Corporate Reputation Review

Volume 1 Number 3

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

Paul A. Argenti, Amos Tuck School of Business Administration, Dartmouth College

ABSTRACT This article examines the Dow Corning breast implant controversy in the context of a theoretical corporate communication framework. It begins with a discussion of relevant theoretical constructs for corporate communication strategy. It then presents a chronology of the controversy, based on eld interviews and an exhaustive survey of relevant media coverage. The article concludes with insights about how corporate communication strategy has enabled Dow Corning to deal eectively with its ongoing reputational and nancial crisis. INTRODUCTION Many people are familiar with the controversy over breast implants that has swirled around Dow Corning. However, few have had the opportunity to examine the companys communication strategy and structure and its ability to deal with the controversy. This article begins by describing a conceptual framework for dealing with strategic issues such as Dow Cornings. I then describe our research approach and provide a detailed overview of the case. I conclude by extracting some of the lessons learned and suggest avenues for further research. COMMUNICATING STRATEGICALLY Most of the theories people think about today in terms of communication are based on notions that are as old as language itself and the beginnings of social and political life. In ancient Greece, the subject now

referred to as communication was known as rhetoric, using language to persuade the listener. Practising the art of rhetoric was highly regarded by the Greeks. Aristotle, who lived and studied under Plato and taught in Athens from 367347 BC, is closely associated with the development of the art of rhetoric. In one of his major works, The Art of Rhetoric (1982), we can nd the roots of modern communication theory. Early in that seminal text, Aristotle denes the composition of every speech:
. . . every speech is composed of three parts: the speaker, the subject of which he treats, and the person to whom it is addressed, I mean the hearer, to whom the end or object of the speech refers. Assessing the communicating organization Munter (1997) extends Aristotles threepart breakdown to all management communications, both written and oral. She widens his notion of the speaker to include both writer and speaker, and describes the hearer as the audience, in which she includes both readers and listeners. Munter also adds the notion of channel choice or medium (for instance, email versus telephone) and the cultural context to her model, presented in Figure 1. Whether an organization is trying to develop a coherent image of itself through corporate advertising, to communicate eectively with employees about health

Corporate Reputation Review, Vol. 1, No. 3, 1998, pp. 234249 # Henry Stewart Publications, 13633589

Page 234

Argenti

Munters (1997) Communication Strategy Model

Figure 1

benets, to convince shareholders that the company is a good investment, or to deal with a controversy over its products, it must develop a coherent communication strategy. This strategy involves thinking carefully about each of the elements in Figure 1: (1) The communicator in a corporate communication is the organization; (2) the audience of the communication are the constituents (or stakeholders); and (3) the communications themselves are either messages or images. Argenti (1998) built on Munters (1997) work to articulate a framework for analyzing all corporate communications (see Figure 2). The rst component of an eective corporate communication strategy relates to the organization itself, and should address three issues: determining what the objectives are for the particular communication deciding what resources are available for achieving those objectives diagnosing the organizations image credibility. The framework suggests that organizations have dierent objectives when communicating. The basis for dening these objectives involves asking: What does the

organization want each constituent to do as a result of the communication? Second is the resource requirement. Deciding how to communicate about something like a new employee health plan or about a controversy depends on what resources are available to the organization in terms of money, personnel, and time. Most companies, unfortunately, too often err on the side of short-term, inexpensive solutions to communication problems because they are not looking at the problem from the perspective of the constituency in question. This is similar to a problem many individuals have in communicating when they frame a message in terms of their own needs, rather than the needs of their audience, resulting in an inability to meet their own communication objective. This is due to a failure to understand the organizations position in terms of a comprehensive economic cost/benet tradeo framework (Manseld, 1993). Since we all communicate continuously, it is harder to imagine communication as a discipline with rules and predictable results based on cost/benet analysis and management communication theory, grounded in extensive research at many universities over the last 20 years.

Page 235

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

Figure 2

Corporate Communication Strategy Model

Messages/Images

What does each constituency

Besides nancial commitments, personnel commitments are an important factor in determining a companys success or failure in achieving its communication objectives. Typically, too few people are assigned to a communication task, and all too often those people are inexperienced or unqualied. Finally, time, like human resources and money, is a critical factor inuencing the communication strategy. The allocation of time, like the allocation of all resources, should be determined by careful attention to what it will actually take to achieve the companys communication objective. In some cases, that may mean accepting a longer time line than the organization would like. But almost always, the organization is much better o understanding realistic time requirements in advance. Correcting mistakes in corporate communication can be very costly in

terms of people, time, and money. Understanding this initially is the only way to frame the resource commitment tradeos eectively. In addition to setting objectives for a communication and deciding what resources are necessary to accomplish those objectives, the organization must also determine the underlying credibility it has with the constituencies in question. An organizations image credibility is based on many factors. For example, credibility is often based on the constituencys perception of the organization rather than the reality of the organization. The degree of image credibility the organization has is a critical factor in setting a coherent communication strategy. For simple tasks, this is not problematic. But in complex tasks, the credibility, or lack of it, can make a huge dierence in the success or failure an orga-

