Dorothy Crenshaw July 19, 2018 | 11:10:26

When A Founder Does PR Damage

For a fast-growing startup, a dynamic founder can be a huge PR asset. A charismatic entrepreneur is the face of his brand, its best media spokesperson, and the embodiment of its values. The most talented can attract a top workforce and inspire it to achieve beyond expectations. From Steve Jobs to Marc Benioff, the examples of PR-savvy founders are varied, but they share many of the same attributes.

Have charisma, will backfire

But what happens when the founder’s impact turns toxic? Take the recent soap opera unfolding around Papa John’s founder John Schnatter.  Forced to resign as chairman of the business he started after an ugly, racially-tinged episode came to light, Schnatter is fighting back. He’s now blaming the marketing agency involved in a media training session for goading him into uttering a racist word. Although Papa John’s has recovered a bit from a stock price drop right after the scandal broke, nothing about this is good for the brand or the business. Who can focus on competitors when the founder is his own – and the company’s – worst enemy?

Elon Musk also made waves with a self-inflicted PR crisis this week — this one on a more global scale. Musk was enjoying mostly positive coverage after his company’s prototype submarine became a sidebar as a possible aid in the rescue of the boys trapped in the Thailand cave. Happily, the sub wasn’t needed for the rescue, but when one of the cave divers criticized it as a “PR stunt,” Musk exploded. He tweeted an angry response and called the diver a “pedo.” The insult to a true hero of the high-stakes rescue naturally brought a furious backlash. Musk walked back his comment and deleted the tweets, but the tantrum startled investors and caused a temporary drop in the share price of Tesla, Musk’s troubled electric car company.

It’s the Travis Kalanick problem. Sometimes the very qualities that lead an entrepreneur to achieve extraordinary success can spell trouble as a company matures. When it comes to taking on the risks and obstacles involved in scaling a world-class business, brazen self-regard and iron confidence are useful. But when confidence metastasizes into arrogance and self-interest, the company’s reputation – even its very survival — can be placed in jeopardy.

Boards must wrangle renegade founders

So, what’s the answer? In most cases it falls to Board members and investors to wrangle a toxic founder before things go irretrievably bad. Gene Munster, founder of VC firm Loup Ventures, offers relevant advice in an open letter to Elon Musk following the cave diver episode. Munster advises Musk to ignore short sellers and reminds him that the perception of “think-skinned and short-tempered” leadership is not helpful to his company.

Thankfully, the road to regaining investor confidence is well traveled. It starts with an apology. Then, focus your message on your progress toward achieving Tesla’s mission. You might consider taking a Twitter sabbatical. Twitter might keep Tesla in the news but it won’t help continued improvements in production and product.

Board members, officers, and investors have a critical responsibility here, and one’s that’s increasingly being scrutinized among venture-backed tech companies as well as others. The Theranos fraud showed the consequences of a board that’s overly credulous, asleep at the controls, or badly chosen.

There are always warning signs. A deeper look into Papa John’s reveals a company that in the words of one former employee, is a “public company operated like it is privately owned.” Founder Schnatter has a history of controversy; he resigned under pressure in 2005, only to return three years later to install cronies in top company and board positions. The red flags were there.
Real leadership means making the proper corrections or ultimately the painful changes that can ensure a successful company’s survival, even if that means the guy who started it is the one who needs to go.

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