Bayer will pay $10 billion+ to settle liability lawsuits over its Roundup weedkiller, but its practices assessing business risk will forever suppress its stock price and impede its ability to innovate and grow.
That’s because its reputation was never based on PR, so PR can’t fix it. Don’t believe anything that marketers or communications consultants might say otherwise. The lesson of the Roundup fiasco is that corporate reputation is based — and should be valued — in the operations of the business.
The story is actually somewhat shockingly.
When Bayer completed its $63 billion purchase of Monsanto, there were pending liability lawsuits claiming that use of Roundup had led to customers developing cancer. Bayer had to have known about them — there are an estimated 95,000 cases — and the potential cost of resolving them must have been calculated into the price it paid for Monsanto, right?
It lost the first jury verdict within weeks of completing the deal, and then lost two more within a year or so. Fast-forward to last month and it agreed to 25 separate law firms to pay north of $10 billion to settle the cases (and set aside another billion or more for future ones).
It doesn’t apply to the 30,000+ claims from plaintiffs who chose not to join the settlement, nor does it set aside funds for any potential lawsuits from farmers (they’ve by far the largest users of Roundup).
So, either Bayer thinks the current lawsuits can be made to “go away,” and it can continue to settle new ones instead of plaintiffs choosing to go to trial (the first 3 got far more from juries than what would have been allocated in the subsequent settlement agreements), or it simply misjudged its exposure for selling a poisonous chemical in a world that is aggressively shifting to healthy and sustainable practices.
While oil companies like BP are rewriting their business purpose by reinventing their businesses (BP just wrote down billions’ worth of its oil and gas assets by $17 billion), Bayer is reaffirming its Old School agribusiness additive despite ready indications that it may harm people and certainly isn’t good for the planet.
It isn’t even putting a warning label on its Roundup products.
When Bayer bought Monsanto, it also inherited years’ worth of very aggressive and successful PR efforts to influence regulations, providing company-sponsored research that denied health effects of Roundup’s key ingredient, glyphosate, by claiming that it didn’t “directly” cause cancers (so while the WHO and others found that it probably contributed to cancers, the EPA and other government agencies could claim there was no reliable causative link).
This strategy worked well for tobacco companies for decades. It didn’t work so well for the hundreds of thousands of people who died of cancers that hadn’t been “directly” and inexorably caused by smoking. Big Oil is coming to the end of its equally successful multiyear campaign to confuse us on global climate change.
Again, either Bayer misunderstood this exposure, or it readily endorsed and embraced it.
Such delightful business practices say a lot about how Bayer approaches risk, whether smartly, foolishly, or a combination thereof (i.e. too smart for its own good). It’s an insight into how it makes business decisions and, despite whatever blather its PR people promote about corporate purpose, it reveals what’s important to the company.
Most importantly, it raises unanswered questions about the judgment of its leadership.
Was buying Monsanto and its legal and ethical liabilities foolish or conniving and, if the latter, how long do those executives think they can get away with it (and why would they want to do it)? Are other decisions equally questionable? Why and how can stakeholders trust it to do the “right” things if Bayer applies some vague, malleable definition of them?
What’s the risk of doing business with Bayer? I’d say the Roundup settlement is a good indication that it’s pretty high. Should suppliers extend to it the terms they reserve for they best customers? Should loans be made at the best possible prices? Should employees invest their time and personal reputations in the business?
Those operational areas are where you’ll find the impacts of corporate reputation, not the vicissitudes of social media posts or other made-up measures.
I think it’s going to kill its reputation, and there’s not a damn thing its communicators can do about it.