, net operating profit moved from US$265.9 million to a loss of US$82.6 million.
The results include unfavourable asbestos adjustments of US$17.5 million for the quarter and US$200.0 million for the nine months, which are attributable to the 31% appreciation of the Australian dollar against the US dollar, from US$0.6872 at 31 March 2009, to US$0.8968 at 31 December 2009. The results also include a favourable US$7.6 million adjustment (pre and post tax) to a legal provision following settlement of a contractual warranty.
CEO Commentary
“The business continued to perform well through the downturn in the US residential construction market,” said James Hardie CEO, Mr Louis Gries.
“Year-to-date results benefited from lower input and freight costs, improved plant performance and a higher average net sales price when compared with fiscal year 2009.
“With pulp and freight costs rising ahead of proven evidence of a sustainable recovery in the US residential construction market, there is a risk that margins will be under greater pressure going forward.
“We continue to pursue and fund product leadership initiatives and market share growth, and believe these will deliver substantial benefits when the market improves,” said Mr Gries.
In this Media Release, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions section of this document starting on page 6. The company presents financial measures that it believes are customarily used by its Australian investors. Specifically, these financial measures, which are equivalent to or derived from certain US GAAP measures as explained in the definitions, include “EBIT”, “EBIT margin”, “Operating profit” and “Net operating profit”. The company may also present other terms for measuring its sales volume (“million square feet” or “mmsf” and “thousand square feet” or “msf”); financial ratios (“Gearing ratio”, “Net interest expense cover”, “Net interest paid cover”, “Net debt payback”, “Net debt (cash)”); and Non-US GAAP financial measures (“EBIT excluding asbestos and ASIC expenses”, “EBIT margin excluding asbestos and ASIC expenses”, “Net operating profit excluding asbestos, ASIC expenses and tax adjustments”, “Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments”, “Operating profit before income taxes excluding asbestos”, “Effective tax rate excluding asbestos and tax adjustments”, “EBITDA” and “General corporate costs excluding domicile change related costs”). Unless otherwise stated, results and comparisons are of the 3rd quarter and the nine months of the current fiscal year versus the 3rd quarter and the nine months of the prior_fiscal_year.
Operating Performance
Total sales for the third quarter grew 3% to US$261.0 million, gross profit was up 17% to US$96.7 million and EBIT excluding asbestos and ASIC expenses was 39% higher at US$43.8 million compared to the corresponding period of last year. EBIT including asbestos and ASIC expenses for the third quarter fell 79% from US$118.9 million last year to US$25.1 million in the current year.
For the nine months, total sales decreased 12% to US$849.7 million, gross profit was up 2% to US$324.7 million and EBIT excluding asbestos and ASIC expenses was 11% higher at US$170.4 million. EBIT including asbestos and ASIC expenses moved from US$334.0 million to a loss of US$32.8 million.
Appendix 2
James Hardie Share Price
JHX stock performance
James Hardie Industries is listed on the Australian Stock Exchange (ASX) and the New York Stock Exchange (NYSE) under the code JHX.
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