A Cross-cultural Study of Corporate Response

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A CROSS-CULTURAL STUDY OF CORPORATE RESPONSE AND THEIR IMPACT IN TIMES OF CRISIS

by

SHU-HUI SOPHY CHENG

DISSERTATION

Submitted to the Graduate School

of Wayne State University,

Detroit, Michigan

in partial fulfillment of the requirements

for the degree of

DOCTOR OF PHILOSOPHY

2009

MAJOR: COMMUNICATION

Approved by:

Advisor Date


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3344308

3344308

2009


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COPYRIGHT BY

SHU-HUI SOPHY CHENG

2009

All Rights Reserved


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ACKNOWLEDGMENTS

This journey has been full of uncertainties but turned out to be joyful and fruitful.

After postponing my enrollment for three years, I was eventually able to start my PhD

study in the fall of 2006 at Wayne State University. However, one week before my flight, I

was diagnosed with thyroid cancer. At that time, I felt frustrated and pondered whether I

would ever have a chance to complete my PhD. After discussion with my doctor, I chose

to take the risk of postponing the surgery to start my academic program as scheduled.

During the first winter break, I returned to Taiwan for surgery. Fortunately, the surgery

went well and the cancer has not seriously affected my study and life. All in all, I thank

God.

Here, I wish to acknowledge the people without whom I may never have completed

this educational journey. I first wish to thank my advisor, Dr. Matthew Seeger. I could

never have finished this project without his guidance, patience and support during this

seemingly endless process. It has been a true privilege to work with him. In addition, I

thank members of my dissertation committee, Dr. Donyale Griffin, Dr. Julie Novak, and

Dr. Attila Yaprak whose time and feedback to my research are so greatly appreciated.

I thank all my friends and colleagues for their encouragement and help. My thanks

also go to Hin and Ann for helping me edit the drafts. I would also like to thank the

Graduate School and the Department of Communication of Wayne State University for

helping fund part of this research.

Finally, I want to thank my family and especially my parents, Wei-yuan Cheng and

Yu-yen Hsieh, who raised me to be hard working. I appreciate them more than they will


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ever know. I would also like to thank my sisters, Shu-chuan and Meng-ju, and brother,

Ching-sheng, for their support.

I dedicate this dissertation to my family and also in memory of my little sister,

Shu-ping, who died too young to complete her dream.


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TABLE OF CONTENTS

ACKNOWLEDGMENTS.ii

LIST OF TABLES v

LIST OF FIGURES..vi

CHAPTERS

CHAPTER 1 Introduction.1

CHAPTER 2 Literature Review8

CHAPTER 3 Method...36

CHAPTER 4 Case of Martha Stewart..49

CHAPTER 5 Case of BenQ81

CHAPTER 6 Case of HIH.115

CHAPTER 7 Similarities and Cultural Differences in Crisis Communication...146

CHAPTER 8 Conclusion......173REFERENCES.207

ABSTRACT...229

AUTOBIOGRAPHICAL STATEMENT..231


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LIST OF TABLES

Table 1 Benoits Image Restoration Strategies..14

Table 2 Coombss Crisis Response Strategies..20

Table 3 Characteristics of High and Low Context Cultures..24

Table 4 Hofstedes and Trompenaars and Hampden-Turners Dimensions.28

Table 5 Key Events in Stewart Case...54

Table 6 Martha Stewarts Crisis Response Strategy...................74

Table 7 Key Events in BenQ Case...84

Table 8 BenQs Crisis Response Strateg.....110

Table 9 Key Events in HIH Case....119

Table 10 HIHs Crisis Response Strategy....140


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LIST OF FIGURES

Figure 1 Coombss Continuum of Crisis Strategies...18

Figure 2 Research Design.46

Figure 3 The Stock Price of MSO............78

Figure 4 Revenue and Net Income of MSO...........78

Figure 5 The Stock Price of BenQ.........112

Figure 6 Revenue and Net Income of BenQ........112

Figure 7 Comparison of Three Countries.........157

Figure 8 Situated Cultural Crisis Communication Model....199


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CHAPTER 1

INTRODUCTION

Overview

The personalities of strong business leaders can help shape the image of their

companies. In some cases, the leaders become the virtual icon of the corporate brand,

lending their personal prestige to the brand and personifying the company. They can

also threaten the company when they are involved in a scandal. In this situation, the

consequences for the company can be dire as in the Martha Stewart case in 2002. A

similar event occurred in 2007 when Taiwanese chairman, K. Y. Lee of BenQ was

charged with insider trading after BenQ officially made an announcement it would stop

investing in Siemens mobile phone and file for bankruptcy protection in Germany. In

another case, the HIH Insurance went into provisional liquidation on March 15, 2001,

representing the largest collapse ever in Australian corporate history. The unethical

behavior of the founder and CEO, Ray Williams, and the non-executive director Rodney

Adler is believed to have contributed to the failure of HIH. This corporate disaster raised

the concerns of risk management and corporate governance in Australia well before the

Enron and WorldCom scandals in the U.S.

Much of the literature in crisis public relations focuses on the technical role of

planning, managing and responding (Borda & Mackey-Kallis, 2004; Coombs, 2007a).

For example, organizations need to establish a crisis command center, designate a

management team, develop a crisis plan, choose a single spokesperson with one voice,

tell the truth and respond quickly when crisis encounters. However, very few studies on

crisis communication focus on the role of cultural influences during a crisis (Marra, 1998;


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Lee, 2005). Thus, the aim of this study is to conduct a cross-cultural comparison of U.S.,

Taiwan and Australia to examine whether these different cultural contexts are related to

different crisis communication approaches.

This study explores how the three companies Martha Stewart, BenQ and HIH

responded when confronted with an organizational crisis that threatened existence.

Allegations of insider trading against Martha Stewart led to her imprisonment. Her

strategic plan in response to the insider trading accusations and the media attention

surrounding this crisis left Stewart trying to take action to restore her image. Although the

verdict of BenQs case has not been rendered, negative media stories have caused

BenQs stock to decline rapidly and sales to drop sharply. Shortly after, BenQ

restructured and renamed the company to stop the financial bleeding and to try to

increase profits. HIH was unable to salvage its legitimacy, and business ceased less

than a year after the media first reported concern for the companys future. Its share

price fell steadily from more than A$1 in August, 2000 to its terminal price of A$0.175 on

February 27, 2001. Not surprisingly, HIH collapse came as a shock to thousands of

stakeholders.

It is important to understand how these executives responded to their

wrongdoings. More specifically, the strategies they used to address their corporate

disasters drew widespread public criticism. To be more precise, this study seeks to

investigate: 1) How did Martha Stewart, BenQ and HIH manage their communication

during the corporate crisis? 2) How were these communication strategies received and

interpreted by the stakeholders? 3) How did their communication strategies reflect

different cultural factors?


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This study collects two major types of data: documents and archival records. The

actions and communication strategies used by Martha Stewart, BenQ and HIH are

reviewed with information from their corporate websites, press releases and media

coverage. The organizational archival records, such as stock prices, sales and annual

reports help explain the extent in which the crises had an impact on these three

companies financial performance and stakeholders. The official government archival

information, such as court records and commission reports has added additional

insights.

Coombs (2007a) has synthesized Benoits image restoration theory (1995a) and

other works, and suggested a dynamic typology of crisis response strategies. Thus,

Coombss situational crisis communication theory (SCCT) is used to provide a

framework to interpret and analyze the crisis response strategies that Martha Stewart,

BenQ and HIH employed. It consists of four major crisis response strategies: denying

strategies (attack the accuser, denial, scapegoat); diminishing strategies (excuse,

justification), rebuilding strategies (compensation, apology); and reinforcing strategies

(bolstering, ingratiation).

