Sponsors’ Reaction to the Lance Armstrong Crisis: Guest Post by Kristen Murphy

Public relations professionals are needed to stop a crisis from occurring, or clean up what the crisis has caused. But when the damage is done, how does the calamity effect the investor relations department of a company when they are entering a correction or a bear market?

Lance Armstrong was a role model for many people. Fans worldwide wore LiveStrong bracelets proudly on their wrists, supported his seven title wins of the Tour De France from 1999 to 2005, and were inspired by his testicular cancer survival. Unfortunately, in 2012, it became public news that the cycling conqueror was doping and using illegal performance-enhancing drugs during his prime time as leader in the world of cycling.

We hear of this often. The face of a company suddenly is under scrutiny, causing the whole company to go down with them. Shareholders feel that their relationship is destroyed with the company when the common figure associated with that company’s reputation is tarnished. We know what PR people need to do, but how do the Investor Relations professionals react when shareholders and the press bombard them, in order to keep shareholder’s trust? Investor relations officers have both financial and communication skills that are needed and relied on heavily from a day-to-day basis.

Companies that sponsored Armstrong, such as Nike (NKE), Oakley (OO), Dasani (KO), Bristol Meyers (BMY), and Michelob Ultra (AMGN), have run for the hills to try and escape the collateral damage sparked by Armstrong, and to not get involved in the mess of loosing millions of dollars. Also, most of these companies came out with statements regarding their disapproval of Armstrong’s actions. Even LiveStrong developed a statement saying that Armstrong “misled” them, but “Lance is no longer on the Foundation’s board, but he is our founder and we will always be grateful to him for creating and helping to build a Foundation that has served millions struggling with cancer.”

When looking as an investor relations officer in the sticky situation during the event of a meltdown, investor relations officers want to stay visible, and emphasize the long-term relationship with shareholders and the strength of their balance sheet. To be honest with your investors is the best guiding principle, and they will respect the company for doing so. The company has to make sure they understand their disclosure policy in order to dictate how and when confidential information should be shared to the public.

Every company, investor relations officer, and crisis is different, and there is no right way to answer to all crises. It is seen as though the best way to respond to a crisis of this severity was to drop and dart, because that is what most sponsors have done.

Crisis management is most likely not going to change in the near future. Unfortunately, these types of predicaments occur all the time. I hope that social media will have a larger impact in the future, because having a constant feed of the company’s progress could help shareholders to trust in the company a little more. Crises could be anything, and there is no way to prepare a company for it. The only way to prevail through a crisis is to have a well-trained management team on hand, who is ready to react to anything that comes their way.

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