Monday, January 30, 2012

Who Speaks for Costa in Crisis?

We have yet to hear in a major way from the CEO of Carnival Corporation regarding the shipwreck of the Costa Concordia off the coast of Italy, despite the fact that Carnival owns the Costa Line. Rather, Pier Luigi Foschi, the CEO of Costa’s Italian unit, has been the company’s face to the public, and he has blamed the ship’s captain for the tragedy.

The issue is whether CEO Micky Arison, founder and builder of Carnival, should be the lead spokesman with the press and other third parties…rather than the CEO of a subsidiary unit. Arison believes in giving great independence to his business unit heads, according to a story in the Wall Street Journal on January 23. The question is whether this will be best for his business, one of the biggest brands in the marketplace, over the long-term.

By maintaining a low public profile, the WSJ notes, Arison hopes he can distance the Carnival brand name, and thereby the safety issue, from the Costa disaster. Carnival has 101 ships, and only 15 sail under the Costa brand. “If he talks, Carnival is speaking,” the story points out, and Arison is not granting interviews. He has, however, tweeted his sadness over what occurred and his vows to help all victims; recently he offered $14,000 per victim.

Here’s how I see it. Arison’s hands-off approach has some merit from a management standpoint, but does it hold up with the public? Booz & Company, the leading management consulting firm, found in its recent CEO study that the CEO has longer tenure at companies like this – 6.9 years on average vs. 4.9 at more operational type firms. These types of CEOs also generally bring higher returns for their shareholders, the Booz study notes.

But even Warren Buffet, who has a management style similar to Arison’s (but on a grander level), at risk of a tarnished reputation, had to speak out on the questionable ethics of his heir apparent concerning a company he proposed that Buffet acquire. The heir apparent was forced to resign. But that was all happening at the corporate level and did not involve subsidiaries.

In this case, we have brand protection, safety and shareholder value issues that cross the parent. Speaking out when the spotlight is on you is most likely the action I would recommend in the U.S., where the public respects mea culpa and wants to hear from the top guy. But this situation is not black and white. Arison’s attempt to keep a low profile, thereby protecting the Carnival brand name and putting the focus on Costa and its CEO, might work for a while. But as the lawsuits mount and the trial of the captain takes place, it will be hard for Arison to escape demanding journalists, cameras and lights.

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