Tag Archive: yum brands

Forum Covers Managing Risk ‘Before It Manages You’

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While the Internet initially was a communication tool between the U.S. Department of Defense and multiple academic organizations, it has become the backbone of a global economy and government operations, the Hon. Tom Ridge told a rapt audience of more than 200 directors at the NACD Strategy & Risk Forum in San Diego. The first secretary of the U.S. Department of Homeland Security, Ridge currently serves as president and CEO of the strategic consulting firm Ridge Global and is a director for the Hershey Co. Ridge delivered the opening keynote to directors convened for the two-day forum co-hosted by the National Association of Corporate Directors (NACD) and its sponsors.

“We’ve come a long way from a simple communication tool,” Ridge said. “What’s really remarkable is the tool is designed to be an open platform.… It wasn’t designed to be secure. It wasn’t designed to be global. The ubiquity of the Internet is its strength, and the ubiquity of the Internet is its weakness. For every promise of connectivity, there’s a potential vulnerability.”

A report released last year by McKinsey & Co. and the World Economic Forum found that more than half of all respondents surveyed—and 70 percent of executives from financial institutions—view cybersecurity as a strategic risk to their companies. The report was based on interviews with more than 200 chief information officers, chief information security officers, law enforcement officials, and other practitioners in the United States and around the world.

“In this world, you’ve got to manage the risk before it manages you,” Ridge advised the audience.

Support for the forum was provided by BDO USA, the Center for Audit Quality, Dechert, Dentons, ­Diligent, Heidrick & Struggles, KPMG’s Audit Committee Institute, Latham & Watkins, Pearl Meyer & Partners, Rapid7, and Vinson & Elkins.

The Chattering Class

Risks to reputation are nuanced and numerous. Jonathan Blum, senior vice president and chief public affairs and global nutrition officer for Yum! Brands Inc., which operates 41,000 KFC, Pizza Hut, and Taco Bell restaurants worldwide, has seen firsthand the damage that can be done to a company’s reputation. He recounted an incident that hit the brand’s reputation and bottom line, and ultimately spurred substantial changes in the company’s supply chain.

In December 2012, a state-owned television network in China reported that some local poultry suppliers were putting unlawful amounts of antibiotics in chicken. One of the many suppliers investigated happened to be one of KFC’s suppliers, albeit one of the restaurant chain’s smallest. “But, because we’re the largest brand in China, not just the largest restaurant, we obviously bore the brunt of the publicity,” Blum said.

The most damaging aspect of the negative attention, according to Blum, was not the investigative report that aired on television, but rather the chatter on social media in the wake of the report. The fallout was a tarnished reputation, a sharp downturn in sales, and some decisive action.

“Consumer trust plummeted. Belief in our brand plummeted. Our sales plummeted. We saw a huge drop in our stock,” Blum said. “Now, this was at the end of 2012, so the impact on our financial results that year was negligible. Up until 2013, we had had a 10-year run of at least 10 percent [earnings per share] growth year over year, which is pretty unusual. In 2013, given the ditch we were in in China, our earnings per share dropped 9 percent. We lost $270 million in profit as a result of this incident, and it took about a year to rebound.” In the aftermath of the negative publicity, Yum! Brands learned that its stakeholders wanted answers to three questions:

  1. What happened?
  2. What was being done about it?
  3. How would the company would prevent it from happening again?

Yum! Brands apologized to the public, fired about 1,000 small poultry suppliers, and worked with the Chinese government to upgrade the quality of the poultry supply.

“Over time, that rebuilt consumer trust,” Blum said.

The company also took a significant step toward managing its reputation on social media.  “As a result of this incident, around the globe, 24/7, we monitor what consumers are saying about us and we immediately respond,” Blum said.

More information on managing reputation risk is available in the publication Board Oversight of Reputation Risk, part of the Director Dialogue series by NACD and global consulting firm Protiviti.

Additional coverage of the forum is available in the July/August 2015 issue of NACD Directorship magazine.

A Ballroom Filled with Board Members: Take Your Places for the Conference Cotillion

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“You’ll have to get on your dancing shoes” said Donna as we watched the Dancing with the Stars finale the other night, and I must admit a shudder ran through me.

“What do you mean?” I asked, worried that she was going to suggest a Latin salsa class or sign me up for the square dance squad at church. My toes refuse to twinkle and I am to ballroom dance what hippos are to hip hop.

Hines Ward. He's no Ken Daly

“Well, I see the NACD conference site is open for business” said my wife “and you know how quickly your dance card fills up every October in DC.”

She’s right. Our conference has sold out for the last two years and we’re expecting more than 800 directors at the JW Marriott in Washington, DC from October 2-4 this fall. It’s great to see chapter leaders, members I first met at roundtables or education events, Board Leadership Fellows and our own NACD board, but it sure is hard to find time to take a turn around the floor with everyone—and to break in on all the interesting networking conversations going on left, right and center.

Conference is like a cotillion, and at all hours of the day and night board members from companies big and small, public and private, from all over America and, increasingly, all over the world, are in constant, swirling motion. You’ll definitely need your comfy shoes.

Like everyone else who makes certain to attend, I like to catch as many break outs as possible. There are 24 this year and it takes the speed and stamina of Maksim Chmerkovskiy to run between them. One definitely not to miss: Bonnie Hill from the board of Yum Brands, Jim Brady from the board of Constellation Energy, former Governor Bill Owens from Colorado at the time of Columbine, and communications guru Richard Levick talking about the board’s role in crisis planning and management in the year of the beef taco, Fukushima and political volatility all over the world.

We have a full day of programming on Sunday this year: plan to attend one of five board committee forums or get to know fellow directors by joining our special private tours of the Capitol or the National Archives.

 

Sir Peter Bonfield

As I write, Sir Peter Bonfield, who has contributed a lifetime to driving international technology innovation and who now sits on the board of Sony Corporation (among others) has agreed to join the opening plenary on Global Governance  with Ambassador Roz Ridgway and our board member Michele Hooper (who Sir Peter knows from the board of AstraZeneca) . It’s a small world—although The Honorable Barbara Hackman Franklin and The Honorable Charlene Barshefsky may beg to differ. They’ll be sharing their view from 30,000 feet on one of the rare occasions when they are not in the air flying to China or other far flung hot spots.

Members of our latest Blue Ribbon Commission on Effective Lead Directors will take the stage as will The Honorable Leo Strine from the Delaware Court of Chancery. As usual, you won’t be able to turn around without bumping into a big name from the business world or someone from the Administration or the Hill. As always, thanks to our fantastic line-up of sponsors who make it possible for us to offer you an event of this size and scale.

Myrtle Potter

I am looking forward to meeting Medco director Myrtle Potter who is based on the West Coast and catching up with Chris Kubasik, President and COO of Lockheed Martin and a board member at USO—an organization that I am sure is close to all our hearts. I know you will have your own “dance card” of movers and shakers in the world of governance. Just remember, you can’t be part of the fun if you don’t make it to the ballroom floor. Register now and I look forward to seeing you twirl by in the middle of all the excitement this October in Washington DC.

Check out all the conference speakers here.