BP oil spill tactics hold lessons for Murdoch

LONDON, Jul Tue Jul 19, 2011 7:00am EDT

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LONDON, Jul (Reuters) - Failed attempts to blame outsiders for mistakes, accusations that senior managers deliberately misled the authorities, and an escalating scandal that threatens the company's very existence.

A year ago it was BP. Today it's Rupert Murdoch's News Corp.

Phone hacking and payments to police by employees at his UK newspaper group lit an explosion of public outrage and political pressure that has scorched his business.

As Murdoch surveys the wreckage the dominant wisdom among commentators is that he and his inner circle need to learn lessons from BP's disastrous Gulf of Mexico oil spill.

"There will come a time when business schools examine their management of the hacking scandal as a textbook exercise in how not to do crisis management," Alastair Campbell, Prime Minister Tony Blair's former chief media adviser, said in Friday's London Evening Standard.

However, some crisis PR experts say the first lesson in disaster management is to learn to ignore these kind of comments.

"Every time a company in crisis makes a major move, 100 percent of the time, the pundits declare it 'too little, too late'. You can't do anything right (in the public's eyes) so you have to go into it knowing that's not even on the table" said Eric Dezenhall, a Washington-based crisis PR advisor.

The key is not to allow criticism to get in the way of taking bold measures, experts say. BP's announcement of a $20 billion fund to compensate Gulf coast residents affected by the oil spill was greeted with cynicism from some politicians -- but it still helped cool public anger toward the group.

"It was a turning point," said Joseph Lampel, Professor of Strategy at Cass Business School in London.

Murdoch's decision to close the News of the World newspaper, the heart of the scandal, and the resignation of key executives such as the head of his British newspaper unit, Rebekah Brooks, is a good start, Lampel said.

The company also dropped its bid for BSkyB before furious lawmakers, united in intent across all parties, forced it to.

But News Corp needs to go further, possibly offering to cover the cost of a planned government inquiry.

The other lesson News Corp could take from BP's experience is to avoid worsening the situation by overexposing top executives in the media.

BP's former Chief Executive Tony Hayward -- not previously known as a slick media performer -- chose to make himself the face of BP's response to the oil spill and engaged in an exhausting campaign of interviews and press conferences.

The result was a series of gaffes, including the now-famous line that he would like his "life back," that enraged America.

Murdoch however is synonymous with News Corp and as such is expected to comment publicly, though he has said little so far.

Mirroring Hayward's mistake, Murdoch remarked in an interview to his own Wall Street Journal last week that News Corp had made only "minor mistakes" in handling the crisis.

His comment was widely criticized and suggested that even experienced media hands can slip up.

As a measure of how badly the company underestimated the scope of the scandal, James Murdoch said back in January that the damage was contained.

"You talk about a reputation crisis -- actually the business is doing really well," he told Charlie Rose in a U.S. interview. "It shows what we were able to do is really put this problem into a box."

In recent weeks Murdoch Senior's decision to largely shun press appearances has so far limited the potential for further embarrassing gaffes -- although that could change when Murdoch, his son James and Rebekah Brooks face questions from British lawmakers in parliament later on Tuesday.

REBUILDING TRUST

In terms of moving beyond the immediate crisis, BP also has lessons for News Corp on how it might rebuild its reputation. Regaining public confidence requires a company to get to the bottom of a scandal and to address the problems found.

News International has hired heavyweight advisor Simon Greenberg and global PR giant Edelman to help manage the crisis and promote its message of reform.

By contrast BP hired Brunswick, a financial PR firm with a strong reputation for advising on big mergers and acquisitions.

BP immediately initiated an investigation into the rig blast that killed 15 men and caused the oil spill. But appointing a senior BP executive to head the probe undermined its credibility -- especially when it found the companies BP hired to help drill the well were largely at fault.

By contrast after its Texas refinery explosion in 2005 which killed 15 men, BP appointed former U.S. Secretary of State James Baker to head an independent investigation.

New York-based crisis PR advisor Richard Torrenzano said Murdoch should avoid the same pitfall by cancelling his plan for News Corp director Joel Klein to lead an investigation.

"I would have picked an outsider who is a very heavy hitter .. like a former director of the CIA," he said.

News Corp is in an better position to indulge in public soul-searching.

For BP, facing multi-billion dollar lawsuits and a legal battle to make its contractors to meet the estimated $41 billion cost of the spill, any admission of failure could weaken its case.

By contrast, the direct costs of compensating victims of the phone hacking saga is expected to only be in the millions or low tens of millions of dollars.

That said, the negative press that followed BP for months can only be more intense for News Corp, which will be judged and assessed by news companies around the world -- its direct rivals.

And it may also be harder for News Corp to regain investor and public trust than it was for BP because the face of the company is unlikely to change any time soon.

BP changed almost everyone in the chain of command from the rig floor upward. It replaced its head of drilling, head of the exploration division, his deputy and Chief Executive Tony Hayward -- all while blaming contractors and low-level managers for the spill.

Numerous UK politicians and commentators have attributed much of the blame for the wrongdoing at News Corp to the hard-driving culture that Chairman and CEO Rupert Murdoch engendered.

But given that he built his company up over almost six decades, few expect the News Corp CEO to follow Hayward's lead.

"I think Rupert Murdoch will probably hang in at News Corp for as long as he can. He's been here before," Torrenzano said.

(Reporting by Tom Bergin; editing by Sophie Walker)

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