|BUSINESSWEEK ONLINE : JUNE 5, 2000 ISSUE|
Commentary: It Pays to Tell the Truth
BP Amoco's disclosure of chem-lab risks makes financial sense, too
Trade places for a moment with H. Laurence Fuller, co-chairman of BP Amoco PLC (BPA). It's the summer of 1999, and your company is being sued by the families of six scientists stricken with a rare form of brain cancer. All were diagnosed soon after retiring from long careers at BP Amoco's chemical research lab in Naperville, Ill., and five are already dead. You know that because BP Amoco is so big and rich--sales topped $100 billion in 1999--a jury might see Robin Hood justice in socking your company with damages that rival a Lotto jackpot. And now you get this bombshell: The outside medical experts you brought in have concluded the brain-cancer cluster was probably work-related. What do you do? If you're Fuller, you call a press conference and disclose everything.
Although many corporate lawyers would have advised Fuller that his was the dumbest move imaginable, BP Amoco is proving that when it comes to workplace liabilities, honesty is the best policy. By taking the moral high ground, the company deftly upstaged its foes in the court of public opinion, denying them a chance to turn it into another corporate ogre. Now, it is casting itself in the same sympathetic role in a court of law. The company won dismissal last year of a would-be class action. In March, the families of five of the chemists with brain cancer dropped their lawsuits for cash settlements, one for as high as $2.7 million. ''Other defendants allow themselves to be put on the defensive,'' says Victor E. Schwartz, a senior partner at the Washington law firm Crowell & Moring. ''BP Amoco broke the vilification.''
Candor doesn't come cheap or guarantee absolution. BP Amoco spent millions to hire top-flight medical investigators and specialists and millions more on the recent settlements. Although widespread reports about the mysterious cancers did nothing to hinder British Petroleum Co.'s takeover of Amoco Corp. in 1998, the company's labs, once acclaimed for breakthroughs in polymer research, are today known by potential recruits as causing cancer. Undoubtedly, the company would have suffered regardless of its response. But by stonewalling, it would have lost any chance to mold its image with the public.
NO SECRETS. Frankness has not stopped BP Amoco from getting sued either. In fact, the company may have turned itself into something of a litigation magnet by releasing such incriminating findings. Even with the March settlements, BP Amoco stands accused by an additional two dozen plaintiffs with a variety of seemingly unrelated tumors. But the payoffs will continue if these suits go to trial. After learning of the research-center cancers, BP Amoco shuttered the lab, offered free MRIs to employees, and hired medical experts to comb through medical records of all 1,676 people who had been employed at the ''cancer building.'' Since the company has owned up to its responsibilities, perhaps the public will think there's less need to slap it with exorbitant damages. That means if BP Amoco loses, it could end up paying less in compensatory and punitive damages, say outside lawyers. Notes Thomas Donaldson, a business professor at the Wharton School and director of its ethics program: ''It seems to me that a company that shows it has heart is going to get a better hearing when it comes to the jury box.''
With so much to gain by going public, why don't more companies come clean? Often, because corporate lawyers generally instruct clients to hunker down and deny everything. That rote advice does have some logic. Without evidence, plaintiffs may not be able to even bring a case, let alone prove it in court. If no one else knows, they figure, the problem will eventually go away, and the company will have saved itself a public tarring and big-time legal fees.
But as corporate defendants are learning, it is harder and harder to keep secrets today. Bad news can spread on the Internet or a 24-hour cable channel faster than ever before. Once the word gets out, it's usually too late. That's because the act of covering up is criminal in and of itself. ''You could try to hide it, and you might get away with it 5 times out of 10, or even 9 times out of 10, but the risk of getting caught even that one time would be severe,'' observes David E. Van Zandt, dean of Northwestern University's law school. ''You look like a bad actor.''
So far, BP Amoco seems to be avoiding that fate. One of its smartest moves was to hire researchers from Johns Hopkins University and the University of Alabama at Birmingham to construct medical histories of everyone who had ever worked in the Naperville lab. The goal: to uncover an on-the-job link between those with the rare and fatal brain tumors, called gliomas, and the thousands of chemicals the scientists handled since the labs opened in 1970. In the end, the researchers failed to identify a chemical or a combination of chemicals responsible for the cancers. But they found that all six of the cancer victims were white men, assigned to the same building wing at some point in their careers, who had worked at the center for at least 10 years. The glioma rate among this group was 12 times as high as in a normal population, suggesting the cluster was related to something in the workplace.
That BP Amoco gets credit for this rankles some plaintiffs' lawyers. They dismiss the study as little more than a publicity stunt crafted to make BP Amoco seem like a good guy. ''That's not exactly a news flash--everyone already knew there were too many gliomas,'' says Tilden Katz of Corboy & Demetrio, a Chicago law firm representing 16 plaintiffs, including the sixth researcher found with brain cancer.
Still, it's hard to argue that BP Amoco didn't do the right thing. Marios N. Karayannis, a partner at Brady & Jensen in Elgin, Ill., sued BP Amoco on behalf of six people who claim they got cancer by working at the lab, including his father, Nicholas, who died in February, 1998. Karayannis settled his father's suit on Mar. 21 for an undisclosed sum. The workplace probably killed his dad, he says. But he adds: ''My father enjoyed working there. Becoming bitter would not honor his time there.'' What company wouldn't want to be regarded like that?
By Michael Arndt
Arndt covers manufacturing from Chicago.
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