Reputational Risk and PG&E: A Cautionary Tale

Diablo Canyon Nuclear Power Plant – Photo: CA OES

Trust, whether in personal relationships or in business, is easy to lose and hard to regain. Once lost, the effects snowball to the point where issues that might have been ignored now become highly visible and increase the damage done to one's reputation. The most recent reputational crisis from the Pacific Gas and Electric Company is a good case study of this effect.

Starting in 2008, PG&E replaced the steam generators and reactor vessel heads at the Diablo Canyon nuclear plant on the Central California Coast. Licensing for the plant required a test of the new equipment using a scenario involving an earthquake and a loss of coolant. Instead, PG$E used two separate scenarios, one involving and earthquake and the other a loss of coolant. The mistake was discovered in 2011 during an internal safety analysis and PG&E notified the cognizant agency, the Nuclear Regulatory Commission. PG&E engineers evaluated the new equipment and felt that it was seismically safe. The Commission accepted PG&E's findings.

In another time this incident would have most likely gone largely unremarked. PG&E found identified the problem, verified the safety of the new equipment, and reported the incident as required. Indeed, this incident only came to light in December of last year during hearings on Diablo Canyon held by Senator Barbara Boxer. However, following the explosion of a gas pipeline in San Bruno, California, in 2010 that killed 8 people, PG&E's safety practices came under intense scrutiny. Faulty record keeping, cost-cutting, and poor management decisions contrived to create the image of a company that placed shareholder return and profit above public safety. 

As if this wasn't enough, evidence has emerged that PG&E has a too-close relationship with the California Public Utilities Commission, the state commission that oversees PG&E, forcing the resignation of the head of the commission. Similar criticism has been raised against the NRC by Senator Boxer. 

PG&E now has a reputation for cutting corners wherever possible, barely meeting minimum standards, and covering up its greed by suborning its regulators. The incident at Diablo Canyon is now front page news, further eroding the public's confidence in the utility and providing leverage for those seeking to close the plant. Coming on top of the other negative revelations of the past few years, this incident compounds PG&E's reputational problems. Whether the utility will ever be able to regain the public's trust is debatable.

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The Killer Hiding In Your Home!

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The Killer Hiding In Your Home!

Growing up in sunny San Francisco, we always had glass jars along the window ledge above our kitchen sink. They held the usual school assignments such as sprouting beans on blotter paper and avocado seeds supported by toothpicks. We also had jars that were catch-alls for all the little buttons, pins, rubber bands and such that turn up in a kitchen. Little did we know that we were letting a potential killer into our home.

From London comes a story that will change how you view those glass jars. Fire inspectors believe that the sun’s rays refracting through a glass jar on a bedroom window ledge was responsible for a devastating fire that severely damaged a family’s home and killed their dog. Damage was so severe that it will take a year to repair.

What are we to do? Can we rely on the media to educate the public about this new risk in their usual calm and measured fashion? What about a social media campaign that can go viral and really get the word out? Perhaps we should consider legislation banning jars on window ledges and authorize the authorities to enter our homes without notice to enforce these laws. Surely corporate America can devise monitoring devices to help with enforcement. Better still, go to the source and ban the manufacture of glass jars. After all, the manufacturer is the one who is really responsible here.

Sounds silly to over-react to such a small risk, doesn't it? Yet this is precisely what we seem to do every time we face a new risk. Case in point was the recent Ebola “crisis” where people with no connection to the affected countries were convinced that they had been infected somehow.

I don’t mean to minimize or make light of a tragedy and I do believe that it’s prudent to take reasonable precautions against even such small risks. But the simple fact is that we tend to over-inflate risks and have an unrealistic expectation that we can live in a risk free world. The less we understand a risk, the more we fear it. This is why you’re probably not too concerned about glass jars on your window ledge but are uneasy about something like Ebola. And why you read blog posts with provocative titles.

So how do you keep your sanity? Gather the facts and understand the difference between real and perceived risk. When you filter predictions of disaster through this lens, you’ll be surprised at how easy it is to put risks into perspective. Focus on real risks, not imaginary ones.

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The Importance of Community

The recent tragic death of Kayla Mueller in Syria reminded me yet again of how interconnected we are and how important community is in time of crisis.