Crisis communication studies are predominantly based on Western theories

(mostly American) but there is a growing awareness of the need to address cultural

differences in this area. Filling the gap left in current literature, the purpose of this study

seeks to explore cultural differences in crisis communication. Drawing upon Halls

context (1976), Hofstedes dimensions of culture (1980) and Trompenaars and

Hampden-Turners cultural factors (1998), this study utilizes these guidelines as a

framework to compare the different communication approaches in these cases from


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three different countries. Through the cross-case analysis, this study aims to contribute

to the body of crisis communication research in the context of cultural differences and its

future direction.

In short, when a crisis strikes, communication is critical for protecting the

organizations image and reputation. An effective response might even prevent an

escalating crisis. Specifically, what an organization says is a key element in managing

the uncertainties during and in the post crisis situation. Three cases namely, Martha

Stewart, BenQ and HIH are employed to examine their corporate messages in their

corporate crises. I will take a closer look at the stakeholders perception of these

communication strategies. This study also attempts to identify the similarities and

differences in communication styles and strategies. The following section provides a

brief overview of these cases.

Background of Cases

Martha Stewarts Insider Trading

Beginning with the 1982 publication of her book Entertaining , Martha Stewart

made a name for herself as a homemaking diva with an emphasis on do-it-yourself

ingenuity. As the chief of Martha Stewart Living Omnimedia (MSO), Stewart used her

name and face to make connections with various businesses including a line of

housewares, television shows, radio channels, magazines and a series of books on

entertaining. On December 27, 2001, Stewart sold 3,928 shares of her ImClone stock

worth $228,000 the day before the U.S. Food and Drug Administration (FDA) rejected

approval of Erbitux, ImClones anti-cancer drug. Stewart had denied any wrongdoing,

insisting she did not receive any advance knowledge from Sam Waksal, the founder and


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CEO of ImClone about the decision on Erbitux (Pollack, 2002). Instead, her sale of

ImClone stock was part of a predetermined plan to sell if shares fell below $60.

Later, Stewart was officially indicted on charges of obstructing justice and

securities fraud related to her sale of ImClone stock on March 5, 2004. Judge

Cedarbaum dismissed the securities fraud charge against Stewart, saying prosecutors

had failed to present enough evidence on the issue. Charges of conspiracy, obstruction

of justice and making false statements remained (Masters & White, 2004). Stewart was

sentenced to five months in prison as well as a $30,000 fine, five months of home

confinement and two years of supervised probation after her release. On October 8,

2004, Stewart reported to Alderson Federal Prison Camp in West Virginia (Newman,

2004) and was released on March 4, 2005 (Glater, 2005).

BenQs Insider Trading

BenQ, a Taiwanese based company, was established in 1984, initially known as

Acer Peripherals Inc., and later rebranded as BenQ in December 2001. BenQ is a

multi-faceted company with interests in mobile communications, visual display and

network convergence technologies. Its principal products include LCD monitors, LCD

TVs, MP3 players, digital projectors, mobile phones, and other gadgets. The company

name reflects its vision: Bringing Enjoyment a Nd Quality to life. On October 1, 2005,

BenQ acquired the ailing mobile devices division of Germanys Siemens. The new

business group and new brand, BenQ-Siemens became the 4th largest mobile phone

company in terms of its market share (BenQ Press Release, 2005a). After BenQ bought

Siemenss handset unit, it began accumulating losses of US$781 million in only one

year. In late September 2006, BenQ decided to stop investing in the money-losing


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operation and filed for bankruptcy protection in Germany (Wang, 2006a).

Before BenQ made the losses public, chairman K. Y. Lee, president Sheaffer Lee,

vice president Eric Yu instructed a group of financial employees to sell 6,769

undistributed bonus shares for NT$230 million (US$7 million) and put the money into the

BenQ branch in Malaysia, Creo Ventures. Later they moved the money back to Taiwan

and, when the plunge of BenQ share prices slowed down, used the money to buy back

BenQ shares to boost the stock market (Pao, 2007). On May 8, 2007, chairman K. Y.

Lee, president Sheaffer Lee, chief financial officer Eric Yu, financial officer Wei-yu Liu

were charged with insider trading. The accounting section chief Ta-wen Liu who knew

the companys financial situation but still helped transfer money to Malaysia, was

charged with violating securities laws and money laundering (Wang & Chuang, 2007).

The Collapse of HIH Insurance

The HIH failure was Australia's biggest-ever corporate disaster. HIH collapsed on

March 15, 2001, and moved from provisional liquidation to full liquidation on August 27,

2001. Prior to its collapse, the HIH Group was the second largest general insurer in

Australia, comprised of 217 subsidiaries. HIH liquidators estimated that the company

loss with debts was about A$5.3 billion (US$3 billion). Following the failure of the HIH

group, the Australian Federal Government established the HIH Royal Commission to

inquire into the causes of the collapse. Justice Neville Owen, who led the HIH Royal

Commission, noted that the collapse of the HIH has reverberated throughout the

community, with consequences of the most serious kind (The HIH Royal Commission,

2003). According to the report of the HIH Royal Commission, the primary reason for the

failure was that adequate provision had not been made for insurance claims and past


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claims on the policies had not been properly priced. This meant that HIH had

mismanaged of its core business activity. Specifically, many of HIHs difficulties could be

attributed to its failed acquisition strategy and business operation.

Within HIH management, there appeared to be no clearly defined statement of

duties or limits on authority. The HIH Royal Commission (2003) revealed that a corporate

culture of not questioning leadership decision making appeared to have developed within

HIH. The type of culture was inimical to sound management practices. It resulted in

decision making that fell well short of the required standards. Executive self-indulgence

and corporate expenditure also hurt HIH. For instance, the founder and CEO Ray

Williams continued to give lavish presents and parties for friends and executives, when

the company was already in financial straits (Donaldson, 2008). On April 15, 2005,

Williams was jailed for 4 years 6 months with a non-parole period of 2 years 9 months,

after pleading guilty to misleading shareholders about the financial position of HIH. He

walked out of Sydneys Silverwater jail on January 14, 2008 (Main, 2008).

Summary

This chapter first identifies the lack of understanding cultural differences in crisis

communication. To this end, it is important to explore how communication strategies

reflect different cultural factors. Using the cases of Martha Stewart, BenQ and HIH from

three different countries, the goal of this study is not only to understand the strategies

they used to address their corporate crisis but also to examine the importance of cultural

sensitivity in crisis communication. The next chapter examines the literature relevant to

crisis communication in organizational settings. This literature review provides a more

detailed rationale for the necessity addressing cultural issues in crisis communication.


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CHAPTER 2

LITERATURE REVIEW

This chapter provides a theoretical foundation for exploration of the role of the

cultural factor played in crisis communication. I revisit the existing literature in public

relations, crisis communication and intercultural communication for formulating three

research questions and later for developing the research design. This chapter is divided

into four sections: 1) crisis communication, 2) crisis communication and culture, and 3)

cultural issues in crisis communication, and 4) the three research questions which will

guide the analysis of this study.

Crisis Communication

Crisis & Crisis Communication Defined

A variety of crisis typologies can be found in the literature (Coombs, 2007a;

Ulmer, Sellnow, & Seeger, 2007). While crises possess different characteristics,

basically they have been categorized into identifiable types. For example, Ulmer,

Sellnow and Seeger (2007) describe two major types of crises: (1) intentional crises (i.e.,

terrorism, sabotage, workplace violence, poor employee relationships, poor risk

management, hostile takeovers, and unethical leadership), and (2) unintentional crises

(i.e., natural disasters, disease outbreaks, unforeseeable technical interactions, product

failure, downturns in the economy). In this study, the crises of Martha Stewart, Ben Q

and HIH occurred from organizational misdeeds which placed the stakeholders at risk.

Specifically, the crises were created by the leaders of the organization whose unethical

and knowingly illegal behavior violated the law.

In fact, crisis events can and do strike organizations of all types. Every kind of


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organization, from Fortune 500 companies to small family owned businesses, have the

potential of being a victim of crisis (Seeger, Sellnow, & Ulmer, 2003). Fishman (1999)

points to five elements that are common in most definitions of a crisis situation. First, an

unpredictable event occurs. Second, important values for an individual or institution must

be threatened for a crisis situation to exist. Third, the intention of an actor or an

organization plays a minor, if negligible, role in analyzing a crisis situation. Fourth, a

crisis occurrence represents a time-sensitive situation. Fifth, a crisis situation involves a

dynamic or multi-dimensional set of relationships within a rapidly-changing environment.

