Hershey's Ethical Crossroads

Case Overview: The "Hot Mess" (Based on "Hot Mess" PDF by Erika Fry)

In May 2015, Nestlé India, a subsidiary of the world's largest food and beverage company, was plunged into a severe crisis. Its enormously popular Maggi 2-Minute Noodles, a brand with deep cultural resonance and significant market share in India (accounting for roughly a quarter of Nestlé India's $1.6 billion revenue in 2014), faced allegations of containing lead above permissible levels and undeclared Monosodium Glutamate (MSG). The issue originated from routine testing by food safety officials in Uttar Pradesh, India's most populous state.

Despite Nestlé's internal testing protocols and data indicating the noodles were safe, the situation escalated dramatically. The company's initial response was perceived as slow, dismissive, and overly technical, failing to address growing public fear and media frenzy. Sanjay Khajuria, Nestlé India's head of corporate affairs, and his team initially expected the issue to be resolved quickly based on their data. However, the crisis rapidly gained national attention, fueled by extensive media coverage and social media outrage (#MaggiBan).

On June 5, 2015, the Food Safety and Standards Authority of India (FSSAI) announced a temporary nationwide ban on Maggi noodles, declaring them "unsafe and hazardous for human consumption" based on government lab tests. This triggered widespread consumer anger, public destruction of Maggi packets, and comparisons to major industrial disasters. The financial fallout for Nestlé was immense: at least $277 million in missed sales, $70 million for a massive product recall (37,000 tons of noodles incinerated), and an estimated $200 million in brand value damage.

Nestlé CEO Paul Bulcke eventually flew to India, and the company initiated a voluntary recall just before the official ban, while still insisting on the product's safety. Nestlé subsequently challenged the FSSAI's ban in the Bombay High Court, arguing procedural flaws and unreliable testing methods. The court overturned the ban in August 2015, conditional on further testing, which Maggi passed, allowing its relaunch in November 2015. However, the FSSAI appealed this decision to India's Supreme Court, and the government also filed a separate $99 million lawsuit on behalf of consumers, leaving legal uncertainties ongoing.

Framework Application to the Maggi Crisis

1. Crisis Management Cycle (Marc Stears)

• Immediate Response: Critically flawed. Nestlé's response was delayed (first public statement on May 21, 2015, weeks after internal notification). Their communication was primarily defensive, focusing on their internal data and technical arguments ("What is your spectrometer setting?" - Paul Bulcke), rather than empathetically addressing public fear. CEO Paul Bulcke's direct intervention was late.
• Diagnosis: Nestlé's diagnosis was heavily skewed by its internal conviction of product safety. They failed to adequately diagnose the socio-political context of India, the reasons for conflicting government lab results (under-resourced labs vs. potential actual contamination), or the escalating power of media and public sentiment. Their view of it as a purely "technical matter" was a misjudgment.
• Reforming Interventions: The voluntary recall was a significant step but was undermined by simultaneous assertions of product safety, confusing the public. The subsequent relaunch involved new packaging ("A Commitment to Goodness You Can Always Trust") and targeted marketing campaigns (e.g., #WeMissYouToo), attempting to rebuild trust.
• Evaluation: While Maggi returned to shelves, the FSSAI's appeal and the ongoing consumer lawsuit indicated that the crisis was not fully resolved. The long-term reputational repair required sustained effort and a change in engagement style, as later acknowledged by CEO Paul Bulcke.

2. Reputation-Reality Gap & Determinants (Eccles et al.; Marc Stears)

A chasm opened between Nestlé's perceived "reality" (Maggi is safe based on internal, sophisticated testing) and the emerging "reputation" (Maggi is unsafe, based on government tests and public fear). This gap was driven by:

• Changing stakeholder expectations: Heightened public and regulatory sensitivity to food safety in India.
• Weak internal coordination & external communication: Nestlé's initial silence, followed by perceived arrogance and legalistic statements, alienated stakeholders. They "communicated but didn't engage" effectively. Khajuria's late-night call signaled the internal surprise and lack of preparedness for the story's explosion.