Page 236

Argenti

nization has in achieving its communication objectives. These three elements are key building blocks upon which all other components depend. A second component in an eective corporate communication strategy is a comprehensive assessment of the constituents involved.
Analyzing constituencies Analyzing constituencies involves asking:

(1) Who are the constituents? (2) What does each constituent think about the organization? (3) What does each constituent know about the communication? The identity of the principal constituent may not always be obvious. Usually, constituents come from a group that is primary to the organization (employees, customers, shareholders, communities), but a secondary group can also be the focus of a particular communication (eg, media, suppliers, government) (Argenti, 1996). Dening the constituency is therefore a process with two sub-elements. The rst is the main constituency with whom we are directly trying to communicate; the second is the unintended recipient. Here, another important issue is the powerful unintended constituent who reacts actively and negatively to the communicator. The second issue involves assessing what constituents think about the organization. It is easier to communicate with people who know and like us than with those who do not. The same is true of organizations. If a company has built up a stock of goodwill with a constituency, it will be easier for the company to reach its objective. The third issue to consider is the constituencys attitude toward the communication itself. If constituents are predisposed to do what an organization wants, then they

are more likely to help the organization reach its objective. If they are not, however, the organization will have diculty in trying to achieve its goals. In summary, after an organization has set objectives for its corporate communication (component one), it must thoroughly analyze all of the constituencies involved (component two). Once these are accomplished, the organization is ready to move to the third and nal component: determining how to deliver the message most appropriately.
Delivering messages appropriately Communication theory posits two elements of eective message delivery. The rst involves channel selection, the second involves message construction. Channels are the distribution outlets of communications. Determining the proper communication channel is more dicult for organizations than for people. An individuals channel choices are usually limited to writing or speaking, with some variation in terms of group or individual interaction. Organizations have many more channels through which to deliver a message. A simple press release, for instance, might be released to either the local media or the national media. A multinational company might also consider sending the message to an international newswire, such as Reuters, announce it on its home page, or even broadcast it directly to employees via satellite hookups. Message construction can be either direct or indirect. Direct structure means revealing your main point rst, then explaining why; indirect structure means explaining why rst, then revealing your main point. Academics almost always rely on indirect structures. However, empirical studies show that management communications are often more eective when they rely on a direct structure (Munter, 1997; Minto, 1983).

Page 237

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

A third option to direct or indirect structures is no message at all. A response that companies often make when problems arise is no comment. Contemporary communication theory challenges the ecacy of this option despite its widespread use (Argenti, 1998). In this case, managers are often swayed by lawyers concerned about the legal ramications of their statements. Direct structure, however, means facing the court of public opinion, and can be more far-reaching. The next section applies the conceptual framework of Figure 2 to Dow Cornings handling of the breast implant controversy between 1991 and 1997.
THE CASE OF DOW CORNING To develop a detailed account of the breast implant controversy that came to surround Dow Corning in the early 1990s, we interviewed managers, media participants, protagonists in the suit, attorneys, and public interest advocates. Among the personal interviews we conducted over a ten-month period were those of Richard Hazelton, Dow Cornings CEO, Barie Carmichael, Vice President of Corporate Communications, and ten other senior ocers directly involved in the controversy. The eld research included interviews with Business Week reporter John Byrne, whistleblower John Swanson, consultants at Fenton Communications, and discussions with Fortune reporter Joseph Nocera, Sybil Goldrich of the Command Trust Network, lawyers at OQuinn and Lamanack, and women who had been involved in the class action suit. We also did an extensive survey of the public record, including newspaper accounts, and previous studies on the controversy. At Dow Corning, we were given full access to thousands of pages of internal company documents. We obtained all of the videotaped broadcasts on the controversy, from programs that

appeared in Australia to the centerpiece of the case study, the Oprah Winfrey Show.
Background For the rst 50 years of its existence, Dow Corning was little known outside the business community. Founded in 1943, the companys success was due in large part to its development of silicones. Corning brought the basic silicone technology to the joint venture while Dow oered both chemical processing and manufacturing capabilities. As a result of silicones resilient properties, Dow Corning began using it for medical devices inside the human body ranging from shunts for draining uids from the skull to the controversial implants developed to enlarge womens breasts or reconstruct breasts removed due to cancer. Magazine articles in the 1940s hailed silicone as a miraculous substance and predicted that it would one day be among the most critical industrial plastics and synthetics in the world. Dow Cornings rst foray into silicone was a compound used to seal ignition systems on Allied aircraft during World War II. It also produced the popular toy, Silly Putty, which was developed as a byproduct from a failed experiment. By the mid-1990s, Dow Corning had grown dramatically into a company with projected sales for 1995 of $2.5bn, employing 8,300 people, with 8,700 products and specialty materials used by over 45,000 business customers worldwide representing virtually every major industry. The nature of its business had grown to include the development, manufacture, and marketing of materials that enhanced the quality of other products. Its product line now included (in addition to silicone materials) related specialty chemical materials, and polycrystalline silicon for use in computer integrated circuits (Byrne, 1996).

