Corporate reputation crises: A timeline
February 27, 2014, 4:18 PM UTC
Crisis: Formula boycott
In 1974, an anti-poverty charity published a booklet accusing Nestlé of getting mothers living in developing countries unnecessarily addicted to baby formula. The organization even went so far as claiming that babies were dying because of the Western-style infant milk. A New York Times article published in 1981 uncovered that many families were over-diluting the formula with contaminated water preventing children from absorbing the proper nutrients. During the same period, research came out indicating that breastfeeding was healthier for babies. All of this created a major disaster for Nestlé, and the company faced boycotts around the world. The food and beverage giant reacted by issuing guidelines for mothers about how and when to give babies formula. Nestlé officials also completely remade their marketing materials to deal with complaints that advertisements were pushing products on mothers. Today, the debate over baby formula remains heated. However, the market is still growing, particularly in Asia, according to research from UBIC Consulting.
Johnson & Johnson
Crisis: Extra-strength Tylenol scare
When it comes to crises in corporate history, Johnson & Johnson's (JNJ) 1982 Tylenol scare tops the list. Seven people died in the Chicago area from consuming Extra-Strength Tylenol capsules laced with cyanide. The company immediately recalled more than 30 million bottles and went to work creating new tamper-proof packaging. Most medical experts concluded that the drugmaker would not be able to recover from the stumble. However, Johnson & Johnson's emphasis on customer care saved one of its top brands. In 2013, Tylenol was the sixth best-selling pain reliever in the country, according to data from market intelligence firm Euromonitor International.
Crisis: Sweatshop protests
Protest against Nike's (NKE) labor conditions abroad escalated in 1992 after Harper's published an article highlighting that the company paid its Indonesian workers less than minimum wage. Demonstrators appeared at the Olympics that year in Barcelona to speak out against Nike's perceived exploitation of factory workers. Nike initially resisted the criticism. It wasn't until 1998 that the company faced the issue head on. "The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse," then-CEO Phil Knight said in a speech. Knight also announced that he would raise the minimum age of his company's global workforce. Today, Nike continues to be transparent about its global work conditions and frequently publishes reports outlining efforts to improve the lives of its workers.
Crisis: Bonus scandal
In 2008, multinational insurance corporation AIG (AIG) posted a $61 billion loss: the largest quarterly loss in corporate history. The troubled insurer would soon become the target of criticism surrounding the role the company played in the financial crisis that followed. After the catastrophic loss, the company was bailed out for $170 billion by the government with taxpayer dollars. Through all of these missteps, AIG executives still rewarded themselves with $165 million in bonuses in 2009. A company official defended the decision, telling the New York Times that he needed to reward his employees in order to "retain the best and brightest talent." AIG continues to remain in the media spotlight -- for the worst -- as it deals with settlements over the faulty mortgage-backed securities it issued before the crisis.
Crisis: Bangladesh factory fire
A Bangladesh garment factory caught on fire in 2012, killing more than 1,000 people -- mostly workers -- when it collapsed. The horrendous event became a symbol for terrible work conditions throughout the country's textile factories. Wal-Mart (WMT) was implicated in the disaster when it was discovered that the world's largest retailer sourced clothing from the factory along with some of its peers such as Gap (GPS), H&M and Zara-parent Inditex. Wal-Mart declined to sign a binding and enforceable safety accord pushed forward by many European retailers. Instead, the company responded by announcing its own safety plan for Bangladesh garment factories that was criticized for its ambiguity surrounding enforceability and standards.
Abercrombie & Fitch
Crisis: CEO Mike Jeffries says too much
In 2013, Business Insider resurfaced offensive comments that Abercrombie and Fitch CEO Mike Jeffries made in a 2006 interview. The executive said he only wanted to market his clothing line to "cool, good-looking people." The repurposed comments went viral, and Jeffries had to apologize for his perceived prejudice against overweight customers. The crisis could not have come at a worse time for the retailer. In February, the company announced its eighth straight decline in quarterly sales. Still, Abercrombie executives seem confident that Jeffries can recover from his past statements and help the company get out of its current rut. In December, Abercrombie extended Jeffries' contract for at least another year.
Crisis: Data breach
Target (TGT), the second-largest U.S. discount retailer, experienced a heavy blow to its reputation when a 2013 data breach compromised the personal information of more than 100 million customers. In December, the company announced that the credit and debit card information of around 40 million customers was at risk due to a data hack that occurred around Black Friday weekend. As Target began to investigate the attacks, officials realized the identities, mailing addresses, and emails of about 70 million additional customers may have been stolen during the breach as well. Despite the retailer's strategy to be as transparent as possible about the problem, Target's bottom line continues to suffer. The retailer saw the number of transactions this holiday season sink 3% to 4% compared with the weekend before Christmas last year. Some analysts have projected that the hack could cost the company more than $1 billion in fines and other related expenses.