As such, effective communication is essential to maintaining a positive relationship with

key stakeholders such as employees, customers, suppliers, and shareholders

(Fishman, 1999, p. 348).

Fearn-Banks (2007) defines crisis communication as the dialog between the

organization and its public prior to, during, and after the negative occurrence. The dialog

details strategies and tactics are designed to minimize damage to the image of the

organization (p.9). Moreover, crisis communication is concerned with the transferring of

information to significant persons to help avoid or prevent a crisis (or negative

occurrence), recover from a crisis, and maintain or enhance reputation (Fearn-Banks,

2007). Crisis communication, as Seeger and Ulmer (2002) note concerns the processes

whereby organizations create and exchange meanings among stakeholders regarding

the risk of crisis, cause, blame, responsibility, precautionary norms, and crisis-induced

changes in the organization and its relationship to stakeholders (p. 128).

As noted earlier, for an organization to manage the effects of a crisis it must

communicate to both internal and external stakeholders. Crises, in almost all


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circumstances, immediately trigger a deluge of questions from an organizations many

different publics (Marra, 1998). Reporters, employees, stockholders, government

officials, and local residents all want to know what happened. Ulmer, Sellnow, and

Seeger (2007) suggest all crises involve the general communication strategies of

reducing uncertainty, responding to the crisis, resolving it, and learning from it. The

ability to communicate quickly and effectively is clearly an important component of

successful and effective crisis management. Effective crisis communication can not only

defuse or eliminate crisis, but it can sometimes bring an organization a more positive

reputation than before the crisis occurred (Kauffman, 2005). On the other hand, Marra

(1998) argues if an organization fails to respond to a crisis in the correct manner, a bad

situation can be made worse. Hence, crisis communication strategies can substantially

diminish the harm caused by a crisis or magnify the harm if mismanaged.

Several general theoretical frameworks have been adapted to explain a crisis

situation. According to Seeger, Sellnow, and Ulmer (2003), these theories emphasize

such crisis elements as uncertainty, the novelty of the situation, and the potential threat

to established routines and order (p. 21). Further, they note that crisis theories try to

reveal and explain the understanding of risk factors associated with the concept of crisis,

organizations response to these factors, and the impact of crises on the key publics and

stakeholders. Based on the need for better understanding of organizational crisis and

communication, crisis communication studies have emerged as a vibrant research area.

Fishman (1999) agrees that of all the areas in public relations, none has grown faster

than crisis communication. Currently, the main lines of crisis communication research

relevant to the current study are corporate apologia, image restoration, and situational


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crisis communication theory.

Corporate Apologia

When an organization is criticized for wrongdoing, the situation can easily

escalate into a crisis situation. This often happens when the organization is thought to be

incompetent or is seen as being careless towards the community. At such times,

discourse becomes an organizational resource that corporations utilize as part of a

comprehensive crisis management strategy. The primary way to counter charges is to

choose an apologetic strategy (Hearit, 1994). Ware and Linkugel (1973) are the first to

classify apologetical discourses as a distinct form of public address and characterized

apologia as speech of self-defense. They identified four factors commonly found in

speeches of self-defense which included denial, bolstering, differentiation, and

transcendence.

Dionisopolous and Vibbert (1988) are the first to posit that the apologia genre can

be applied to organization. Apologia seeks to defend an organizations or an individuals

alleged offensive actions while reestablishing organizational legitimacy. They argue that

organizations have a public persona and are generally perceived as individuals by their

various stakeholders. If organizations are considered to be individuals and have

personas, it is possible to experience attacks on character and the need to engage in

self-defense (apologia). Hearit (1995) claims that in apologia, organizations employ

three prototypical appearance/reality disassociations. These include 1) denial of guilt

through opinion/knowledge disassociation, 2) differentiation of guilt by scapegoating

through individual/group disassociation, and 3) distancing from guilt through act/essence

disassociation.


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Hearit (1994) explains that an apologia is not an apology (though it may contain

one); rather it is a response to a social legitimation crisis in which an organization seeks

to justify its behavior by presenting a compelling counter account of its actions. Although

corporations are not individuals but rather juristic persons before the law, the current

trend is for corporations to make use of the personae of CEOs as spokesperson to

deliver their apologia (Hearit, 1995). The CEO may bring authority and credibility to a

highly equivocal situation and establish the moral tone for the crisis response. The CEO

may further accept responsibility and take steps to provide appropriate compensation

and provide assurances that similar events will not occur again. Hearit (2001) indicates

such a move has two effects. First, apologies are character-based defenses in which

people measure the degree to which individuals have changed, and the use of CEOs

assists auditors in gauging corporate sincerity. Second, if apologies fail, then there are

ready-made scapegoats of individuals (i.e., the CEOs) who have publicly taken

responsibility for the situations.

In one of the most thoroughly studied examples of public relations and crisis

management, Johnson & Johnsons CEO, James Burke took decisive action that helped

save his company after 13 people died from Tylenol capsules laced with cyanide in

1982. Moving fast to save its product, the company withdrew the entire Tylenol stock

from stores. Burke then appeared on the media to explain that the company had nothing

to do with the poisoning incident. He further presented a plan to guarantee that Tylenol

could never again be tampered with. Tylenol sales rebounded, largely because of the

credibility of Burkes remarks and the personal reassurance he offered. He built

credibility and goodwill through his appearance on the media, and this goodwill helped


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the company survive (Ulmer, Sellnow, & Seeger, 2007).

There are instances, however, when a CEO is not familiar or comfortable with the

press, when he or she is not an effective communicator, and when it may not be

appropriate to expose the CEO to probing media questions. When Exxons tanker

Valdez ran into an Alaskan reef in 1989, spilling 1.5 million gallons of crude oil, chairman

and CEO Lawrence Rawls response made the damage to the company much worse.

Rawl defended the company and sought to avoid responsibility by blaming Captain

Joseph Hazelwood for the spill and the State of Alaska for the failed clean-up. At the very

time when cooperation was needed, Rawl became engaged in a public dispute with

Alaskas Governor Steve Cowper. The Exxon Valdez oil spill is generally recognized as a

public relations disaster which was compounded by Rawls behavior (Small, 1991).

Image Restoration

In image restoration theory, the organization determines what is threatening its

reputation or image and also determines which publics must be addressed and

persuaded to maintain and restore a positive image (Fearn-Banks, 2007). Specifically,

when images are threatened, as they are during crises, organizations are forced to

respond. They attempt to regain consumer confidence, minimize negative publicity, and

return the company to economic stability. Based on the work of Ware and Linkugels

(1973) theory of apologia, Burke's (1970) discussion on guilt, and Scott and Lyman's

(1968) accounts approach to self defense, Benoit (1995a) has developed a

comprehensive typology of image restoration strategies. This includes denial, evasion of

responsibility, reduction of the offensiveness of the act, corrective action, and

mortification.


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There are two major assumptions that underlie Benoits (1995a) theory of image

restoration. First, he argues that communication is a goal-oriented activity. This means

that humans communicate with an agenda. Some goal or outcome is desired when

humans communicate. His second assumption is that a very important communication

goal is to maintain or preserve ones image or reputation after alleged or suspected

wrongdoing. This process of image management is also known as face-work. Five

strategies make up the rhetoric or image repair discourse and each of these strategies

have a set of tactics within them as shown in Table 1.