Page 238

Argenti

Dow Cornings image Dow Cornings slide into bankruptcy occurred as a result of mismanagement of its reputation in its early years. At Dow Corning, most of the top management came from engineering or scientic backgrounds. Many of them also grew up inside the company. This gave them an insular view of the external environment. When the breast implant controversy hit in the early 1990s, Dow Corning also had very little credibility with the public (Munter, 1997). The companys reputation suered, not only from its low prole and large size, but from its association with Dow Chemical best known as the company that had dumped Napalm and Agent Orange on Vietnam in the 1960s (Argenti, 1998). In addition, Dow Corning had done little to build awareness for itself until after the breast implant controversy was well under way. It was, however, known for its corporate ethics program. As it turns out, the companys reputation before the controversy as a business leader in the area of ethics actually contributed to Dow Cornings problems. Throughout the 1970s and 80s, Dow Corning had been highly regarded for its corporate ethics programs and its Business Conduct Committee (Byrne, 1996). It had been the subject of three Harvard Business School cases. Made up of six managers who devoted up to 15 per cent of their time to the task, the committee performed ethics audits of each business every third year and reported those audit results back to the companys board of directors. The guiding spirit behind the ethics eort and a permanent member of the Business Conduct Committee was John Swanson, a long-term executive at Dow Corning who had worked in communications for most of his career. Swanson became involved with ethics in 1976 when CEO Jack Luddington asked him and three other managers to form the companys rst business-

conduct committee. This came about as a result of increased sales overseas and internal concerns about whether the company was adhering to the same values in Europe and Asia as it did in Midland, Michigan. By the late 1980s, the committee was completing as many as 40 business audits a year, worldwide. The reviews included face-to-face meetings with executives and managers exploring issues such as pricing, bribes, contributions to politicians, and conicts of interest. As a result of the companys unique emphasis, ethics had become a key part of the corporate culture and was widely regarded, both internally and externally (Tuck Panel, 1996). Thus, Dow Cornings image credibility was based on strong internal ethics that were fairly well known outside the company when the breast implant controversy began to heat up but mostly to specialized audiences. It was relatively unknown to the general public.
The breast implant controversy Women had looked for ways to increase the size of their breasts externally for centuries by attaching materials such as glass or ivory (Angell, 1996). The rst attempt to enlarge a womans breasts through surgery had occurred in Germany in the late 19th century. Fat from a benign tumor on a womans back was transplanted to her breasts. Experiments continued in the early 20th century with paran and other substances like petroleum jelly. Two Houston plastic surgeons came up with the idea of designing a breast implant made of silicone in 1961 and approached Dow Corning, the leading manufacturer of the substance, to collaborate on the project. The next year, one of the surgeons placed the rst Dow Corning Silastic mammary implant in a woman who wanted to enlarge her breasts. In addition, the surgeons conducted two years of clinical trials from 196264 (Carmichael, inter-

Page 239

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

view, November 26, 1996). Now in her mid-sixties, the rst woman to receive implants still had the original ones in place in 1995. The implants consisted of a rubbery silicone bag containing the silicone gel. This was an attempt to avoid migration of the silicone into other parts of a womans body. The implants were surgically inserted through two small incisions, usually in the crease under the breast. Some women reported problems with leaks in the bags containing silicone, others reported shifting of the bags themselves, while others had diculty with mammograms following the surgery. Dow Corning had the breast implant market to itself for many years, but eventually competitors appeared with innovations designed to deal with some of the problems women were experiencing with Dow Cornings implants. During the period from 1965 to 1992, Dow Corning sold almost 600,000 implants, with 42 per cent sold outside the United States (Carmichael, interview, November 26, 1996). As the market matured, Dow Corning was selling close to 25 per cent of all implants, but making little or no money on the product. It also supplied the silicone for other implant manufacturers. Breast implants were classied as medical devices, which was an unregulated industry in the mid-1960s. By the mid-1970s, however, the medical devices industry, including breast implants, were subject to regulation by the Food and Drug Administration (FDA). At that time, however, the classication for breast implants did not require testing as a condition for continued sale. The lack of complaints from the million or more women with implants led to no action by the FDA throughout the 1980s. Despite attempts by Ralph Nader and others to force a ban on implants, the product was left relatively unscathed until a