Applying Stears' informal framework: Trust in the Maggi brand and Nestlé plummeted. Consumers and regulators likely felt profoundly disrespected by the company's initial handling, which seemed to prioritize its own data over public health concerns.

3. Communication: I-You vs. I-It (Martin Buber; Marc Stears)

Nestlé's initial crisis communication was predominantly **"I-It."** They focused on facts, technical specifications, and their internal processes, treating the public and regulators as entities to be informed of Nestlé's "correctness" rather than as partners in dialogue. This "detached if polite superiority" (as described in the "Hot Mess" article) was counterproductive.

The arrival of Suresh Narayanan as Nestlé India's new head and Paul Bulcke's press conference marked a belated shift towards more **"I-You"** engagement. This involved direct media interaction, expressing commitment to India, and acknowledging (to some extent) the shaken consumer trust. However, the core message of "Maggi is safe, was safe, always will be safe" still carried the risk of sounding dismissive if not delivered with profound empathy and acknowledgment of the legitimacy of public fear.

Case Overview: Emissions Scandal (Based on Rustler PDF & Reuters Timeline)

In September 2015, the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) issued a notice of violation to Volkswagen Group, revealing that the company had deliberately programmed its Turbocharged Direct Injection (TDI) diesel engines with "defeat devices." These software mechanisms could detect when they were being tested, changing performance accordingly to improve results. In real-world driving, these vehicles emitted nitrogen oxides (NOx) at levels up to 40 times higher than the U.S. legal standards.

The scandal, quickly dubbed "Dieselgate," initially implicated around 482,000 VW and Audi diesel cars in the U.S. sold since 2009. Volkswagen soon admitted that this software was present in approximately 11 million vehicles worldwide across multiple brands within the group, including VW passenger cars, Audi, SEAT, Škoda, and VW commercial vehicles. The company had marketed these vehicles heavily on their "clean diesel" technology, fuel efficiency, and environmental friendliness.

The crisis triggered a cascade of severe consequences for Volkswagen:

• Massive Recalls and Financial Costs: VW initiated enormous recall programs. The total financial impact, including fines, settlements with authorities (like the EPA, Department of Justice, states attorneys general), vehicle buybacks, repairs, and legal fees, has been estimated to exceed $30 billion to $35 billion globally over several years.
• Leadership Changes: CEO Martin Winterkorn resigned shortly after the scandal broke, stating he was "stunned that misconduct on such a scale was possible" but accepted responsibility for the irregularities. Other executives and engineers were suspended, fired, or faced criminal charges in the U.S. and Germany.
• Stock Price Plummet & Brand Damage: VW's stock price fell dramatically (losing about a third of its value quickly), and its brand reputation, long associated with quality German engineering and reliability, suffered immense damage. The "clean diesel" marketing claim became a symbol of corporate deception.
• Regulatory Scrutiny & Lawsuits: Investigations were launched by authorities in numerous countries. VW faced a barrage of lawsuits from consumers, dealerships, and investors worldwide.
• Industry Spillover: The scandal cast a pall over the entire diesel car industry, leading to increased scrutiny of other manufacturers' emissions performance and contributing to a decline in diesel car sales in many markets.

Framework Application to Dieselgate

1. Waller and Younger: Character vs. Competence

Volkswagen was globally renowned for its engineering competence and the perceived quality and reliability of its vehicles. However, Dieselgate exposed a profound and systemic failure of corporate character. The deception was not accidental but was an intentional, sophisticated, and prolonged effort to circumvent environmental regulations across multiple markets. This indicated deep-seated ethical lapses, a culture that likely prioritized achieving emissions targets (through illicit means) over legal compliance and genuine environmental stewardship, and a willingness to mislead consumers and regulators.

The gap between VW's marketed image (clean, efficient diesel) and the reality of its actions was enormous, leading to a catastrophic loss of trust when revealed.