Table 1: Benoits Image Restoration Strategies

Strategy Key Characteristic Denial

Simple denial Organization did not perform actShift the blame Act performed by other

Evasion of ResponsibilityProvocation Responded to act of anotherDefeasibility Lack of information or ability

Accident Act was a mishapGood intentions Meant well in act Reducing Offensiveness of Event

Bolstering Stress good traitsMinimization Act not seriousDifferentiation Act less offensiveTranscendence More important consideration

Attack accuser Reduce credibility of accuserCompensation Reimburse victim

Corrective Action Plan to solve or prevent problem Mortification Apologize for act

Source: Adapted from Image repair discourse and crisis communication,by W. Benoit, 1997, Public Relations Review , 23 , p. 197.

Benoit (1995a) argues that individuals made various communication decisions

when responding to an accusation that threatens their image or reputation in order to

restore their good standing before salient audiences. He further suggests that multiple


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image repair strategies are most frequently used. If the organization or individual is

falsely accused, says Benoit, denial might be an effective initial approach. Once the

accused has established his innocence through denial, bolstering may still be required to

repair residual effects of damage to his reputation. Mortification, for example, might be

used to precede corrective action.

Benoit and colleagues have developed and applied the model to a variety of

different crisis situations. For instance, Benoit and Brinson (1994) analyze AT&Ts

defense following an interruption of its long-distance service in New York in September

of 1991. Initially, AT&T tried to shift blame to low-level workers. As the complete story

emerged, however, AT&T apologized for the interruption (mortification) and began to

bolster its image by stressing its commitment to excellence, the billions of dollars

invested in service, and the quality of its employees. Finally, AT&T promised corrective

action and introduced a comprehensive review of its operations to anticipate and prevent

further problems. It also stressed its commitment to providing excellent service and its

willingness to spend billions of dollars to do so. Given these corrective action strategies,

AT&Ts finally restored its image.

Benoit (1995a) also examines Union Carbides response to the Bhopal, India, gas

leak that killed thousands and injured hundreds of thousands. Union Carbides primary

strategies, bolstering and corrective action, were focused on four specific actions: a relief

fund, an orphanage, medical supplies, and medical personnel. Although these strategies

were appropriate and timely, Benoit claims that Union Carbide failed to address the most

important question: What were they doing to prevent another tragedy?

Fishman (1999) comments that the strength of Benoits typology lies in the details


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that it provides, and that the model can be adapted to cover virtually every attack-defined

situation from a celebrity crisis such as the Tonya Harding case (Benoit & Hanczor,

1994) to a company which defends its actions by promising reforms for overcharging its

customers for automobile services (Benoit, 1995b). However, Fishman (1999) thinks that

Benoits approach lacks a comprehensive picture of the entire cycle of a crisis as well as

a mechanism for examining multiple parties and their culpability in the crisis.

Burns and Bruner (2000) revisit Benoits theory, arguing that at certain points, it is

constrained by its current language and mental representations and even invites

misinterpretation (p. 27). They note that the theory reflects a more static or linear view

of rhetoric which is based on a simple stimulus-response sequence that does not

emphasize a more audience-oriented point of view (p. 28). They are also concerned

that Benoits theory oversimplifies the assessment of effectiveness. Hence, they suggest

that: 1) a more comprehensive understanding of multiple audiences may help focus the

assessment of effectiveness, and 2) diverse and more precise measures of

effectiveness may help in some cases. More specifically, the suggestion is to employ the

triangulation of research methods to the measurement of precise relationship between

image restoration discourse and other phenomena (Burns & Bruner, 2000).

Ulmer, Seeger, and Sellnow (2007) also point out that the focus of image

restoration is limited primarily to post-event discourse and to that communication

specifically associated with accusations and responses (p.131). The success of image

restoration strategies depends on the crisis and this focus can represent a small portion

of the messages associated with a crisis event, both in terms of time and scope. While

such strategies may be effective, they sometimes come across as insincere and even


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deceptive, particularly when the organization is obviously in the wrong (Ulmer, Sellnow,

& Seeger, 2007).

Situational Crisis Communication Theory

Coombs (1995) combines the work of corporate apologia and image restoration

theory to develop situational crisis communication theory (SCCT). He synthesizes

existing literature to create a list of crisis response strategies and develops a set of

guidelines for the appropriate use of a given strategy. The guidelines are based upon the

attribution theory and use the crisis situation and the public as the factors that help to

determine when a crisis response strategy is appropriate. Attribution theory is premised

on the belief that people assign responsibility for negative, unexpected events (Weiner,

1986). Coombs (2007a) indicates that crises are unexpected and negative, so they

provoke attributions of responsibility. In turn, these attributions shape how a stakeholder

feels and behaves toward the organization.

Conceptual frameworks for Coombs approach have evolved over time. He states

that a more productive approach is to identify the most common crisis communication

strategies and to discover a thread that connects them together (Coombs, 1999).

Coombs later revised his theory to place crisis situations along a continuum from weak

responsibility to strong responsibility. The continuum reflects a range of actions from

defensive to accommodative. In his revised approach, Coombs (1999) chooses

strategies that are cited as most commonly being used by corporations faced with

reputation-altering decisions. Figure 1 places the common crisis communication

strategies on such a continuum. Accommodative responses accept responsibility, admit

a problem exists, and/or attempt to take corrective action. Defensive responses insist


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there is no problem, reassure the stakeholders that the organization can generate future

revenues, and/or take action to restore normal operations.

Source: From Ongoing crisis communication: Planning, managing and responding (p. 124),by W. T. Coombs, 1999, Thousand Oaks, CA: Sage Publications.

Figure 1: Coombs's Continuum of Crisis Strategies

Defensive Accommodative

attackaccuser denial excuse ustification ingratiation corrective

actionfull apology

Weak Crisis Responsibility Strong CrisisResponsibility

rumors malevolence accidents misdeeds

naturaldisasters

In SCCT, a crisis manager begins by identifying the basic crisis type to determine

the initial level of crisis responsibility stakeholders will attribute to the crisis situation.

Next, performance history and the amount of damage are considered to determine if

adjustment should be made to the original crisis responsibility assessment. After the final

adjustment, the crisis managers select the crisis response strategy to fit the level of crisis

responsibility. SCCT concentrates on crisis response strategies that will maximize

protection of the organizations reputation (Coombs, 2006a).

Using Coombss typology of crisis response strategies, Wilcox and Cameron

(2006) examine the case of Intel. In 1993, Intel initially denied there was a problem with

its Pentium 586 chip. As the crisis deepened and was covered in the mainstream press,

Intel used the justification strategy by saying that the problem was not serious enough to

warrant replacing the chips. It minimized the concerns of end-users such as engineers


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As shown in Table 2, Coombs (2006a) defines the primary and supplemental crisis

response strategies used in SCCT. Crisis response strategies are grouped into four

clusters. Bolstering strategies are only supplemental and must be used with one of the

other three.

Table 2: Coombss Crisis Response StrategiesPrimary Crisi s Response Strategies

Strategies Explanation Example

Deny

Attack the Accuser

Crisis manager confronts theperson or group claiming somethingis wrong with the organization.

The organization threatened tosue the people who claim acrisis occurred.

Denial Crisis manager asserts that nocrisis exists.The organization said that nocrisis event occurred.

ScapegoatCrisis manager blames someperson or group outside of theorganization for the crisis.

The organization blamed thesupplier for the crisis.

Diminish

Excuse

Crisis manager minimizesorganizational responsibility bydenying intent to do harm and/orclaiming inability to control theevents that triggered the crisis.

The organization said it did notintend for the crisis to occurand that accidents happen aspart of the operation of anyorganization.

JustificationCrisis manager minimizes theperceived damage caused with thecrisis.

The organization said thedamage and injuries from thecrisis were very minor.

Rebuild

Compensation Crisis manager provides money orother gifts to the victims. The organization offeredmoney and products ascompensation.

Apology

Crisis manager publicly states thatthe organization takes fullresponsibility for the crisis and asksstakeholders forgiveness.

The organization publiclyaccepted full responsibility forthe crisis and askedstakeholders to forgive themistake.

Secondary Cris is Respons e StrategiesStrategies Explanation Example

Bolstering

ReminderThe organization tells stakeholdersabout its past good works.

The organization restated itspast good work and improved

its recent work.