sensational report appeared on Face to Face with Connie Chung in 1990. Chungs program alleged that the implants were extremely dangerous devices being implanted in unsuspecting women. Chungs CBS broadcast was the rst to present the case for a connection between autoimmune disease and breast implants. Within a year, in December of 1991, a federal jury in San Francisco awarded what was at that time the largest verdict ever in a breast implant case $7.34m. Mariann Hopkins, the plainti in the case, claimed that the implants had accelerated the development of a very rare disorder known as scleroderma. Dan Bolton, her lawyer, made much of secret documents he had found at the Dow Corning plant nine years earlier while investigating another case. Bolton urged the FDAs new chairman, David Kessler, to review the documents he had discovered by sending FDA investigators to Dow Corning to search their records. Kessler called for a temporary moratorium on breast implants in early 1992 while he considered the matter further. Dow Corning then released over 800 pages of documents to the public, after pressure from the FDA. However, according to experts, such as Dr Marcia Angell (1996), executive editor of the New England Journal of Medicine, the signicance of the documents describing a range of tests on animals was unclear, since the experiments had little in common with the ordinary use of breast implants in women. Soon after the release of these documents by Dow Corning, and following another sensational program on the topic on the Jenny Jones Show, the FDAs Kessler announced a ban on silicone breast implants in April of 1992. The implants could only be used in the future for women who had agreed to participate in research studies.

Page 240

Argenti

The litigation surrounding breast implants Following the FDA ban, a wave of litigation hit the federal and state courts. More than 16,000 cases were led by over onethousand lawyers in a two-year period. Lawsuits against Dow Corning went from around 200 in 1991 to 10,000 by the end of the following year. A well-organized plaintis bar was largely responsible for the huge growth in litigation. By the mid-1990s, mass tort litigation was at an all-time high in the United States where lawyers, unlike in many other countries such as England, received contingency fees for cases. According to those ghting to reform the legal system, the size and outcome of the litigation often had little to do with the actual risk of the product. The subject had even become a topic for the presidential candidates to debate in the 1996 elections. Dow Cornings chairman and CEO claimed that the company had led for bankruptcy primarily because it was embroiled in an endless sea of lawsuits and litigation (Hazelton, interview, July 29, 1996). The company held that hundreds of multimillion-dollar judgments could result from the suits brought against the company. Speaking about the litigation, Hazelton said: The US legal system is out of control. It has become its own business whose goal is to get money out of our corporations. There is an inherent economic incentive to nd or create legal problems to litigate, and this system is extremely damaging to corporations. By March of 1994, implant makers and plaintis had agreed on a settlement fund that would pay $4bn to plaintis over a 30-year period. Dow Corning agreed to pay almost half, with the rest coming from other major manufacturers such as BristolMyers Squibb, Baxter, and 3M. Federal Judge Sam Pointer, who was in charge of

the case, granted nal approval to the settlement in September calling it fair, reasonable and adequate. By October, 145,000 women had registered for the agreement despite growing scientic evidence from researchers at Harvard Medical School that found no link between implants and connective tissue disorder. On May 15, 1995, Dow Corning led for Chapter 11 bankruptcy protection to deal with the onslaught of pending litigation as a result of challenges to its breast implant products. At that time, over 400,000 women had joined the class action suit, with separate suits still pending against Dow Corning. Judge Pointer began to realize that the money set aside would not be enough to meet the demand of litigation. With over 20 per cent of all women with breast implants involved in the litigation and Dow Corning in bankruptcy, the class action suit that had led to the agreement began to fall apart. All claims against Dow Corning would now be settled by a bankruptcy court in Michigan. On September 7, 1995 Judge Pointer acknowledged that the original settlement was dead. Dow Cornings communications department would now be responsible for helping to shape the companys reputation as never before.
Corporate communications at Dow Corning When Barie Carmichael left NCR to join Dow Corning in 1990, she was the rst communications professional to head the function. Before her appointment, communications had been run by chemical engineers who would take a tour of duty as the corporate communications director. She was hired to report to an area president, Kerm Campbell, who in turn reported to the president of the company, who reported to the CEO. Management in general and Kerm Campbell in particular, knew that an inter-

