Mass Fatality Events and their Impact on Public Company Value
[by Howard Fencl, APR]
The emerging horror of a suicidal pilot methodically guiding Germanwings Flight 9525 and all 150 souls on board to their demise thrust the CEO of the airlines’ parent company, Lufthansa, onto the world media stage. CEO Carsten Spohr is in full-blown crisis mode, with millions – especially critics – hanging on his every word.
Mr. Spohr has transparently shared the facts he is able to communicate without jeopardizing the ongoing investigation. He told the media about the disaster and said the idea that the plane’s co-pilot deliberately brought the Airbus A320 down left him “speechless” and “stunned.” He said, “We are shaken. This is our worst nightmare, that such a tragedy could happen in our group.”
Mr. Spohr made a point of telling interviewers that, out of respect , Lufthansa has worked to share information with grieving families as soon as possible so they are not learning of new developments in the media. The company is providing psychological counseling services to surviving family members.
Is his response so far appropriate? Is he expressing enough empathy and compassion? And while it may sound tone-deaf at this early stage, how should he deal with reporters who are already asking blunt questions about the long-term financial impact on Lufthansa?
It is far too soon in this tragedy for Mr. Spohr to discuss the financial impact of this calamity (and he has not), but digital magazine Quartz points to an interesting (albeit somewhat macabre) Oxford Metrica study about the impact of corporate catastrophes on shareholder value. The study concludes that “…irrespective of whose responsibility is the cause of a mass fatality event, a sensitive managerial response is critical to the sustaining and creation of shareholder value,” and that “…the key determinant of value recovery relates to the ability of senior management to demonstrate strong leadership and to communicate at all times with honesty and transparency.”
According to the study, everything a CEO says and does in a crisis involving mass fatality has an impact on their organization’s long-term financial health. And the better a CEO does in communicating quickly, truthfully and ethically, the better the chance that the organization will emerge strongly from a crisis.
By doing the right thing now – being empathetic, assisting the surviving family members, and examining safety protocols to protect against a repeat of this type of tragedy – Mr. Spohr will help ensure the very survival of Lufthansa.