Ingratiation

Crisis manager praisesstakeholders and/or reminds themof past good works by theorganization.

The organization thankedstakeholders for their help.

VictimageCrisis managers remindstakeholders that the organizationis a victim of the crisis too.

Source: Adapted from The protective powers of crisis response strategies: Managing reputationalassets during a crisis, 2006, Journal of Promotion Management , 12 , p. 248.


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Although SCCT does have a limited scope of application, it can be used by

organizations when they face any of the above crisis types. SCCT is not meant to apply

to individuals such as politicians or celebrities. There are financial/legal limits to the

selection of crisis response strategies (Coombs, 2006b). SCCT recognizes that crisis

managers may be forced to use suboptimal crisis response strategies because the

organization cannot afford the financial and legal liabilities of strategies that accept full

responsibility for the crisis. At times, financial/legal constraints will prohibit an

organization from using a crisis response strategy that openly accepts responsibility. On

a related note, an organization can express compassion without accepting responsibility.

Demonstrating compassion may be a way to enhance organizational credibility, a

valuable aspect of the reputation.

On the other hand, Coombs has frequently used empirical method to examine

how an organizations reputation is impacted as a result of crisis (Coombs, 2004, 2006a).

However, communication scholars do not always use empirical approaches because of

the difficulty in controlling the uncertainty surrounding organizations in crisis. Seeger,

Sellnow and Ulmer (1998) argue that the inherent threat to the organization and its

employees may diminish respondents willingness to share information honestly on a

survey (p. 259). In addition, when relying on student populations (as Coombs often

does), comprised of neither the actual stakeholders of the organizations studied, nor

even those representative of the actual stakeholders, artificiality is introduced

(Ezzeddine, 2006, p. 48).

In sum, the stream of image restoration research or crisis response strategy has

helped establish a useful framework from which practitioners can determine the most


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appropriate crisis response type, ranging from accommodative to defensive strategy.

Specifically, they are designed to understand what strategy is relevant to be used for a

given circumstance. An organization may use one or more crisis strategies in

combination as long as they are not contradictory (Ihlen, 2002). For example, it is a

contradiction if crisis managers used deny strategies with strategies that acknowledge a

crisis has occurred. Face, image, reputation are important concepts embedded in this

line of research. However, there is little research on the role of culture in crisis response

strategies. In the next section, the concept of culture is reviewed. The importance of

cultural factors in crisis communication is addressed as well.

Crisis Communication and Culture

Research by Pauchant and Mitroff (1988) indicate a strong relationship between

an organizations overall culture and its response to crises. Sriramesh, Kim and Takasaki

(1999) have followed the line of research and described how societal culture influences

the practice of public relations in every nation and region of the world. Taylor (2000)

argues that one of the most difficult challenges for public relations in the global

marketplace will be in the area of crisis communication. She explains further that crises

are exacerbated when they occur in an international environment. Similarly, Molleda and

Quinn (2004) point out that public relations professionals practicing in more than one

country are challenged by conflicts that impact their organizations or clients activities

and reputation in more than one location at the same time. This is elaborated when a

national issue becomes international in an instant, impacting host, home and

transnational publics. In particular, nowadays the internet technology can inform their

local public about problems in different areas of the world that become a global issue.


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In short, to understand culture, we must find ways to assess and compare

cultures. There are three influential and accepted comparison points for intercultural

communication: Halls idea of context (1976), Hofstedes cultural dimensions (1980) and

Trompenaars and Hampden-Turners cultural factors (1998). The following section

explains each and relates them to the field of crisis communication.

High-Context and Low-Context Cultures

There are many different contexts which lead to differences in how and what

people communicate. Edward T. Hall (1976) proposed the concept of high versus low

context as a way of understand different cultural orientations. The difference between

high and low context cultures depends on how much meaning is found in the context

versus in the code. The code can interpret as message and context as setting or

circumstance, including the people, in which the message appeared. More specifically,

context leads to differences in how and what people communicate.

In Halls view, a high context culture is one in which people are deeply involved

with each other. As a result of intimate relationship among people, a structure of social

hierarchy exists, individual inner feelings are kept under strong self-control, and

information is widely shared through simple messages with deep meaning. The

communication styles of Asian and Arab nations, for example, are high context cultures.

In contrast, European and American communication styles are considered low context

cultures. A low-context culture is one in which people are highly individualized,

somewhat alienated, and fragmented, and there is relatively little involvement with

others (Hall, 1976, p. 39). As a consequence, social hierarchy, as well as society in

general, imposes less on individuals lives, and communication between people is more


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explicit and nonpersonal. Lustig and Koester (2006) summarize the key communication

differences between high and low context cultures as shown in Table 3.

Table 3: Characteristics of High and Low Context Cultures

High Context Cultures Low Context Cultures Covert and implicit Overt and explicit Message internalized Messages plainly coded Much nonverbal coding Details verbalized Reactions reserved Reactions on the surface Distinct ingroups and outgroups Flexible ingroups and outgroups

Strong interpersonal bonds Fragile interpersonal bonds Commitment high Commitment low Time open and flexible Time highly organized Examples of context by country:

Japan, China, Korea Examples of context by country:

Germany, USA, Great Britain, Australia

Source: Adapted from Intercultural competence: Interpersonal communicationacross cultures (p. 114), by M. W. Lustig and J. Koester, 2006, Boston: Allyn &Bacon.

Dimensions of Culture

Hofstedes Dimensions of Culture

Various researchers have suggested underlying principles or dimensions that can

be used to examine culture comparatively. The work of Geert Hofstede (1980) has been

widely used as a foundation of culture and business communication. Hofstede (1980)

defines culture as the collective programming of the mind which distinguishes members

of one human group from another. He points out cultures are built on values; values

create the collective programming. Collective programming means that people share

patterns of thinking, feeling, acting, and reacting. Thus, people from different cultures

can see and react to the same event in every different ways.


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In a study of IBM employees from around the world, Hofstede (1980) found four

dimensions of societal culture: power distance , individualism or collectivism , uncertainty

avoidance , masculinity or femininity . Later, with Bond (1988) he identified a fifth category

Confucian dynamism or long-term-short-term orientation that has its roots in Eastern

culture. These five variables are present in all cultures and the degree of their presence

influence the internal and external communication of any organization.

Hofstedes (1980) first dimension, power distance focuses on how a society deals

with the fact that people are unequal in physical and intellectual capabilities. Specifically,

power distance refers to the openness of upward communication in an organization. In a

high power distance culture, public relations practitioners may hesitate to express their

opinions to their supervisors (Taylor, 2001). The individualism versus collectivism

dimension focuses on the relationship between the individual and social group. People

with high individualistic values tend to care about self-actualization and career

progression in the organization, whereas people with collectivist values tend to value the

overall benefits to the organization more than their own individual interests (Taylor,

2001). Sriramesh, Kim, and Takasaki (1999), for example, identify the collectivism as a

major influence on Japanese public relations. The concept of wa, meaning harmony, and

amae , meaning others goodness, results in public relations efforts that create a mutual

solidarity in the organization.

Hofstedes uncertainty avoidance dimension measures the extent to which

different cultures socialize their members into accepting ambiguous situations and

tolerating uncertainty. There tend to be more written rules, regulations, and stress in high

uncertainty avoidance culture. Basically, humans have used technology (particularly


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automation), rites and rituals (a facet of corporate culture), and formalization (also an

aspect of corporate culture) to cope with ambiguity in organization (Sriramesh, Kim, &

Takasaki, 1999, p. 275). Nations that have high uncertainty avoidance are not tolerant of

risk or crisis. Taylor (2001) suggests that organizations that operate in high uncertainty

avoidance nations must recognize that situations that may appear to be low risk may

actually be perceived to be a crisis (p. 77).

Masculinity versus femininity dimension looks at the relationship between gender

and work roles. In masculine cultures, sex roles are distinguished and traditional

masculine values, such as achievement and the effective exercise of power,

determined cultural ideals. Finally, Hofstedes fifth and newest dimension, Confucian

dynamism or time-orientation dimension, refers to a persons point of reference about life

and work. Cultures that promote a long-term orientation toward life admire thriftiness,

perseverance, and the desire for orderly relationships with others.