Page 241

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

nal communications problem existed at Dow Corning, which led to a nationwide search for a communications professional. According to Carmichael: There was not a dialogue-driven communication process in the company; it was more publications and top-down oriented in the early 1990s, Dow Corning needed to renew itself through a stronger internal communications eort. (Carmichael interview, November 26, 1996). As a result, her job was to deal with the internal communications problems, enhance communication with customers, and work on community relations and public relations. Carmichael was not completely satised with the appointment because communications was still not a prominent function in the corporation. When she came to the company, her oce was in a separate building from senior management leaving little room for interaction with other functional areas. She felt, however, that it would change in time. John Swanson, the company ethicist who had been manager of internal communications at the time Barie Carmichael was hired, was interested in the new director of communications job when the search was announced. Instead, the company decided to go outside for a fresh look at the area. Swanson remained in an internal communications position reporting to Carmichael. He was also asked to serve as a senior consultant on business ethics and to spend 25 per cent of his time drafting the new Dow Corning Code of Conduct for the president and 75 per cent of his time reporting to Carmichael. On a functional level within the department, marketing and corporate communications were totally integrated under Carmichael. A manager responsible for external communications handled media and community relations. Swanson would handle internal communications, and Jan Botz was assigned to become manager of

management communications, which would also handle internal communications within the management chain. The company had a small government relations area at the time reporting to the legal department.
Internal communications Carmichael found the formal internal communications function at the time in, as she described it, the dinosaur era. The main source of corporate communications was, as she said: ...an unwieldy set of company magazines that were unapproachable and untimely. (Carmichael, interview, November 26, 1996). Dow Corning distributed external press releases through interoce mail after most news had already hit the local newspapers. There was no sense of an internal audience, said Carmichael, just a set of pass-throughs. (Carmichael, interview, November 26, 1996). In addition, the company held what were termed management forums. These were presentations sometimes held in a large local theater at night. The CEO, Jack Luddington, would read speeches written by John Swanson to what one manager referred to as an uninspired group. Employees soon learned that these were not critical meetings and stopped attending. Carmichael sought to change the employee communications environment by using Dow Cornings computer network for press releases and employee bulletins; streamlining Update, a company newsletter created to inform employees of what was going on in the company more quickly; and setting up less structured employee forums in which employees could talk with senior management (like the President and CEO) in the cafeteria. Jan Botz headed up the initiative, handling the dialog between management and employees. Ultimately, the breast implant issue

Page 242

Argenti

became both the biggest internal issue as well as the thorn in Carmichaels side on the external communications front.
External communications While the company clearly realized its problems on the internal side, it seemed less interested in dealing with external constituencies. We were naive, said Carmichael. This is a company in the middle of a corneld in Michigan. The stock was not publicly-traded and we didnt have to answer to public stockholders. And, we were naive about politics and did not fully appreciate how Washington, DC worked, or how politics could aect the company. Not only that, but most of management saw the implant issue as a scientic issue, not one of communications. (Carmichael, interview, November 26, 1996). At the time Carmichael was hired, the company did not even know about some of the more potent groups working to undermine Dow Cornings breast implants, such as the Command Trust Network even though this key breast implant adversary, headed by activist Sybil Goldrich, had existed since 1988. Carmichael brought in public relations experts from Burson-Marsteller to help with corporate communications issues related to the breast implant controversy. The company began to conduct focus group research on the issue, set up a 1-800 line to handle questions, and participated in an implant team in place under Campbell (comprised of Carmichael, the chief counsel, head scientists, and the head of the breast implant business). In February of 1992, Keith McKennon took over for Luddington as Chairman in a widely-reported and controversial management change and had corporate communications report directly to him. McKennon had been an executive vicepresident of Dow Chemical and a Dow Corning director. He had been labeled the reman for his ability to handle Dow con-

troversies during his 37 years with the company such as Agent Orange, Dioxin, and Benedictin, a morning sickness pill made by Merrill-Dow that allegedly caused birth defects. By putting a highprole executive like McKennon in charge of Dow Corning and moving the corporate communications function into the ranks of senior management, the company was in a better position to deal with the growing controversy over implants.
John Swansons role in the controversy While the prognosis for breast implants in general and Dow Corning in particular continued to decline, another controversy was brewing internally. John Swansons wife, Colleen, had herself received implants years earlier to enlarge her breasts. As an employee of the company and its chief ethicist, John Swanson, along with other Dow Corning colleagues and the plastic surgeon who performed the operation, was able to assure his wife that the implants were completely safe (Byrne, 1996). Almost immediately following the operation, however, Colleens health began to decline. She suered from migraine headaches, lower back problems, numbness in her arms and hands, extreme fatigue, a burning sensation in her chest, and unbearable pain throughout her body. Her weight fell to a low of 89 pounds. Although she had been examined by countless doctors and had received extensive medical tests, the cause of her problem was never identied. After her daughter had watched a talk show lled with women showing similar symptoms who all had implants, Colleen was convinced that she had discovered the cause of her health problems. Although skeptical at rst, John Swanson also came to believe soon thereafter that Colleens problems were coming from the implants. As a result of his wifes experience and what he later described as his own crisis of