2. Predictable Surprises (Watkins & Bazerman)

While the specific "defeat device" software was a shock to the public, the underlying pressures and potential for misconduct could be viewed through the "predictable surprise" lens:

• Recognition Failure (Potential): Did senior leadership truly not know, or were warning signs ignored or suppressed? The challenge of meeting increasingly stringent U.S. diesel emissions standards while maintaining desired vehicle performance and fuel economy was a well-known engineering problem for all automakers.
• Prioritization Failure (Potential): If some within VW knew of the technical difficulties, was meeting market launch deadlines or cost targets prioritized over ensuring full compliance through legitimate engineering solutions?
• Mobilization Failure (Potential): If ethical concerns were raised internally, were they effectively addressed, or did organizational barriers (e.g., a high-pressure engineering culture, fear of reprisal, siloed decision-making) prevent proper mobilization of resources to find compliant solutions or halt the deceptive practices?

The systematic nature of the deception across multiple engine types and years suggests that this was not an isolated rogue action but indicative of deeper organizational and potentially cognitive/political vulnerabilities within VW that allowed such a high-risk strategy to be pursued.

3. Reputation Commons (Rustler, Barnett & King)

Dieselgate had a significant negative spillover effect on the "reputation commons" of the automotive industry, particularly for diesel technology and "German engineering." Other manufacturers faced increased scrutiny, regulatory testing, and public skepticism regarding their emissions claims, even if they were not directly implicated in using defeat devices. Consumer trust in diesel technology as a "clean" alternative was severely damaged across the board, accelerating the shift towards gasoline and electric vehicles in many markets.

Case Overview: The Gulf of Mexico Oil Spill (Based on Rustler PDF & other sources)

On April 20, 2010, the Deepwater Horizon oil drilling rig, operated by Transocean and leased by BP (British Petroleum), experienced a catastrophic explosion in the Macondo Prospect in the Gulf of Mexico. The explosion tragically resulted in 11 fatalities and numerous injuries. Two days later, the rig sank, rupturing the wellhead at the seabed and initiating the largest marine oil spill in history. For 87 agonizing days, crude oil gushed into the Gulf, with estimates eventually placing the total spill at approximately 4.9 million barrels (over 200 million gallons).

The environmental consequences were devastating and widespread, impacting vast stretches of the Gulf Coast across Louisiana, Mississippi, Alabama, and Florida. Marine ecosystems, including fisheries, oyster beds, and delicate marshlands, suffered extensive damage. Images of oil-soaked birds, dead dolphins, and tar balls washing ashore became potent symbols of the disaster. The region's vital fishing and tourism industries were crippled, leading to profound economic hardship for coastal communities.

BP's handling of the escalating crisis was subject to intense public and governmental scrutiny and was widely criticized for several key failings:

• Underestimation of Spill Rate & Downplaying Severity: In the initial stages, BP significantly underestimated the amount of oil leaking and was perceived as downplaying the potential environmental impact. This created an information vacuum and fueled public distrust.
• Technical Challenges & Failed Containment Attempts: Numerous high-profile attempts to cap the well (e.g., containment domes, "top kill," "junk shot") failed, broadcasting BP's technical struggles to a global audience and eroding confidence in its competence to manage the disaster.
• Public Relations Gaffes & Perceived Lack of Empathy: Then-CEO Tony Hayward made several public statements that were widely seen as insensitive and out of touch with the suffering of those affected. His remark, "I would like my life back," became infamous and symbolized a perceived disconnect between BP's leadership and the gravity of the situation. Other comments, such as the spill being "relatively tiny" in a "very big ocean," further inflamed public anger.
• Control of Information & Access: BP faced criticism for attempting to control the narrative and restrict media access to the spill site and affected areas, leading to accusations of a lack of transparency.