Trompenaars and Hampden-Turners Cultural Factors

In 1998, Trompenaars and Hampden-Turner incorporated some of Hofstedes

dimensions, but used seven different terms to describe culture:

1. Universalism versus particularism

Universalist societies emphasize standards and obedience to the rules; particularist

societies are those in which particular circumstances and relationships are stronger

than abstract rules.

2. Individualism versus communitarianism

Individualism is about rights of the individual. It seeks to let each person grow or fail

on their own, and sees group-focus as denuding the individual of their inalienable


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rights. Communitarianism is about the rights of the group or society. It seeks to put

the family, group, company and country before the individual.

3. Neutral versus affective orientation

In emotionally neutral cultures, one carefully controls emotions. In cultures with an

affective orientation, people freely express their emotions.

4. Specific versus diffuse

People from a specific oriented culture tend to analyze elements of a situation

separately, viewing the whole as the sum of its parts. People from a diffuse culture

tend to see all elements of a situation as interwoven, viewing the diffuse whole as

more than simply the sum of its parts.

5. Achievement versus ascription:

Achievement oriented societies accord status to people on the basis of their

performance only. Ascription oriented societies also attribute status based on age,

class, gender, education, etc.

6. Internal versus external control orientation

In cultures with an internal control orientation, people tend to believe that they can

dominate their environment. In cultures with an external control orientation, people

are inclined to adapt to external forces instead of resisting them.

7. Time orientation

Cultures which focus on time give relevance to the past, present, and future and their

short versus long-term orientation.

Trompenaars and Hampden-Turner (1998) see culture fundamentally as the way

in which groups of people solve problems and reconcile dilemmas. Thus, they propose


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that value orientations represent a cultural groups solution to fundamental human

dilemmas related to living together and interacting with the environment. While Hofstede

talks about cultural difference in terms of a sort of psycho-emotional programming,

Trompenaars and Hampden-Turner attempt to identify the varying internal logics used by

differential groups to explain their value choices (Shaules, 2007, p. 53). Table 4 shows

the comparison of Hofstedes and Trompenaars and Hampden-Turners cultural

dimensions.

Table 4: Comparison of Hofstedes and Trompenaars and Hampden-TurnersDimensions

Hofstede (1980) Trompenaars and Hampden-Turner (1998) Individualism-Collectivism Individualism vs. Communitarianism Uncertainty Avoidance Universal vs. Particular Uncertainty Avoidance Neutral vs. Affective Long-term Orientation Time Orientation Masculinity vs. Femininity Internal vs. External control Power Distance Specific vs. Diffuse Power Distance Achievement vs. Ascription

Cultural Issues in Crisis Communication

Coca Cola Tainting Crisis in Europe

Taylor (2000) applies the concept of uncertainty avoidance and power distance to

examine the case of Coca Colas tainting crisis in Europe. The case examined the crisis

faced by Coca Cola in Belgium on June 14, 1999, in which school children fell ill after

consuming its products. Coca Cola had to recall about 30 million cans and bottles, the

largest ever product recall in its 113-year history. The crisis cost the company about

$200 million (Mitroff, 2001). The Belgian government instructed Coca Cola to withdraw

all of its products from the market and prohibited any distribution of related Coke

products until government approval was obtained. Later, the governments of Spain and


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France also banned the sale of Coca Cola to safeguard the health of their publics. Other

nations, however, such as Denmark, Norway, and Sweden, did not ban sales of coke

products.

Taylor (2000) notes that uncertainty avoidance and power distance are most

applicable and affect an organizations communication and public response to crisis in

two ways. First, organizations from low power distance and low uncertain avoidance

cultures may not see a need to communicate to the public about the situation. On the

other hand, organizations from high power distance and high uncertainty avoidance

cultures may directly communicate with governments during a crisis to secure their

support. Second, the fact that power distance and uncertainty avoidance interact

seriously affects how the public responds to the crisis. People who live in high

uncertainty avoidance nations seek rules, rituals, and laws to guide behaviors, and in

high power distance nations, people respect those who hold power. When these two

dimensions interact, it has serious implications for crisis public relations (Taylor, 2000).

The tainted Coca Cola crisis case showed that this multinational organization

misjudged its publics on a variety of cultural dimensions. Belgium, France and Spain are

high power distance and high uncertainty avoidance nations. The cultures of these three

countries do not tolerate an incident that creates risk, ambiguity, and conflict. However,

Coca Cola failed to communicate to each government during the crisis. The action was

initially taken by Belgiums Minister of Health after the Coca Cola failed to respond in a

timely and appropriate manner. Coco Cola delayed its response because it believed that

there was nothing technically wrong and that the children and their parents were

overreacting to the situation (Mitroff, 2001, p. 19). Taylor (2000) argues that it was Coca


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Colas CEOs absence, in both comment and presence that directly affronted the high

power distance nations during this crisis. The company was not condemned for the

tainting situation. It was criticized because the company remained silent for over a week

after the first illnesses. In contrast, more risk-tolerant nations including Sweden, Norway

and Denmark appear to be more patient and if the Coca Cola crisis is any indication,

more forgiving of mistakes (Taylor, 2000).

Airl ine Crash Crises

Drawing upon Hofstedes five dimensions of culture, Haruta and Hallahan (2003)

contrast the organizational responses to two major airline crashes that occurred in 1985

in Japan and the United States. The study reveals significant cultural differences that

affect communication practices by Japan Air Lines Flight 123 and Delta Air Lines Flight

191. Haruta and Hallahan (2003) point out that both airlines were obviously striving for

the same goal of obtaining control over and alleviation of the crisis situation. However,

each company followed a different set of protocols that had been thought to meet the

expectations of their own corporate and national culture.

In these two airline crashes, the study shows significant differences in the use of

apology, media strategies, and litigation concerns (Haruta & Hallahan, 2003). Most

importantly, the use of apology reveals the greatest contrast between the two societies.

While JAL President Takagi was highly visible and repeatedly made public apologies to

the victims families and the survivors, neither the CEO nor the president of Delta ever

made a public apology. Strong Confucianism in the Japanese culture stress virtue. In this

case, virtue dictated that JAL to offer an apology. Haruta and Hallahan (2003)

emphasize when an organization makes a mistake that disrupts society, the large power


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distance in Japanese culture also demands that the person at the top of the

organizations hierarchy take the most responsibility. Reflecting the highly masculine

culture in Japan, men are expected to take control of situations. People in a society that

tends toward uncertainty avoidance also demand decisive leadership. In contrast, in the

Delta crash case, the US airline never literally said sorry. It seems that making a public

apology was neither desirable for Delta airline because of litigation concerns nor

expected by the public. The findings suggest that cultural sensitivity is a key to

developing a successful crisis communication plan in the airline industry.

South Asia Financial Crisis

Based on Trompenaars and Hampden-Turners framework (1998), PrudHomme

(1998) analyzes the 1997 Asia financial crisis for understanding the relationship between

culture and economic behavior. He argues that there are large cultural differences

between the Western world and East Asia, but also within East Asia itself.

Cultural similarities resulted in the crisis being felt similarly all over East Asia, but the differences enabled some nations to deal with it moresuccessfully than others. Hong Kong, Singapore, China and Taiwan haveemerged as relatively the best survivors, while Indonesia, Korea andThailand needed IMF support packages and the near term outlook forJapan is still deteriorating, unless the government there introducesmeasures to address the financial sector problem. (PrudHomme, 1998, p.27)

PrudHomme (1998) explains that concealment of financial losses underlines

much of the crisis in the Japanese financial sector. The Japanese have a special word

for practice of hiding losses, tobashi . For example, at Yamaichi Securities, the first

financial institute to collapse during the crisis, losses of US$2 billion were hidden for

seven years. Tobashi becomes a dangerous custom when the distinct Japanese


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cultural values of particularism and external control orientation are taken to the extreme

(PrudHomme, 1998, p. 27). To some extent, this reflects that the Japanese maintain

harmony and discourage self-assertions. As a result, warning and negative comments

against the organization are perceived as violating harmonization. Not surprisingly,

problems are often hidden, until the situation explodes. PrudHomme (1998)

acknowledges that the Hong Kong and Singapore systems seem to be reasonably stable

and robust, perhaps because they integrate Western values with East Asian values. This

integration leads to a combination of flexibility and focus, to transparency, and to fast

response and long-term strategies.