Page 243

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

conscience, Swanson decided in September of 1991 to confront management and take himself o any work connected with breast implants (Byrne, 1996). Colleen had had her implants removed earlier that summer. He chose to tell Kerm Campbell, Barie Carmichaels boss at the time, of his decision. As a result, Swanson was no longer able to work on the most critical communication issue confronting the company in his role as ethicist and communicator. Two years later, in May 1993, Colleen settled a lawsuit against Dow Corning out of court for an undisclosed sum. Swanson retired from the company in August of that same year. By this time, a new CEO, Richard Hazelton, was in place and Barie Carmichael was now a vice president of corporate communications. The Swansons left Midland within a few days after John left his oce for the last time. Given Swansons position in the company and his wifes situation, his nal two years in the company were a bit awkward, but not acrimonious. He had discussed the idea of a book before leaving, so it was not surprising when author John Byrne approached Dow Corning about the book in May of 1994 (interview, July 30, 1996). John Byrne, a senior editor at Business Week and author of several other books, was well known for his cover stories in the magazine on executive pay as well as the famous business school rankings. He was working on a book which would chronicle John and Colleens story, in conjunction with John Swanson, who would receive part of the royalties from the sale of his story. Carmichael was at rst convinced that the company should participate in interviews for the book. They were going to do the book with or without us, said Carmichael, so we might as well present our side of the issue coherently. (Carmichael, interview, November 26, 1996).

After several months of deliberation, however, the company decided not to participate in the book as a result of its non-scientic orientation. Swanson had stated that the science on the breast issue was irrelevant, which ew in the face of Dow Cornings core values, according to Carmichael. We did not want to legitimize the book by putting Dow Cornings support behind it. So, in September we refused to be interviewed for the book. By the following September (1995), Informed Consent was ready for publication. Publicists for the book were eager to get the controversy back on center stage once again and Barie Carmichael was approached by the producer of the Oprah Winfrey show to put the CEO, Richard Hazelton, on with John and Colleen Swanson as well as author John Byrne. The Oprah Winfrey Show was still the most popular daytime talk show in the United States despite heavy competition from a number of imitators throughout the 1990s. Oprah herself had become a major celebrity and was reported to be making close to $80m from the show. Originally sensational in orientation, it now seemed tame by comparison to other daytime talk shows. While Carmichael and CEO Hazelton were deciding whether to participate in the Oprah Winfrey show, Byrnes book had just hit the bookstores. Its cover included a sentence in large type stating: A story of personal tragedy and corporate betrayal...inside the silicone breast implant crisis. The book had been excerpted in a Business Week cover story a few weeks earlier. Carmichael and Hazelton made a very controversial and unusual decision to go on the Oprah Winfrey Show in October of 1995. Women with complaints against the manufacturer as well as supporters turned out for what Winfrey said was the rst appearance by a CEO on her program in ten years. According to Hazelton, he

Page 244

Argenti

decided to go on the program to support breast cancer patients whose story had been largely ignored. He felt that those women would be more likely to tell their story, which was more supportive of the company, if the Dow Corning CEO were present to support them publicly. In addition, employees at Dow Corning also needed to hear top managements position on the book in a public forum.
Cornings reputation begins to rise Building and maintaining morale within the company throughout the controversy was a major concern for both CEO Hazelton and VP Carmichael, but especially following the decision to le for bankruptcy. The support from employees, however, became evident in late May. Dawn Bartell, a regulatory and womens health specialist for the company, decided to respond to a grassroots desire among employees to show support for top management (Bartell, interview, July 30, 1996). She formed a committee within a few days of the bankruptcy ling and collected $2.50 voluntarily from thousands of employees. They asked each employee who gave money if they wanted to sign a statement reading: To: Dow Corning Executive Management, Your Employees Are Behind You 100%! The signatures were placed as an advertisement in the Midland Daily News (May 31, 1995). Pride at headquarters continued to rise as a backlash to Byrne and Swansons book took hold. This is a big company, but in many ways its small, said Bartell. We have erce pride in our company and its products. Mr Swansons book hurt all of us a lot. Midland, as a community was put down in the book, its churches were put down in the book, and that made me really sad. Many of us asked why would he do this? (Bartell, interview, July 30, 1996).

Although some (including the CEO himself) would argue that Hazeltons performance on Oprah was less than stellar, it was the rst of many proactive attempts by the company to rebuild and reposition its reputation among key constituencies. Following the Oprah show, 60 Minutes did a pro-Dow Corning piece that essentially supported the companys position by referring to several studies that had been published in highly regarded academic circles especially the New England Journal of Medicine. A piece ran soon after on Frontline that also supported the companys case against what was now being publicly referred to as junk science developed and supported by attorneys ghting against the company. Over the next year, the Wall Street Journal, Fortune (with Joseph Noceras articles on the corrupt plaintis bar), and the New York Times all began to support the notion that Dow Corning was essentially free of blame in the breast implant controversy. It was depicted as a pawn in a game being won in the courts by a greedy group of lawyers working together with weak scientists paid o by the lawyers. They were all working for women who were innocent bystanders looking to explain illnesses that had nothing to do with their breast implants. Marcia Angells book, Science on Trial (1996), was also a tremendous reputation booster to the company because of the authors prominence (executive editor of the New England Journal of Medicine) and her position that the breast implant controversy was based on junk science rather than the clear and valid scientic evidence published by reputable academic researchers. Angell slammed the reputation of the junk scientists throughout the book. With Angell and other highly credible academic studies on their side, Dow Coming decided in late 1996 to put its reputation on the line once again.