I didn't know Kayla or anything about her. But this week I found out that we were both members of the same social group, an organization that considers its members as all part of an extended family. I learned about Kayla from another friend in our local group who had known her and was deeply affected by her death. We honored her at a recent meeting, partly because she was one of us but also to help our friend deal with his grief.

This is not unusual for our group. We have developed customs for dealing with the loss of our members that allow us to share grief and, in that sharing, mitigate some of its sting. More importantly, we try to reach out to any member in need. We have a volunteer emergency coordinator who contacts any members affected by disasters, whether large or small, and identifies needs that are not being met locally. Sometimes we help on an organizational level by replacing lost regalia, documents, or equipment; sometimes it is on a personal level with gift cards and donations. Our northern California group recently raised over $30,000 to fund a much-needed operation for one of our members.

I also know that we are not the only organization that does this. Over the years, I have encountered many, many organizations that give aid in time of trouble. In such times, community becomes all important, reminding us that we are not alone and have friends who will help. As effective as Federal, state, and local governments are (and don't believe everything you read – we have one of the most sophisticated response systems in the world here), they can never come close to matching the support provided by close-knit communities in time of crisis. The government can only share material goods and services; community groups offer a sense of belonging, of being part of something good. We are at our very best when helping each other in crisis.

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Farewell, Rod McKuen

I was saddened to hear that Rod McKuen had died last week. Though not really well known now and almost universally trashed by critics at the height of his fame, McKuen was a popular poet and singer/songwriter back "when I wore a younger man's clothes." I'm not a big fan of blank verse and even I have to admit that McKuen's poetry is not the best but there was something in them that spoke to me. It may have been the connection to the Bay Area – McKuen grew up in Oakland, CA, and his second book was titled Stanyan Street and Other Sorrows, a street that was important to me growing up. Whatever the reason, I learned quite a bit about life and love from his poetry and songs.

Mckuen's life was not easy. He was an illegitimate child who had no idea who his father was and grew up with an alcoholic stepfather. McKuen ran away from home at 11. One of the ways he coped with life was to keep a journal that eventually became source material for his poetry and songs. His obsession with locating his true father was also, I believe, a source of inspiration. He eventually found the answers he sought and chronicled his search in his autobiographical book, Finding My Father.

If Rod McKuen's life teaches us anything, it is that adversity and challenge can some times lead us to do incredible things. How we face challenges determines who we are. This is why I have so little patience for those who try to eliminate all risk from life. If you risk nothing, you stagnate; you fail to grow; you stop living. As McKuen wrote:

It's nice sometimes
to open up the heart a little
and let some hurt come in.
It proves you're still alive.

    ― Rod McKuen, Listen to the Warm

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Katz, Marshall & Banks

During pre-flight preparations at SFO last July, United employees discovered a disturbing image drawn on the tail of the aircraft near the access panel to one of the gas turbine engines. The image showed two faces, one of which could be interpreted as threatening, and the words "BYE BYE".

Fearing a possible bomb, the Captain opted to hold the flight because of security concerns and passengers, who had not yet boarded, were told the flight was delayed for maintenance reasons. Maintenance inspectors inspected the engine compartment and found nothing suspicious. They did not inspect the rest of the plane. The Captain, suspecting that the drawing was just a bit of ground crew graffiti, deemed the aircraft safe to fly and ordered the passengers boarded.

However, the flight attendants did not agree. They felt that the only way to ensure complete safety was to conduct a full security sweep of the aircraft. They refused a direct order from the United SFO inflight supervisor to return to work, which constituted grounds for dismissal under United rules. Thirteen flight attendants were terminated and the flight was canceled because of crew availability. The attendants have filed a federal whistle-blower complaint with the US Occupational Safety and Health Administration and are considering a lawsuit for wrongful termination.

This incident makes an excellent case study for decision makers. On the one hand, you have a genuine concern for passenger safety demonstrated by the flight attendants. On the other hand, you have United managers using risk analysis as the basis for deciding that a threat was not credible. Or you could describe it as an irrational fear for their own lives by the attendants versus corporate employees placing profits above safety. It all depends on your perspective.

This is what makes this such an great case study. We are taught that safety is always our first priority but the reality is that we can not guarantee complete safety and that safety comes at a cost. We are frequently in a position where we have to weigh that cost against other factors such as the credibility of the threat, expense, and public inconvenience. That sometimes means accepting a certain amount of risk.