Given these examples, culture does matter and plays a major role in response to

the crisis situation. However, crisis communication theory is largely rooted in the

ethnocentric lens and based on Western (mostly American) theorizing about managing

communication in times of crisis. As a result of its origins in American thought, little

attention has been paid to the cross-cultural aspects of crisis communication. However,

the American theory might not be extensive enough to address all situations and explain

worldwide cultural variances. More specifically, ethnocentric assumptions and theories

invariably reflect biases of the society in which those assumptions originate, and might

not necessarily be applicable across cultures (Vercic, L. Grunig, & J. Grunig, 1996).

Therefore, there is a need for cross-cultural study to understand the cultural dimensions

of crisis communication.

Although organizational culture is an important factor in crisis communication, this

study emphasizes societal culture as the primary focus in these three cases.

Organizational culture involves the internal dimensions of an organization, including


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values, norms, traditions, symbols and communication processes, among other factors.

An organizations individual culture obviously has some relationship to the societal

culture within which it is embedded. Moreover, organizational culture will affect how the

organization responds to a crisis and the organizational culture will be affected by crises

the organization experiences.

Research Questions

Based on earlier discussion, this study seeks to understand how the

organizational leaders make their public statements during the corporate crisis and

explore the cultural differences in their crisis communication strategies. Simply put, this

study focuses on two areas of communication: 1) corporate communication managing in

times of crisis on the cases of Martha Stewart, BenQ and HIH, and 2) the cultural

variances shown in crisis communication contexts. Specifically, this study is guided by

the following three questions:

RQ1: How did Martha Stewart, BenQ and HIH manage communication during

their corporate crisis?

RQ2: How were these corporate communication strategies received and

interpreted by the stakeholders?

RQ3: How did their corporate communication strategies reflect different cultural

factors?

These research questions are proposed based on the previous theoretical

discussion and literature review. The first research question explores how Martha

Stewart, BenQ and HIH manage their organizational crisis situation through

communication. As such, this study first reviews what communication strategies Martha


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Stewart, BenQ and HIH use in times of corporate crisis. Basically, image restoration

strategies are designed to help the organization shift the blame, reduce responsibility,

avoid damage to the companys reputation and get past the crisis as quickly as possible

(Ulmer, Sellnow, & Seeger, 2007). Moreover, organizations use the impression

management strategies, which Coombs (2007a) terms crisis response strategies , to

repair reputational damage from a crisis. Coombs (2007a) points out crises threaten to

damage reputations because a crisis creates negative impressions of the organization.

Put in plain terms, reputations are widely recognized as a valuable, intangible asset. In

essence, reputation management attempts to build and maintain a favorable perception

of an organization among its stakeholders (Coombs, 2007a). Poorly managed issues,

imposing excessive risk to others, and callous responses to crisis damage an

organizations reputation. Similarly, Wilcox and Cameron (2006) affirm when this

damage is extreme, image restoration strategies may help (p. 246). Hence, Coombss

crisis response strategies (2007a) are utilized to examine how strategically these three

companies disseminate their information to various stakeholders during the corporate

crisis.

The second research question further explores how these strategies are received

and interpreted by the stakeholders of these three companies. The question tries to find

out whether these strategies work out or not. Furthermore, how do these strategies

impact on corporate performance (e.g., significant decline in stakeholder trust and stock

price)? How do the news media report these crisis events?

The third question examines the cultural differences of organizational responses

following corporate leaders misconduct in the U.S., Taiwan and Australia. There may be


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some generic similarities in managing basic crisis response procedure across cultures.

However, practice is expected to be influenced by innumerable cultural factors. Under

certain circumstances, the crisis responses need to be more culturally conscious. As

mentioned earlier, culture is recognized as having an important effect on crisis

communication. To be precise, this question explores the crisis response strategies and

examines crisis communication in a context outside of American culture.

Summary

This chapter reviewed the fundamental concepts related to crisis communication.

They included the definition of crisis communication, type of crisis and communication

perspectives to crisis research. In particular, three crisis communication theories

relevant to the current study, corporate apologia, image restoration, and situational crisis

communication theory were addressed. However, existing theoretical frameworks of

crisis communication may not be adequate in explaining the complex settings and

dynamic mechanisms in international crisis communication. Thus, the importance of

cultural factors in crisis communication is highlighted. The goal of this is to illustrate that

one size may not fit all in the different cultural contexts of organizational crisis. Three

research questions proposed in each case allow for an examination of these issues in

more detail. The next chapter provides more detail about the rationale for using a case

study method and explains in detail the data collection and analysis procedures.


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CHAPTER 3

METHOD

This chapter provides a rationale and description of the case study method and

demonstrates its applicability in the field of crisis communication. Specifically, this

chapter details the three-case study methodology which is uniquely suited for

highlighting similarities and differences in crisis response strategies and is used to

answer the proposed three questions regarding how organizations manage their crisis

communication. This chapter also describes the sources of data and explains the

procedures for analysis.

Case Study as Method

Davey (1991) defines case study research as a method that involves an in-depth,

longitudinal examination of single instance or event. It is a systematic way of looking at

what is happening, collecting data, analyzing information, and reporting the results. Yin

(1994) offers another description of the case study as an empirical inquiry that uses

multiple sources of evidence to investigate a contemporary phenomenon within its

real-life context, in which the boundaries between the phenomenon and its context are

not clearly evident.

Stacks (2002) mentions that an obvious strength of the case study method is that

what is being studied has already occurred. The case study looks back in an attempt to

explain through the use of direct observation, participatory informal research, and

secondary research of what and why something occurs and how that outcome is

managed. The case study, then, provides detail only found in hindsight and presents it in

such a way as to establish what strategies work and why. Thus, the case study, for


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example, in public relations can examine the way the problem is stated and the initial

research gathering stages based on environmental scanning and monitoring; the

strategic communication planning based on stated objectives; the messages

themselves, the actual outputs; and the evaluation of the entire program or campaign

(Stacks, 2002). Merriam (1998) emphasizes that the advantage of the case study is its

ability to discover new relationships, concepts, and understanding, rather than

verification of predetermined hypotheses.

An objective of case study research is to generate knowledge of the particular.

Schwandt (2001) explains that case study research seeks to discern and pursue the

understanding of issues intrinsic to the case. Schwandt states, however, that cases can

be chosen and studied because they are thought to be instrumentally useful in furthering

the understanding of a particular problem, issue, and concept. According to Gomm,

Hammersley, and Foster (2000), in-depth research of specific instances in case studies

can actually show causal processes in context, which allows researchers to see which

theoretical perspectives provide the best explanations. Wimmer and Dominick (2006)

suggest case study research is most valuable when the researcher seeks to obtain a

wealth of information about the research topic. Case study methodology is not only at the

exploratory stage of research but also gathering descriptive and explanatory data. The

case study method also affords the researcher the ability to deal with a wide spectrum of

evidence.

Rationale for the Case Study Method in Crisis Communication

Crisis communication inquiries have traditionally been conducted using

naturalistic and critical approaches (Seeger, Sellnow & Ulmer, 1998). Naturalistic


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research in crisis communication can be categorized as either frequency-based or

descriptive/exploratory. The frequency-based approaches have included surveys and

content analyses and usually involve only one audience group. According to Seeger,

Sellnow and Ulmer (1998), when a crisis is still unfolding or in the process of being

managed, the practicality of administering and responding to a survey is often neither

practical nor desirable. As such, case study analysis provides the crisis researcher with

the opportunity to conduct descriptive and exploratory inquiries (Seeger, Sellnow, &

Ulmer, 1998). Of all the methods, those that are descriptive/exploratory, like the case

study method, tend to be best suited for the study of the messages addressed to

multiple stakeholders in a crisis situation (Seeger, Sellnow, & Ulmer, 1998, p. 264).