Page 245

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

The reorganization plan On December 2, 1996, Dow Corning announced that it had led its Plan of Reorganization and Disclosure Statement with the US Bankruptcy Court in Michigan. Under the Dow Corning $3bn plan, anyone with an allowed claim would be paid in full. The plan included $1bn to compensate commercial claims, which would be paid in full plus interest, and $2bn to compensate product liability claims. Included in the product liability compensation was a $600m fund designed to favor settlement over litigation to resolve product liability claims exibly and eciently. It oered ve settlement choices available over a multi-year period to process and resolve the claims. One of the more ingenious parts of the plan, however, was a provision for up to $1.4bn in a contingent fund that largely depended on the outcome of a causation trial on whether breast implants caused disease. Dow Corning obviously believed that the scientic evidence did not support the claim that breast implants caused disease. However, Dow Coming stated in its press release that it recognized that the issue of causation is controversial and has proposed a causation trial as an objective, streamlined mechanism to resolve it. (Dow Corning Release 12/2/96). The reorganization forced the hand of the junk scientists to prove their claims in court before the company would agree to any settlement. As a prelude to coming out of bankruptcy, Dow Cornings move was a brilliant strategy to rebuild its image credibility and put its opponents on the defensive in terms of reputation management. Lawyers and junk scientists strike back After close to a year of rebuilding its reputation and managing its way slowly out of bankruptcy, Dow Cornings reputation

once again came under attack in late 1996. Lawyers for the opposition hired Fenton Communications to coordinate an attack against Dow Cornings argument that science was on its side. David Fenton founded Fenton Communications in 1982 to serve a host of progressive causes. In the early years, the rm specialized in no-nukes issues and Marxist regimes (Labash, The Weekly Standard, 1996). Following the cold war, Fenton worked on a variety of environmental cases, the most famous of which was the anti-Alar campaign that very successfully attacked the apple industry. Fentons group created a road show that included John Swanson, the Command Trust Network (headed by Sybil Goldrich, a vocal opponent of breast implants), and scientists willing to argue the other side of the case. By December 1996, the road show had toured several cities in the northeast and articles critical of the main-line scientists began to show up in the national press, including the Wall Street Journal. But by the end of 1996, Dow Corning had put in place a strong corporate communications function and was using its communications more strategically. As a result, Fenton was unable to deter public opinion.

LEARNING FROM DOW CORNING Fombrun (1996) shows how critical a role reputation plays in the overall success of organizations, from business schools to large companies like Dow Corning. What the theoretical framework presented in this article posits, however, is that organizations also need to look at corporate communications more strategically, particularly when facing strategic situations such as the breast implant controversy. There are several hypotheses that come from applying this theory to practice. First, reputations are hard to win but easily lost (Fombrun, 1996) even in the face of scien-

Page 246

Argenti

tic evidence published in top journals. The decline into bankruptcy, in spite of John Swansons early eort at building Dow Cornings reputation as an ethical company, serve as an example of how rapidly the tables can turn when a corporate communication strategy is lacking. Secondly, the companys failure to articulate a corporate communication strategy and its denigration of the corporate communication function as a legitimate discipline made it easier for the plaintis bar to win over both the legal system and the court of public opinion in the nascent stages of the controversy. It resulted in Dow Cornings descent into bankruptcy and near insolvency. Even though the company had subsequently begun to establish a strong function and was working to rebuild its image credibility, it invested resources in corporation communications too late in the game. Thirdly, despite a loss of reputation, companies can turn themselves around by using corporate communications as a strategic weapon. Attention to the specic components discussed in the conceptual framework of Figure 2 helped Dow Corning turn itself around. Specically: By focusing on employees as a critical constituency following Barie Carmichaels arrival, Dow Corning was able to keep employee morale high during bankruptcy proceedings and throughout the publicity surrounding Byrnes book (1996). In addition, Hazelton went on the Oprah Winfrey Show specically to defend Dow Corning for its employee constituency and for women who were happy with their implants. The company used a no comment approach in terms of message delivery in dealing with Byrnes book (1996). This allowed it to position Byrne and Swansons allegations as part of the

