This 2016 has been a crazy year. Some of the ups and downs are due to the many public relations crises and reputation scandals we witnessed over the past twelve months. Some offer learnings while others simply have a train wreck kind of fascination. Here’s my list of the standout scandal stories of 2016.
Top Nine Reputation Scandals
Samsung’s Faulty Recall
Within weeks of launching its blockbuster Galaxy Note 7, Samsung had to recall the product after reports of overheating and exploding batteries. Worse, its crisis management process turned out to be fraught with missteps. Initially, Samsung looked proactive and reputation savvy with its swift recall of 2.5 million phones, but it was soon forced to pull the replacement devices as well after they, too, showed problems. The company’s overall communications with customers were not transparent, and it failed to coordinate the recall with the Consumer Product Safety Commission. Customer research shows that Samsung still commands a loyal following, so the damage appears to be temporary. The communications lessons, on the other hand, will stay with us.
Ryan Lochte Loses Favor
For someone who brought home medals after the 2016 Olympic Games, Lochte was a PR loser. His drunken antics at a Rio gas station might have been excused, but he was caught making up a half-baked, self-aggrandizing story about a robbery at gunpoint. Then he left the country and his young teammates holding the bag. Despite a public apology for his behavior, Lochte paid a high price in bad PR and lost endorsements. As of year-end, his reputation was recovering, thanks to a stint on “Dancing With The Stars” and the recent announcement that his fiancée is pregnant. Maybe he learned a lesson or two.
Theranos’ Fall from Grace
The other shoe dropped for blood-testing startup Theranos in 2016. Its unwinding was particularly operatic, in part because the company was a victim of its own PR. The story of a new technology that performs complex clinical tests based on a single drop of blood was a media dream, and founder Elizabeth Holmes drew comparisons to Steve Jobs.
As Theranos grew, the media was so busy lionizing Holmes as the world’s youngest self-made female billionaire that it didn’t scrutinize her claims. Its own boldface-name-stuffed Board of Directors also failed to spot the red flags. Ace Wall Street Journal reporter John Carreyou followed his initial investigative piece with twelve more stories about Theranos in 2016, and its troubles multiplied. Recently it became the target of criminal and civil investigations by the Securities and Exchange Commission, among others. If you haven’t read Carreyou’s account of the insider who blew the whistle on the company, check it out― part suspense novel, part Shakespearean tragedy.
EpiPen Price Backlash
Mylan CEO Heather Bresch temporarily displaced Martin Shkreli as a poster child for pharmaceutical industry greed. After public outrage over Mylan’s 400% price increases for EpiPen, Bresch was grilled by the House Oversight Committee, and the media coverage was punishing. Bresch tried to appease regulators with measures to cut EpiPen’s cost for those without adequate health insurance, as well as a plan to launch a generic version, but the company was clearly blindsided by the fierce public and regulatory backlash. Mylan’s stock has dropped from $54 at the beginning of the year to $36.60.
Wells Fargo Weathers Scandal
After reports hit that millions of fake accounts were set up by Wells Fargo staff to fatten their sales figures, CEO John Stumpf was harshly criticized by members of the Senate Banking Committee, Stumpf apologized, pledged to prevent future problems, and guaranteed oversight of operations. But with 5,300 people let go for creating the fake accounts, the apology wasn’t enough, and the behavior was too pervasive to be an isolated case. Stumpf retired in October, and Wells Fargo is still grappling with the reputation impact.
Trump’s Lewd Boasts Make Headlines
Donald Trump’s recorded remarks during a taping of an “Access Hollywood” segment 11 years ago was probably the biggest reputation story of 2016, in a year that saw its share of PR crises and reputation scandals. When the then nominee for president bragged about kissing and grabbing women for the world to hear, it provoked a public reaction and even caused some prominent Republicans to withdraw their endorsements. But the Trump campaign made the decision to tough it out with a perfunctory apology video, then counterattacked with accusations against the Clintons. The rest is history.
“Bathroom Bill” Stirs Controversy
When North Carolina Governor Pat McCrory signed HB2―the “bathroom bill” that regulates use of public facilities by transgender individuals―he set up one of the biggest controversies of 2016 and, ultimately, his own narrow electoral defeat in a year that saw a GOP sweep. The governor tried to frame the bill as a privacy issue, but eventually a coalition of LGBTQ rights groups and big business, including major technology companies, overwhelmed his argument.
The move to block HB2 really gained steam when it triggered serious economic boycotts, and the NBA canceled plans to hold the 2017 All-Star Game in Charlotte. McCrory dropped a lawsuit asking a federal court to preserve it, and his loss of the governorship presumably offers a path to the bill’s repeal or modification.
Democratic Email Hacks Wreak Havoc
The DNC was beset by its own reputation scandals when private emails became public, resulting in the resignations of Chairwoman Deborah Wasserman Schultz and other key officers. It moved quickly to contain the damage, only to see its eventual nominee, Hillary Clinton, beset by a slower and more insidious drip-drip when campaign director John Podesta’s hacked emails were released by Wikileaks. It’s nearly impossible to emerge unscathed if a leak or hack turns up newsworthy material, so the Clinton campaign was between a rock and a hard place in terms of how to respond. All in all, the hacks were a reminder to all of us that employee behavior needs to adapt to the security risks we all run every day.
Fake News Goes Viral
Fake news was big news in 2016. The many false stories that went viral prior to the presidential election fueled concerns that we’re entering a “post-factual” or “post-truth” era when trust in legitimate media will only erode further. The good news is that some of the smartest technology and journalism minds are working together to offer solutions.
First, Google and Facebook announced they won’t support the ad technology for fake news sites, and Facebook has said it’s devising a range of countermeasures to flag false articles. More recently, Upworthy‘s Eli Pariser and others have started The Truth Project, which is looking at Chrome extensions, fake-news-blocking apps, and even blockchain technology to rid us of the fake news plague.