The long-term consequences for BP were monumental:

• Immense Financial Burden: The total costs to BP for cleanup, compensation, fines, and legal settlements have exceeded $65 billion. This includes a landmark $18.7 billion settlement with the U.S. government and five Gulf states, which acknowledged BP's "gross negligence" and "willful misconduct."
• Severe Reputational Damage: BP's carefully cultivated image as an environmentally conscious energy company (symbolized by its "Beyond Petroleum" rebranding) was shattered. The company became a byword for corporate irresponsibility and environmental disaster.
• Leadership Overhaul: Tony Hayward resigned as CEO in July 2010 under immense pressure and was replaced by Bob Dudley, who was tasked with navigating the aftermath and rebuilding the company.
• Regulatory Overhaul & Increased Scrutiny: The disaster prompted a significant overhaul of offshore drilling safety regulations in the U.S. and increased scrutiny of oil and gas operations globally.

Framework Application to Deepwater Horizon

1. Crisis Management Cycle (Marc Stears)

• Immediate Response: BP's initial response was heavily criticized for underestimating the spill's scale and for communication missteps that conveyed a lack of empathy and control. Statements from CEO Tony Hayward, such as "I would like my life back," became symbols of a flawed immediate response that prioritized corporate image over genuine concern. The technical attempts to stop the leak were public and often unsuccessful, further damaging perceptions of competence.
• Diagnosis: The technical diagnosis of the well failure was complex and took time. However, the diagnosis of the reputational crisis and the failure to manage stakeholder perceptions (especially those of affected Gulf communities and the American public) appeared slow and inadequate in the early stages. The focus seemed to be more on the engineering problem than the unfolding human and environmental tragedy.
• Reforming Interventions: BP eventually committed substantial financial resources ($20 billion initial compensation fund, and tens of billions more over time) for cleanup and to compensate those affected. Operationally, it undertook significant internal reviews of its safety procedures. However, these interventions were often overshadowed by the damage done during the initial response phase.
• Evaluation: The evaluation of BP's actions was largely driven by external bodies, including the U.S. government's National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, which found systemic root causes related to management failures by BP, Halliburton, and Transocean. The long-term evaluation continues through ongoing environmental monitoring and the slow process of reputational recovery.

2. Leadership Qualities (Weber: Passion, Responsibility, Judgment) & Communication (Buber, Stears)

The leadership of CEO Tony Hayward during the crisis was widely seen as lacking key Weberian qualities. While he may have had "passion" for BP, his public statements often failed to convey a deep "feeling of responsibility" for the devastating consequences of the spill. His "capacity for judgment" in public communication was severely questioned, with gaffes that alienated stakeholders and fueled public anger.

From a Buberian perspective, BP's initial communication often defaulted to an "I-It" mode—technical explanations, downplaying impact—rather than fostering an "I-You" connection built on empathy and shared concern with affected communities. Stears' speech writing framework (I/You connection) was largely absent in early communications, which failed to resonate with the "everyday experience" of those impacted or demonstrate sufficient humility.

3. Reputation-Reality Gap & Determinants (Eccles et al.)

BP had invested heavily in its "Beyond Petroleum" campaign, cultivating a reputation as an environmentally conscious energy leader. The Deepwater Horizon disaster created a catastrophic gap between this projected reputation and the grim reality of the massive oil spill and its handling. This chasm became a primary driver of reputational damage. The crisis also highlighted how changing stakeholder expectations regarding corporate environmental responsibility and safety had become far more stringent than BP's operational reality in this instance.

Case Overview: The North Sea Platform Disposal (Based on "Predictable Surprises" & "Risk-World Scenarios")

In 1995, Royal Dutch/Shell faced a major reputational crisis over its plan to dispose of the Brent Spar, an obsolete oil storage and loading buoy, by sinking it in the deep North Atlantic. After conducting extensive technical studies (over 30 independent studies cited in "Predictable Surprises"), Shell concluded that deep-sea disposal was the Best Practicable Environmental Option (BPEO). This plan received formal approval from the UK government.

However, the environmental organization Greenpeace launched a high-profile campaign against the plan. Activists dramatically occupied the Brent Spar on April 29, 1995, an event timed for maximum media impact just before European Union environmental ministers were scheduled to meet. Greenpeace argued that sinking the Spar, which contained residual oil sludge and low-level radioactive scale, would unacceptably pollute the marine environment. Shell's initial responses included legal action for trespassing and using water cannons to prevent reoccupation, actions that were heavily publicized and often portrayed Shell negatively.