junk science movement, rather than as legitimate antagonists of the company. The company invested heavily in resources related to corporate communications including all three subelements: time, personnel, and money. It hired a professional to head its corporate communication function and elevated the function to a vice presidential level reporting directly to the CEO. It expanded the corporate communications sta considerably and hired outside counsel to help deal with the controversy. The CEO and other ocers also invested heavily in terms of time. The company sees time as a necessary investment for its very survival and a way to reposition itself as a viable business following emergence from bankruptcy. The company claried its communication objectives. Specically, to inform all constituents that there is no scientic evidence (Angell, 1996) to support the allegations against its silicone breast implants; that it stands by the product for the millions who have been unaffected; and that it will not simply react to the controversy, but instead will set the terms of the debate in the court of public opinion. The company turned the media from an early adversary into a supporter. By opening wide its doors to the media and allowing access to senior management, it was able to garner support from prestigious media channels such as CBS, NBC, PBS, the New York Times, Fortune, and The Wall Street Journal. Ultimately, the Dow Corning case suggests that a more strategic focus on corporate communications can have nancial implications as well. As Table 1 shows, Dow Corning has been able to turn itself around nancially in terms of the only publicly available nancial measure at our disposal

Page 247

Corporate Communication Strategy: Applying Theory to Practice at Dow Corning

Table 1: Dow Cornings Revolving Credit Loan Bid/Oer Prices (Bloomburg, 1997) 199597 Day (3 month intervals) 4/20/95 7/17/95 10/16/95 1/15/96 4/15/96 7/22/96 10/14/96 1/13/97 4/14/97 7/14/97 10/20/97 *Ninety day rates, close/bid. Bid 68 80 84 83 97.25 100.75 103 109.75 117.5 120.5 123.5 Oer 80 82 86 85 98.25 102 107 110 118 121.25 124.5 LIBOR* 6.25 5.88 5.94 5.57 5.50 5.63 5.53 5.59 5.84 5.75 5.81

the credit terms available to the company (and a proxy for investors in this case) (Bloomburg, 1997). The trading prices for the companys revolving credit loan have continued to rise in recent months, much more than would be attributable to the modest decline in LIBOR rates over the period. It indicates that Wall Street is now bullish on Dow Corning for its successful handling of the controversy.
CONCLUSION In conclusion, this article presented a conceptual framework for examining corporate communications. It has shown how the framework could be applied usefully to an analysis of the Dow Corning breast implant controversy. Practitioners have an opportunity to rene further the framework as they work to manage the corporate communications function more strategically. Researchers are encouraged to examine in greater detail how each of the elements of the communication strategy model of Figure 2 interact. An accumulation of other comparable cases would enable subsequent quantitative testing of the model.

ACKNOWLEDGMENT The author wishes to thank Professor John Shank of the Tuck School for his help with this article. In addition, the author wishes to acknowledge the research support of Remie Roseman, T97, who worked on the development of materials and conducted interviews on the Dow Corning case. REFERENCES
Angell, M. (1996) Science on Trial: The clash of medical evidence and the law in the breast implant case, W. W. Norton & Company, New York. Argenti, P. A. (1998) Corporate Communication, (2nd ed.), Irwin McGraw-Hill, Burr Ridge, IL. Argenti, P. A. (1996) Corporate Communication as a Discipline, Management Communication Quarterly, Vol. 10, No. 1, pp. 7397. Aristotle (1982) The Art of Rhetoric, (with an English translation by John Henry Freese), Harvard University Press, Cambridge, Mass. Bartell, D., Dow Corning, interview, July 30, 1996. Bloomburg Financial Services, 1997. Byrne, J. A. (1996) Informed Consent, McGrawHill, New York. Carmichael, B., Vice President of Corporate Communication, Dow Corning, interviews, July 29, 1996 and November 26, 1996. Fombrun, C. J. (1996) Reputation: Realizing Value

Page 248

Argenti

from the Corporate Image, Harvard Business School Press, Boston, MA. Garbett, T. F. (1988) How to Build a Corporations Identity And Project Its Image, Lexington Books, Lexington, MA. Hazelton, R., Chief Executive Ocer, Dow Corning, interview, July 29, 1996. Labash, M. (1996) Scaremonger, The Weekly Standard, 4: pp. 2429. Manseld, E. (1993) Managerial Economics, W. W. Norton Company, New York, NY.

Minto, B. (1983) The Pyramid Principle: Logic in Writing and Thinking, Minto International Inc, London. Munter, M. (1997) Guide to Managerial Communication, (4th ed.), Prentice-Hall, Englewood Clis, NJ. Tuck Panel (1996) The Albert G. Milbank Memorial Endowment. Business Ethics and Communication: The Dow Corning Breast Implant Controversy, Tuck Today, Summer 1996, pp. 2426.

Page 249