Adjunct Fellow Jon Entine

When a brand's reputation is at stake, responsible practices are not enough. For companies in crisis, it's also about preparation and dialog. What does a company do when a brand blows up? It's one thing when a corporation publicly blunders--an official is charged with malfeasance or a plant is beset by safety allegations. But what happens when it is an innocent victim?

Earlier this summer, anyone knowledgeable about corporate responsibility would have nominated Mattel as the ethical gold standard among toy manufacturers. For nine years, the International Center for Corporate Accountability (ICCA), a nonprofit, has independently monitored Mattel's labor conditions--not just at company-owned plants, but at subcontractors as well.

"Good guys don't always finish first," says Prakash Sethi, professor at Baruch College at the City University of New York and president of ICCA. "I was as surprised as anyone about the lead paint crisis, but probably no more so than Mattel."

The problems and product recalls threatening Mattel were both predictable and unavoidable. Many manufacturers face the collateral damage of globalization. To keep costs down, they understandably contract with manufacturers in low-wage havens such as China. But with Chinese wages slowly rising, undercapitalized sub-contractors are finding their margins squeezed, prompting some to pinch pennies on raw materials.

Mattel may not be the only victim. "If Mattel has these problems," adds Sethi, "considering its commitment to transparency, you can be certain other manufacturers have them too, but haven't had the urgency to find them."

What Companies Should Do

Companies need a three-pronged approach to managing brands under siege, even when they are as much the victim as the perpetrator.

• Employ due diligence to assess potential liabilities and take action. The assessment should be completed before a crisis occurs. And, it should be done in conjunction with a company's manufacturing organization, legal and communications counsel, and insurance carrier.
• Aggressively take responsibility for the problem. If your brand is on a product, it's your problem in your customers' eyes. This is especially true when a company makes products for children. Parents are fanatical about their children's safety--and rightly so. Go above and beyond what is required by law to protect the brand by adding a margin of review, such as independent testing, which Mattel and Disney have announced they will begin. This may offer a huge opportunity for more high profile brands. Although they are the most vulnerable because their products are easily identifiable, bigger brands have more resources and technical expertise to monitor the train wreck that is China's supply chain, and subsequent recalls, and cultivate public trust.
• Establish a credible narrative with customers and the media, and put a human face on the issue. In a recall, this is the CEO. People want to know what happened, why it happened and what the company is doing to never let it happen again--and that the person at the top is personally involved.

Ask the Industry for Help

In cases such as contract manufacturing, which is a toy industry issue, a company should not shoulder the responsibilities alone but instead turn to its trade associations to address broader concerns. No one company can crack the endemic problems facing manufacturers using foreign subcontractors.

Most importantly, before a crisis--and unfailingly during one--a company must lead, in much the way that Nike transformed itself from an object of derision over wages paid to overseas workers to an ethical standard bearer. Only by responding quickly, taking decisive action, and telling a clear and compelling story can a company begin the slow process of restoring public trust--and rescuing a brand under siege.

Jon Entine is an adjunct fellow at AEI. Rick Miller is the president of public relations for Northlich.