Communications Crisis at the Red Cross

Definition of a communications crisis: when ProPublica launches a crowdsourced initiative to report stories about mismanagement at your organization. That’s what happened today to the American Red Cross.

ProPublica’s “Red Cross Reporting Initiative” offers journalists “everything you need to do it: potential sources, documents, and step-by-step tips.” Among the tips: how to file open records requests with state and local emergency offices for emails sent about the Red Cross during a disaster.

“The best way to dig into the reality of the Red Cross is to report from places that have found themselves in need of the group’s aid,” ProPublica said. “And to do that takes more than one news organization in Manhattan.”

This comes after a brutal couple years of stories by ProPublica and NPR about the ARC’s alleged mismanagement of funds donated to help earthquake victims in Haiti (e.g., “How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes”).

ProPublica is only one of the ARC’s challenges. Just last week, Sen. Charles Grassley released “a blistering Senate report” after a year-long investigation and accused the ARC of misleading Congress. According to ProPublica and NPR, the Senate report “raises fundamental questions about the integrity of the country’s most storied charity and its stewardship of donors’ dollars.”

After the ARC’s long failure to stop the bleeding on this story, it’s hard to see how this ends without a thorough housecleaning.

Red Cross

Signs of a Financial Bubble Bursting in China?

Reading today’s Wall Street Journal over my morning coffee, I was struck by several stories with warning signs of a bursting credit bubble in China.

The Chinese government has been trying to tamp down speculation by restricting bank lending, but companies and investors have been highly creative at finding ways to keep the funds flowing.

Because copper is used so widely in manufacturing, economists see it as a proxy for economic activity in China, the world’s biggest copper consumer. Well, it turns out that “much of the copper stored in China…is used by companies and investors as collateral for loans from banks and other lenders,” the Journal says.

This is how it works: While it has gotten harder to fund speculative investments by borrowing money from Chinese banks, it is still relatively easy and inexpensive to borrow for financing trade. Companies have been arranging letters of credit from banks and using the funds to import copper. They then put the copper up as collateral for new low-cost bank loans, and turn around and invest the money in higher-yielding / higher-risk assets.

That sounds to me like a game of musical chairs, and in a game of musical chairs the music always stops one day.

In other news from this morning’s paper:

China reported a rare trade deficit in February. Exports were expected to grow 5%, but instead they fell 18% from the previous year.

China’s central bank on Monday weakened the yuan by the largest percentage in more than a year and a half. Recent yuan weakening has been seen mainly as the bank’s effort to deter speculation as it moves to liberalize trading in the currency, but of course a weaker yuan will also help flagging exports.

Last week saw the first default on a Chinese corporate bond. Shanghai Chaori Solar Energy said it won’t be able make a payment due on its 1 billion yuan ($164 million) bond. In the past, the Chinese government has always stepped in with bailouts to avoid impending defaults.

There has been trouble in another big shadow lending market called trust financing. Two Chinese trust companies so far this year have warned they would default on investment products linked to loans to coal mines.

Meanwhile, Chinese investors are pulling money out of banks and pouring tens of billions of dollars into high-yielding savings account run by internet companies. E-commerce giant Alibaba introduced a savings account in June that yields around 6%, compared to 0.35% on bank accounts, pulling in $65 billion in investments. Other big Internet companies have followed suit and set up their own funds.

Sooner or later, every fast-growing economy experiences a catastrophic bursting of a financial bubble. I have no idea when or if that’s coming in China. Just some worrying straws in the wind, all blowing in the same direction.

Kleiner Perkins Backs Away From Name Partner After Incendiary Letter to WSJ

When a former executive screws up in public, his ex-company usually doesn’t feel the need to go beyond a “he doesn’t work here anymore.” It takes some fairly radioactive behavior to elicit a comment like Kleiner Perkins Caufield & Byers gave today about co-founder Tom Perkins. KPCB was forced into some quick crisis communications after the Wall Street Journal published a letter to the editor from Perkins equating resentment of the wealthy with the persecution of Jews in Nazi Germany.

KPCB: “Tom Perkins has not been involved in KPCB in years. We were shocked by his views expressed today in the WSJ and do not agree.”

Somewhat inconveniently for KPCB, its website (as of tonight) highlights Perkins as one of its partners emeriti and says, “By continuing their relationship with KPCB long after leaving, they bring our portfolio companies the benefit of decades of deep experience.” It will be interesting to see if that text is still there in a couple weeks.

Can a corporate video be truly moving? Watch this one and see

Public relations and marketing firms have rebranded themselves as storytellers, but most of their stories are as forgettable as their press releases. Lots of dreck, plenty of the merely adequate and, rarely, a gem.