In other words, case study allows researchers to explore different outcomes of

general processes suggested by theories depending on different crisis contexts, which

suits crisis communication research that seeks application of theories to practice. In

essence, it is not surprising that a growing number of crisis communication studies have

used the case study approach (Benoit, 1995b; Benoit & Brinson, 1994; Fishman, 1999;

Hearit, 1994; Kauffman, 2005; Seeger, & Ulmer, 2002; Seeger, & Ulmer, 2003; Taylor,

2000).

Furthermore, the case study method draws on thick descriptions without

disrupting the organization, victims of the crisis or the context. Ezzeddine (2006) also

states that this allows researchers to examine a crisis even after much time has passed

since the actual events. These historical approaches have the added benefit of allowing

for an examination of the crisis events and their impact on multiple stakeholders over an

extended period of time (Ezzeddine, 2006, p. 49).


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Multiple Case Selection

Yin (1994) indicates that the evidence from multiple cases is often considered

more compelling, and the overall study is therefore regarded as being more robust (p.

45). In this study, three cases, Martha Stewart, BenQ and HIH, are explored to examine

the crisis communication practices among these organizations. Daymon and Holloway

(2002) argue that the use of multiple case studies enables some measure of

generalization to a wider universe. It is thus necessary to look closely at the individual

case in order to discover what is essentially unique about them. To effectively analyze

the data from the multiple case studies, the cross-case analysis technique is also

employed (Merriam, 1998). Given the interest in cross-cultural studies, findings based on

three countries are preferable to findings based on one because they encompass more

of the cultural variety. Of particular interest is the different cultural variation from one

case to the other. Cross-case analysis compares each of the cases in order to determine

underlying similarities and differences. The distinctive feature then can be identified by

evaluating similarities and contrast between cases. More clearly, cross-case analysis

strengthens the precision, validity and stability of the research findings.

The cases for this study Martha Stewart, BenQ, and HIH were selected

because of their exemplary nature. First, these three cases are analogous each involving

a similar crisis but within a different situation. The use of similar cases for analysis can

provide larger contexts for understanding the specific circumstances of events. A more

robust study can be constructed by gaining insights into the situation and phenomenon

from similar examples. Second, these three cases have involved corporate executive

wrongdoings. The corporate misdeeds have decreased stakeholder confidence and


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raised the concern of corporate governance problems. Third, all of three executives are

strong business leaders in their industry. Martha Stewart, K. Y. Lee and Ray Williams,

through their unethical misconduct, placed these companies in crisis. In a sense, their

personalities help shape the personalities of their companies brand. When personal

reputation is impaired, as a result, corporate reputation and financial outcomes might be

unavoidably and seriously undermined. Fourth, crisis communication studies are

predominantly American-based. Through the comparative analysis of these cases from

different countries, this study can shed some light on the importance of considering

culture in crisis communication and point to a need for international crisis communication

research and practice.

In short, communication scholars often use the case study method in order to

analyze individual and corporate communication strategies. For this study, a

multiple-case study approach allows the research to perform a more complete and

compelling analysis. Furthermore, the three research questions designed and guided for

this study seek to increase the understanding of corporate leaders crisis response

strategies and cultural variances in crisis communication.

Sources of Data

Generally speaking, the case study is flexible and unobtrusive in that data can be

obtained both from the organization and from the public domain. One of the

characteristics of the case study is the triangulation of data such as collecting evidence

from multiple sources (Yin, 1994). According to Yin (1994), the six sources of evidence

that are typically associated with the case study include documents, archival records,

interviews, direct observation, participant-observation, and physical artifacts.


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For this study, texts documenting Stewart, BenQ and HIHs discourse in response

to incidents that threatened their image were collected from multiple sources.

Specifically, this study employs predominantly two types of data: documents and archival

records. It begins with gathering data and finding facts related to cases and defining the

specific tasks. The actions and communication strategies used by Martha Stewart,

BenQ, and HIH are reviewed with information from their corporate websites, press

releases and media coverage. Martha Stewart, BenQ and HIH are all publicly traded

companies. A look at the organizational archival records (e.g., stock prices, sales and

annual reports) and official government records (e.g., court records and commission

reports) contribute to understand the impact of corporate scandals have had on the

companies financial performance and their stakeholders.

Selection of News Art icles

Traditionally, media articles are considered a secondary source of data which

illustrate how the organization is presented in the public discourse. To some degree,

these data reflect the attitudes and interpretations of the media and the perceptions of

the general public. The three cases in this study created a crisis on a national scale. As a

result of the national nature, the data were focused on reports from the nations largest

circulation national newspapers. More specifically, these sources were chosen because

of their interest in the case and the amount of coverage on the crisis.

In this study, the major criterion on organizational misconduct was that news had

to focus on either the corporate executive or on the organization itself. The selected

news article data were used to explore how the major media told news stories about the

crisis situation of Martha Stewart, BenQ and HIH. Therefore, the contents of the


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collected news articles were qualitatively analyzed to find the major concepts embedded

in the news coverage and the attitudes of news narration.

The media coverage on the Martha Stewart case was found through Lexis Nexis

Academic keyword search of Martha Stewart & insider trading in The New York Times

and The Washington Post. For the purpose of the valance of news narration in this study,

the period of analysis covered two time frames (during the crisis and post-crisis). The

first time frame started from the trading day to the verdict, beginning in December, 2001

and running through March, 2004. The second time frame started from the day of

sentencing to her release from prison, beginning on July 16, 2004 and running through

March 2005.

Similarly, the keyword search of the BenQ case was BenQ & insider trading in

the two major native language newspapers: The China Times and The United Daily

News. The other two English newspapers in Taiwan, The Taipei Times and The China

Post were also included. The period of analysis covered a five-month period, starting

from the day of the investigation to the indictment of five executives, beginning on March

14, 2007 and running through August 21, 2007.

For the case of HIH, the keyword search was HIH collapse in the two major

Australian national newspapers: The Australian and The Australian Financial Review .

The first time frame started in September, 2000, when the financial difficulties began in

the market and ran through August, 2001. The analysis of the second time frame began

with the post-collapse developments, such as the HIH Royal Commission Inquiry by

Justice Neville Owen in 2003 and the sentencing to jail of the two HIH major directors,

Ray Williams and Rodney Adler in 2005, through their release from prison in 2008.


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In summary, three representative cases namely - Martha Stewart, BenQ and HIH

were chosen for this study. They provided a larger context for understanding specific

circumstances of corporate communication in times of crisis. Documents and archival

records were the major sources of evidence. More specifically, data were collected from

their corporate websites, press releases, media coverage, organizational archival

records and official government records.

Unit of Analysis

According to Babbie (2007), units of analysis, are those things we examine in

order to create summary descriptions of all such units and to explain differences among

them. In other words, units of analysis in a multiple case refer to the phenomena being

studied. As a general guide, the definition of the unit of analysis is related to the way the

initial research questions have been defined (Yin, 1994, p. 22). Since the research

questions of this study were related to crisis communication strategies, the unit of

analysis for this study was the corporate response to stakeholders during and post crisis.

The unit of analysis provided a message-centered technique for understanding how a

company manages its corporate communication in times of crisis. Thus, the strategies

were apparent through the types of evidence. As noted earlier, major theoretical

frameworks such as crisis communication and intercultural communication served to

explain how crisis response strategies are similar and different in these three cases.

Theory and Case Research

This study attempted to offer a rich overview of data, using both individual case

and comparative analysis. Analyzing case study evidence is particularly difficult since

techniques and procedures have not been well defined in the past (Yin, 1994). Yin


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