Imagine yourself the person that had to make the decision as to whether or not to cancel this flight and conduct a full security sweep. What would have been your recommendation?

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Government Conspiracy to Suppress Dissent Revealed! Really?

Government Conspiracy to Suppress Dissent Revealed! Really?

Police used teargas to drive back protesters following an attempt by the Occupy supporters to shut down the city of Oakland. Photograph: Noah Berger/AP

Early last month I wrote a blog titled How The Media Raises Your Anxiety Over Terrorist Attacks in which I traced the evolution of a story from a largely unsupported series of statements to a full-blown end-of-the-world type story. There is a story currently making the social media rounds that shows once again have different perspectives, bias, and additions can change even the most common sense and routine government action into a conspiracy.

In her recent article Revealed: how the FBI coordinated the crackdown on Occupy, journalist Naomi Wolf claims proof of a coordinated effort by corporations and the government to repress dissent, citing a document obtained by the Partnership for Civil Justice Fund under the Freedom of Information Act. Ms. Wolf links this pre-event surveillance and planning to the violent response by many police departments to Occupy activities, even though the original PCJF article and the related document discusses surveillance and coordination meetings, not tactical plans. Ms. Wolf’s implication is that the violence was preplanned at the direction of corporate America rather the actions of individual officers or poor departmental planning.

However, my real issue is the implication that coordinated planning between government and the corporate sector is by its very nature suspect. This is completely contrary to what we in the emergency management community have been working towards for years. Effective response requires cooperation and integration of all available resources, whether private or public. We try to anticipate problems and to develop an appropriate plan of action.

According to the General Accounting Office, 85% of the critical infrastructure in the United States is in the hands of the private sector. Threats to this infrastructure, from whatever cause, can produce significant harm to both the economy and individual citizens and are therefore the legitimate concern of government. To discharge that responsibility, it is essential that the government work closely with the private sector. To gather information on potential threats, to meet and coordinate planned activities, and to work collaboratively during response is essential. To do otherwise would be gross negligence.

Like many Americans, I’m concerned by the overuse of government surveillance and the gradual erosion of privacy. These are legitimate concerns. However, we must recognize that there are times when surveillance is appropriate and necessary and when government and the private sector must work together for the benefit of all.

Watch for a more in-depth discussion on this topic in this month's newsletter, Emergency Management Solutions.

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In considering the recent hacking incident involving Sony, I’ve been trying to put myself in the position of the decision-makers who had to react to the crisis. I’ve been asking myself, “What advice would I give my CEO in this situation?” It is easy to second-guess such decisions after the fact. It is also easy to spout platitudes such as, “no negotiations with terrorists” or “we must stand firm in the face of terrorism.” But when it is your loved one that is the focus of the negotiation or your local theater that is firebombed, the discussion takes on a more personal dimension.

CEOs receive advice from many during a crisis and the nature of that advice is, to a certain extent, predictable. Corporate counsel will inevitably recommend the most cautious approach that limits company liability, for example. But too cautious an approach carries a price as well, as we are seeing in the many voices criticizing Sony’s decision to capitulate. On the other hand, a decision to continue business as usual carries enormous liability in the event an incident actually occurs.

So how do we give the best possible advice to corporate decision-makers? Ultimately, we must fall back on the fundamental emergency management skill of assessing risk. In this case, we need to ask, “What is the capability of those making threats to actually carry them out.” Secondly we must consider our own ability to block any attempts to harm the public. But this only takes us so far. We also need to consider the ramifications of any decision that we make.

Let me put this in a slightly different context. The Disney Corporation is seldom sued. The reason for this is that years ago Disney made a conscious decision not to settle frivolous lawsuits. There was clearly an initial cost in litigating frivolous lawsuits but, in the long run, this upfront costs was recouped 100 times over through the avoidance of future frivolous lawsuits. Lawsuits against Disney became an expensive proposition that yielded few rewards and few attorneys were willing to take them on without a solid complaint.

Returning to the Sony incident, we need to consider not only the ramifications of this single incident but what it will mean in terms of future incidents. Can we allow anyone with an Internet connection to dictate how we lead our lives? Risk is an inherent part of life and I believe that if we make people aware of the risk and allow them to decide whether it is acceptable or not they will support us. There are ample historical examples of this. In the end, we must take the long term view and accept that nothing we do is truly risk-free.

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