Here’s one of the gems – an incredible video produced for Google Maps by Stephen Higgins at Storybox Films in NY. It tells the story of a five-year-old boy named Saroo Munshi Khan who fell asleep on a train in India and was separated from his family for more than a quarter century. Growing up with his adoptive family in Australia, he used Google Earth to comb through his memories and find his village and family.

The video was inspired by a November 2012 article in Vanity Fair. Stephen (we worked together as PC Week reporters way back) says it was the rare project with no creative brief. “The mission was simply to go out, as a documentary filmmaker, and find the heart of the story.”

Too often, the creative juice is squeezed out of a corporate video as it goes through layers of approval. “The point for marketers is to let go a little bit,” Stephen says. “Allow filmmakers to have a run with it. Don’t try to sell. Feel more. Inadvertently perhaps, that creates the best ad experiences.”

Crisis Communications Over Employee Malfeasance – Australia’s Army Chief Takes No Prisoners in Video, Becomes “Unlikely Feminist Hero”

It’s every CEO’s nightmare – an incident of employee malfeasance threatens to shatter an organization’s reputation and undermine its ability to recruit.

A hat tip to @realdanlyons at HubSpot for flagging a video that turned Australia’s Chief of the Army Lieutenant-General David Morrison into what The Sydney Morning Herald calls an “unlikely feminist hero.”

The Australian Army on Wednesday posted a YouTube video responding to an exploding scandal over officers and other defense force members allegedly producing and distributing explicit emails and photos denigrating women – at a time when the Army is trying to recruit more female soldiers.

What makes the video outstanding isn’t so much the forthright manner of confronting the problem head-on and pledging action, which is good crisis communications practice (see FedEx’s video response after an employee was caught delivering a new computer monitor by throwing it over the fence). Rather, it’s the strength of the personal commitment Morrison makes to change. “I will be ruthless in ridding the army of people who cannot live up to its values,” he says.

His steely delivery leaves no doubt of his seriousness – staring straight into the camera, the guy goes two full minutes without blinking. Morrison delivers a beautifully clear and bold piece of internal communications to his solders: “If you’re not up to it, find something else to do with your life. There is no place for you amongst this band of brothers and sisters.”

For a Change, Some Good News on the Environment

Amid the steady stream of troubling environmental news – severe weather events, dying coral reefs, nonstop deforestation in Brazil and Borneo – it is easy to be disheartened. But to assume everything is headed in the wrong direction would be a mistake. In fact, there has been major, underappreciated progress on at least two critical fronts.

Perhaps the most significant has been the huge reduction in greenhouse gas emissions in the United States over the past few years. This has been an unintended consequence of the boom in natural gas production, enabled by techniques like fracking and horizontal drilling.

Utilities and other power producers are shutting down or converting coal-fired plants to run on newly cheap natural gas. Burning natural gas produces about half the carbon dioxide of an equivalent amount of coal, and far less of the other nasty pollutants in coal.

As a result, according to @CharlesCMann in the current issue of The Atlantic, “U.S. energy-related carbon-dioxide emissions have dropped to figures last seen in 1995.”

In fact, as MIT Professor Ernest Moniz said at a World Affairs Council event I attended in San Francisco last October, U.S. carbon emissions have fallen below even the levels called for by the 1997 Kyoto Protocol that the U.S. refused to ratify. (In March, President Obama nominated Prof. Moniz to become Secretary of Energy).

Of course, this environmental good news is solely a happy accident of economics. Had the world suddenly discovered a way to produce coal at a quarter the price of natural gas, electricity production would have shifted toward the dirtier fuel and carbon emissions would have soared.

A second underappreciated change is the ongoing reduction in emissions by the cargo movement industry. This piece of progress is being achieved by intention and through a lot of hard work.

The Ports of Los Angeles and Long Beach – through which 40 percent of U.S. imports pass – have reduced diesel emissions from all sources by 75 percent since 2005, according to Renee Moilanen at the Port of Long Beach, as quoted in Monday’s Journal of Commerce. That includes a 90 percent reduction in truck emissions from the ports’ Clean Truck Program, Moilanen told JOC’s @billmongelluzzo.

I’m happy to report that my client PierPass has played a crucial role in cleaning the air around the Los Angeles and Long Beach ports. Under the OffPeak program run by PierPass, the container terminal operators at the two adjacent ports established new nighttime and Saturday shifts that now handle 55% of container-moving truck trips, reducing the congestion and resulting air pollution the ports previously experienced during peak daytime hours. PierPass has also worked with the two ports to enforce a ban on older, dirty trucks under the Clean Truck Program, and its members are now building the infrastructure to let ships run on electric power rather than dirty bunker fuel while in dock.