Company Horror Stories 2016: 10 That Will Make You Glad You’re Not a CEO
‘Tis the season for scary stories.
But you don’t need devils, ghosts, or skeletons to bring chills to business people’s spines this year, not when we’ve had a year so rich in company disasters. Whether caused by negligence or just bad luck, some business events have been so bad as to put the fortunes of thousands and the reputations of some of the biggest brands on the planet at risk.
These are events, horror stories that can make even the most seasoned CEO wish they’d never been born. Aside from the in-the-moment navigating of these challenges and the suspense of whether a company can survive, these moments affect consumer trust of brands for years to come.
Take my deep-seated distrust of Jack in the Box, for instance. I can’t view their menu without having ‘E. coli’ flash through my head. Why? Because in 1993, the fast food chain’s undercooked meat made over 600 people sick, caused acute kidney failure in nearly 50, and, sadly, killed four children.
Or how about once-vaunted auto maker Volkswagen and the revelation that they had cheated on their vehicles’ emission tests? Before the revelation, 7 in 10 had a favorable opinion of the company. Just a few months after the news broke, that number had nearly flipped, with 64% now saying they no longer trusted Volkswagen.
Company scandals, mishaps, and miscalculations often hurt so much because, overnight, they can turn once-respected, trusted brands into pariahs and and leave them stumbling along like zombies. It can take years to overcome all the damage that is done to reputations, personal and brand.
Unfortunately, the year 2016 has been no stranger to these horror stories, the stuff of executives’ nightmares. Here are the 10 most harrowing company mishaps of the year so far:
1. Wells Fargo
This journey into terror started as far back as 2011, when the bank set high, maybe unachievable, sales goals for their organization, and employees responded by opening or applying for millions of bank accounts or credit cards — without people’s permission. But it only got worse when the Consumer Financial Protection Bureau and other agencies got wind of the fraud and fined them $185 million. The bank responded by firing 5,300 of their lower-level employees involved but held onto their executives and C-level.
In September, their CEO, John Stumpf, got flagellated before a Senate subcommittee with no attempt to defend himself. In a bitter election year, both parties united around their disgust for Wells Fargo.
Stumpf’s blood was called for. He resigned. Other Wells Fargo execs got picked off one by one, like slasher movie victims, but it wasn’t enough that they resigned or got canned — Congress wanted to also take their bonuses, their “claw back” money, and their severances.
And a class action lawsuit from those 5,300 fired workers is just starting to get warmed up.
Surely, somewhere, the Wells Fargo board of directors is wishing that this nightmare would just end, but with all the damage that’s been done to their internal culture and their brand, their nightmare is likely just beginning.
2. Microsoft’s Tay
Sci fi horror came to life this year. No army of human-exterminating robots rose up to conquer the planet, but we certainly got a “science gone wrong” tale in the form of Microsoft’s AI experiment Tay.
Like a modern-day Pinocchio, the teen-voiced chatbot started off on social media innocent and just wanting to show the world the wonders of AI. But within hours, thanks to the filth of a few Internet users, Tay was soon taught to spew sexist, racist, Nazi-loving hate speech. After realizing that the chat bot had spiraled out of control, Microsoft was forced to unplug their failed creation.
Lindsay Friedman at Entrepreneur said plainly, “Sometimes, science is simply better left alone.”
But maybe Tay, like all good science fiction monsters, only highlighted the flaws of humankind and the hubris of its creators.
3. Chipotle’s Outbreak
Like the Jack in the Box disaster of old, this outbreak took a sledgehammer to the food chain’s brand, flying in the face of their healthy, organic brand image. While it was originally reported in December 2015, the news really spread in 2016 and turned one Chipotle after another into a ghost town.
But perhaps what has been scariest of all is Chipotle’s decision to ignore their customers’ concerns. Rather than making a strong effort to regain customer trust and reassure them that the problem had been eradicated, Chipotle moved forward with launching a feel-good marketing campaign that had nothing to do with E. coli or food safety.
Needless to say, this plague has desolated the once-thriving chain. Customers don’t feel safe, so they’re not buying burritos at Chipotle.
4. Tesla’s Killer Robo-car
Speaking of technology gone awry, the relatively new tech of self-driving cars has generated a lot of anxiety from human drivers unsure of the potential risks. Although there had been accidents involving Google’s self-driving cars during tests, there hadn’t been any fatalities — that is, until May 7 of this year.
Joshua Brown of Ohio was using the Autopilot feature, a semi-autonomous driving feature, on his Tesla, driving at 74 mph (9 miles past the posted speed limit), when the car hit a 53-foot trailer. Brown was killed and the car totaled in the accident, making him the first person to die in a vehicle while a self-driving feature was enabled.
Why it was going over the speed limit and why it collided with another vehicle was unclear.
