Being associated with Andersen turned from being an asset to a liability with alarming rapidity and the firm was ill-fated once people were no longer willing to do business with it. Now it is the turn of insurance broker Marsh & McLennan to find a way to cope with the impact of reputation damage. It stands accused by New York state attorney general Eliot Spitzer of a series of abuses and illegal acts designed to boost its profits at the expense of its customers. Now come reports that those customers – many of the world’s largest corporations – are instructing their in-house teams to no longer deal with Marsh. Their concern is that if Marsh is found guilty, they might be sued by their own shareholders for dealing with the firm when they had reason to be suspicious.
What this underlines is how pressure on customers means they cannot afford to give the accused the benefit of the doubt, nor wait for the situation to be clarified. That is why the share price of Marsh’s parent has dropped 40 per cent and stayed down.
Clearly such cases present a PR challenge. Marsh no doubt thought it was smart to fire its chief executive and appoint someone who used to be Spitzer’s boss and, in fairness, this may make it easier to get a settlement. But the drastic action sends out a signal that there is fire as well as smoke, and that underlines Marsh’s inability to issue a definitive report on what has been going on as a way to take the sting out of the allegations.
The firm has appeared paralysed. That is potentially fatal, for while it is rooted to the spot, its customers are all too mobile.