Hiding the truth can be costly

IT’S KIND of tragic to be bad and dumb at the same time.

Bad is bad, and dumb is bad, and the two together are really, really bad.

Penn State University has achieve that daily double lately, and there’s a business lesson buried amid the rubble of a great state university’s self-immolation in the shielding of a sexual predator.

The good news: Sometimes good and smart can work hand in hand, just like their evil opposites.

Institutions and humans always seem to believe that painful truths can be hidden. What Penn State did in not dealing with an enormity, in the hopes that it would somehow just go away, will be infinitely more costly than early intervention.

It worked about as well as the University of Virginia board of trustees’ recent ill-advised attempt to strong-arm the school’s president out the back door, hoping perhaps that no one would notice if they did it when school was out.

But don’t blame the universities. They’re just following the playbook many companies are employing, one that puts ethics and common sense in the cheap seats and the next quarter’s bottom line in the luxury boxes.

(And, of course, politicians have been torching themselves by hiding the truth since Watergate—not enough room in this column to go there.)

Here’s now the playbook works: If you screw up, you go into ODDS mode—Obfuscating, Dodging, Denying and Spinning. Maybe whoever is looking for the truth won’t be able to find it, or will just give up or can be co-opted somehow. (What used to be called journalism schools turn out scads of bright young people to help companies “control” the truth.)

A few examples from the not-too-distant past of how expensive this policy can be:

Enron, the energy company, concealed billions of dollars in debts by cooking the books, leading everyone to believe it was a raging success right up until the bottom fell out in 2001. Stockholders lost billions. Employees lost pensions. Many executives went to prison.

When an explosion at BP’s Deepwater Horizon terminal turned into one of Earth’s worst manmade ecological disasters ever in 2010, the initial report said 1,000 barrels of oil a day were spilling into the Gulf of Mexico. As the petroleum poured out, the truth trickled.

Four months later, and before the damage was capped, a reliable report said the real figure was some 62,000 gallons a day.

In the month after the spill began, BP’s CEO said it was “relatively tiny” compared with all the oceans in the world, surely one of the most poorly thought-out spins ever. The only thing more tainted than the Gulf coast was BP’s reputation.

In 2009 and 2010, Toyota’s tardy response to the realization that its cars had major problems with accelerator pedals and other issues knocked a hole in the company’s reputation and stock price. After the company finally swallowed its pride and came clean, 8.5 million Toyota vehicles were recalled worldwide. Lawsuits abounded.

Hiding the truth only makes its inevitable exposure worse and ensures that you will be a star for many news cycles instead of just one or two. In a world where information is accessible through multiple platforms almost instantaneously and everyone’s a reporter, it is harder than ever to control the message.

Take a hit early on and move on.

In the long run, you’ll be better and smarter.

Business Editor Howard Owen writes this biweekly column on business and the economy. He can be reached at 540/374-5539 or howen@freelance star.com.

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