A CORPORATE DISASTER

A CORPORATE DISASTER

Georgia company linked to salmonella forgot core values

The sickness and death caused by tainted peanut butter is of great concern, but the way this tragedy played out should also cause alarm about corporate judgment under pressure.

In September of 2008, the first hints of the latest salmonella food poisoning episode were being reported, but within three months the number of cases totaled 400 -- at least four resulting in deaths.

It was early January, when the Minnesota Department of Health first determined that the source of the salmonella was peanut butter and on Jan. 12, the Food and Drug Administration traced contaminated products to peanut butter paste manufactured in a Georgia plant owned by Peanut Corporation of America (PCA).

The next day, a PCA press release expressed "... deep regret that this has happened." And, that "out of an abundance of caution, we are voluntarily withdrawing this product and contacting our customers." To be sure, the PCA was "taking these actions with the safety of our consumers as our first priority."

On a Jan. 28 evening newscast, an Atlanta's TV station first reported that FDA documents indicated PCA officials knew their peanut butter contained salmonella bacteria and shipped it anyway.

By the last week in January, the Centers for Disease Control and Prevention reported the number of cases had gone to 600 and at least nine people were dead.

The next week, a congressional committee released documents that appeared to show that PCA officials knew of at least 12 findings of salmonella bacteria in their peanut butter during 2007 and 2008, but still urged employees to move the product out to its customers.

Today, the list of recalled products at risk of containing the salmonella infected peanut butter is over 2000; the cost to corporations and retailers of recall expense and future lost sales is likely to reach billions; and businesses are expected to spend hundreds of millions to rebuild trust and reassure customers of the safety of peanut-based products.

Anticipating a huge decline in demand for peanut butter products, peanut farmers are already planning to cut back the number of acres they will plant this spring.

Obviously, a lot went wrong here. As a result, Congress is sure to demand more frequent FDA inspections and, as Sen. Amy Klobuchar recently suggested, prosecutors are likely to bring criminal charges.

But in the end, it is frustrating that this happened at all. Like steroids in baseball and the chaos on Wall Street, this appears to be a case of complete breakdown in corporate governance and responsibility.

Managing against loss of reputation and legal liability should be at the core of every business, with the key value in that process being integrity. The truth matters; and the timing and totality of that truth matters most.

A company that works with professionals to build internal corporate values and a strong culture of moral responsibility will not only know the right time to nip a crisis in the bud, but will also have a well-built platform from which to communicate its message.

Unfortunately for the Peanut Company of America, their timing was two years off and their platform shaky.

KATHY TUNHEIM, PRINCIPAL/CEO, TUNHEIM PARTNERS, BLOOMINGTON; AND John Wodele, communications

consultant, St. Paul