Power Sheet – December 11, 2015

Our topic this morning is crisis leadership, with a couple of excellent “do-this-not-that” examples helpfully arranging themselves in this morning’s news.

The first example is really hard to beat because both sides of the lesson are in the same company, Chipotle Mexican Grill. You’re well aware of the company’s problems with food safety over the past several weeks, which are repelling customers and have pushed the stock down over 20% since the first outbreak was reported. And as you may know, Chipotle has co-CEOs, Monty Moran and founder Steve Ells. On Tuesday, Moran demonstrated how crisis leadership is not done. Speaking at an industry conference for investors, he seemed to blame the Centers for Disease Control and the media for the severity of the crisis. “It’s been fueled by the sort of unusual and even unorthodox way the CDC has chosen to announce cases related to the original outbreak in the Northwest,” he said. And: “Because the media likes to write sensational headlines, you’ll probably see, you know, when somebody sneezes … ‘Ah, it’s E. Coli from Chipotle’ for a little bit of time.” Moran may even be right about all that – but this is not how you win back the world’s confidence.

You do that the way Steve Ells did yesterday. He went on the Today show, an excellent venue for reaching consumers, and apologized. He described the company’s extensive efforts to find and fix the problem. And then he made an audacious promise: “The procedures we’re putting in place today are so above industry norms that we are going to be the safest place to eat.” That statement is a high-stakes gamble that will make any future food-safety problems far worse than past ones. But it’s the right way to go. And the stock jumped 5%.

Our second case study examines Volkswagen and General Motors. VW chairman Hans Dieter Pötsch and CEO Matthias Müller yesterday announced, sort of, the results of an internal investigation into the massive emissions-cheating scandal that has already cost the company billions, with more damage sure to follow. The findings, if you could call them that, were mostly bland and non-specific. “There was not one single mistake, but rather a chain of errors that was never broken,” Pötsch said. You don’t need an investigation to figure that out. And what were those errors? He didn’t say. Who ordered the deceptive software installed, and when? Who covered up the deception for almost a decade? Unanswered.

Contrast that with GM’s response to its ignition switch scandal, which broke just days after Mary Barra became CEO at the beginning of last year. It included commissioning a report, which GM released publicly, by an outside law firm. Though a few names of non-GM people were blacked out, the 315-page document is packed with names, dates, damning detail, and withering comment on how the scandal happened. In addition, GM announced early yesterday that it had paid compensation on 128 claims for incidents that occurred before GM’s 2009 bankruptcy; a court has ruled that GM cannot be sued over such incidents, but the company offered the payments anyway.

Do this, not that. The difference in crisis leadership doesn’t get much clearer than it is in this morning’s news.

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What We're Reading Today

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China's Warren Buffett disappears

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Democrats, Republicans change tune on Trump

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Saddam Hussein's hand in ISIS's rise

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Building a Better Leader

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S&P 500 CEOs' use of share buybacks...

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Worth Considering

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Climate accord draft materializes

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Ford turns focus on electric cars

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AIG CFO David Herzog will retire in early 2016. Chief Risk Officer Sid Sankaran will succeed Herzog. WSJ

Tom Wind has been named president of U.S. Bank Home Mortgage, replacing Rick Aneshansel. BusinessWire

Trucking company J.B. Hunt Transport Services has hired Tempur Sealy International CIO Stuart Scott for the same position. Scott will replace Kay Lewis, who's retiring. WSJ