This accident made national news, driving already skittish, robo-phobic consumers away from the idea of self-driving cars and Tesla. Interestingly, this fear didn’t last long. By September, Uber was already testing its new fleet of self-driving cars in Pittsburgh and, earlier this week, Tesla posted its second profitable quarter.
5. DraftKings and FanDuel Drop Out of College
College sports, that is. Bombarded by lawsuits from Nevada, NY, and more than 30 other states, the two top fantasy sports websites made a deal with the NCAA to suspend all of their contests on college sports.
This represents a small hit to their revenue stream — approximately 3% of their total revenue — and was a necessary move for the sites to appear to cooperate with athletic organizations. But it will severely limit the directions in which they can grow in the future.
6. ITT’s Shut-down
You know those movies where a guy wakes up to find that he’s in some weird alternate reality where everything he knew is changed slightly? That’s what happened last month to students of ITT, one of the nation’s oldest and largest for-profit schools. In an instant, they went from working their way toward degrees and certificates to having the school doors locked.
Earlier this year, the Education Department barred ITT from using federal financial aid to enroll new students, which affected pretty much every student at the school. Then, the State of California prohibited ITT from accepting any new students, “citing concerns about the company’s financial viability,” and threatened to revoke their license to operate in the state.
Days later, the for-profit giant folded, voluntarily shutting down operations and leaving about 8,000 employees without jobs and about 35,000 students without a way to complete their educational programs.
7. Galaxy Note 7’s Explosions
Smartphone randomly exploding in owner’s pockets. It sounded like a plot to a doomsday thriller, but this nightmare was all too real, to the horror of Galaxy Note-maker Samsung. And a few spontaneously combusting phones would have been bad enough for a PR nightmare. Too bad 35 cases were reported. And then things got worse.
As reported cases nearly quadrupled, Samsung’s assessment of the problem found that the potential for issues was so large that they decided to recall every Galaxy Note 7 ever sold, approximately 1 million phones. This meant ceasing shipment of new phones and getting refunds or replacements for all of them. And then things got even worse.
Earlier this month, even some of the replacement phones, which were supposed to be explosion-free, also burst into flame. Samsung requested that all users shut down their phones altogether and officially recalled all of the phones.
While this debacle isn’t even close to being over, the impacts so far have been devastating. Samsung posted a 96% loss in mobile operating profit in Q3 of this year, and one IDC survey found that 50% of former Galaxy Note 7 owners will move to the iPhone.
8. Southwest Airlines Blackout
A router failure in one corner of Southwest Airline’s operation set off a domino effect that crippled their entire network, forcing the cancellation of 2,300-plus flights, delaying about 8,000, and leaving thousands of passengers stranded. And this mess took five days, from July 20–25, for the company to fix, earning it a ton of negative headlines and lots of exhausted, angry customers.
And this disaster took a huge bite out of the airline’s bottom line: in Q3, their net income was only $388 million, compared to $584 million in Q3 of 2015. That’s a 34% drop.
9. Mylan’s Epipen Markup
Pharmaceutical companies quietly jacking up the prices of their products is nothing new. But every now and then, customers discover their scheming and rise up in rebellion. Earlier this year, the maker of the EpiPen, a crucial life-saving injection device for anaphylactic emergencies, doubled the price of the product.
Patients who depend on the drug and their families went berserk. Politicians, doctors, and lawmakers went berzerk. Hillary Clinton went berzerk on Twitter.
All of them demanded that Mylan walk the price of the EpiPen back. To everyone’s chagrin, Mylan refused, but instead offered to up to $300 of patients’ out-of-pocket expenses and expand the number of patients who could qualify for the company’s low-income subsidies.
Not good enough, everyone responded.
Mylan announced the upcoming release of a low-budget version of the EpiPen, closer to the previous price. Still not good enough.
Riding the wave of public righteous indignation, looking to score points in an election year, and echoing the refrain heard in the Wells Fargo hearings, politicians and the Justice Department are now calling for Mylan executives to lose their salaries and bonuses over the snafu.
10. Yahoo’s Privacy Problem
Pretty much everyone, at some point in their lives, has set up an account on Yahoo. So when the company announced that it had been hacked by an unknown hand, the whole population felt it. The company estimates that more than 500 million accounts were affected by the breach, including email addresses and passwords and any information that was contained in those email accounts. This make it the biggest data breach of all time from a single site, in terms of many people were affected. That’s enough to destroy trust in any company, but it gets worse.
Just a few weeks later, Reuters broke the story that Yahoo had voluntarily worked with the NSA to scan all incoming emails and share that data with the agency, effectively spying on their behalf and throwing out any expectation of privacy with its users.
In terms of brand trust, this is a nightmare of Roland Emmerich proportions. The fact that it was done willingly and right in the face of the company’s own promises of privacy and security make it a disaster from which Yahoo might never recover.