The crisis rapidly escalated due to several factors:

• Intense Public Backlash & Boycotts: The campaign resonated strongly with the public, particularly in continental Europe. Widespread consumer boycotts of Shell gas stations occurred, most notably in Germany, where dozens of stations were vandalized, and some were even firebombed. Sales in Germany reportedly dropped by as much as 50% in some areas.
• Political Pressure & Diplomatic Rifts: Several European governments, with Germany at the forefront, publicly condemned Shell's plan and criticized the UK government's approval. This created significant political and diplomatic tensions within Europe.
• Misinformation and Emotional Appeal: Greenpeace's campaign effectively used emotional appeals and strong imagery. While some of their initial claims about the quantity of toxic materials remaining on the Spar were later found to be significantly exaggerated (Greenpeace later apologized for this inaccuracy), this admission came too late to change the outcome.
• Shell's Capitulation: On June 20, 1995, facing overwhelming public, political, and commercial pressure, Shell reversed its decision. It abandoned the plan to sink the Brent Spar and opted for the far more costly and technically complex option of onshore dismantling in Norway.

The Brent Spar incident became a landmark case study in corporate crisis management, NGO power, and the concept of "predictable surprises." Shell possessed information suggesting potential opposition but failed to adequately prepare for or mitigate the scale and nature of the backlash. It starkly illustrated the power of public opinion and activist campaigns to influence major corporate decisions, even those backed by technical assessments and governmental approval.

Framework Application to Shell Brent Spar

1. Predictable Surprises (Watkins & Bazerman) - RPM Process Failure

The Brent Spar crisis exemplifies failures at multiple stages of the Recognition, Prioritization, and Mobilization (RPM) process:

• Recognition: Shell arguably failed to fully recognize the potential for widespread, emotionally charged public opposition despite warning signs. While their security advisors considered activist occupation, the scale and nature of the European backlash (especially outside the UK) seemed underestimated. Other oil companies had expressed concerns about the precedent. Greenpeace had a known history of direct action. Shell's engineering-driven culture, confident in its technical analysis and UK government approval, may have harbored cognitive biases (e.g., "we are right, therefore others will see it our way").
• Prioritization: Even if some risks of opposition were recognized, they were not sufficiently prioritized against the perceived technical and economic benefits of deep-sea disposal. The company focused on securing UK government approval, under-prioritizing the critical need for broader European stakeholder engagement, particularly in key markets like Germany. The potential impact of a widespread consumer boycott and inter-governmental pressure was not given adequate strategic weight.
• Mobilization: Shell's mobilization was largely reactive and confrontational once the crisis erupted (e.g., legal action, water cannons). It failed to mobilize a proactive, persuasive communication and engagement strategy to build broader European support or effectively counter Greenpeace's narrative *before* the crisis peaked. Furthermore, Shell's decentralized organizational structure (where Shell UK led the disposal plan, while Shell Germany was largely unprepared for the backlash in its market) significantly hampered a swift, unified, and effective response.

2. Stakeholder Management & Communication (Stears, Buber)

Shell's approach to stakeholder management was flawed. They secured approval from a key stakeholder (UK government) but failed to engage adequately with other crucial ones (other European governments, environmental NGOs like Greenpeace, the broader European public). Their communication was often perceived as arrogant and dismissive of public concerns, relying on technical justifications that failed to resonate emotionally.

This reflected an "I-It" relationship with many stakeholders, particularly critics, treating them as obstacles to be overcome rather than parties for genuine dialogue ("I-You"). Shell did not effectively build a "common purpose and agreement" as suggested by Stears for successful reputation management through persuasion.

3. Reputation-Reality Gap (Eccles et al.)

While Shell believed its disposal plan was environmentally sound (its "reality"), a powerful counternarrative created by Greenpeace shaped public perception, leading to a "reputation" of environmental irresponsibility. The gap was less about Shell's technical assessment (which was largely vindicated later regarding quantities of toxins) and more about a failure to manage perceptions and values-based arguments concerning ocean dumping.