I just realized the other day that it has been almost 30 years since a nuclear reactor at Pennsylvania's Three Mile Island plant overheated, leading to the most serious accident of its kind in American history. I suppose some of my readers weren't even born yet, but I remember that time. I also remember visiting Three Mile Island with a small group from my business school class, nearly 15 years ago.
A key impression that I got was that I was probably at the country's safest nuclear plant. The accident had traumatized those who worked there, and from then on, it seemed that safety was paramount. I could imagine other people at other plants thinking, on some level, that such an accident wouldn't happen to them. But not at Three Mile Island, where they'd grown proud of their generous attention to safety.
So where am I going with this? Well, think about it in relation to investing. Every now and then some company experiences a disaster of some sort. How it deals with it tells a lot about the company and its culture. Think of Johnson & Johnson (NYSE: JNJ), for example, and its Tylenol-tampering scare in 1982. The company moved swiftly to remove possibly tainted products from shelves and to reassure the public that it was redesigning its packaging and taking other measures. Confidence was soon restored.
In 1996, Odwalla -- now a unit of Coca-Cola (NYSE: KO) -- faced a crisis when its apple juice was suspected of containing E. coli bacteria. The stock was slashed by a third, but the company responded responsibly, changing its processes and keeping the public informed. Mattel (NYSE: MAT), meanwhile, suffered awhile ago from two product recalls tied to China imports. The company responded to scores of media inquiries and kept its good reputation. When Firestone tires caused a number of accidents on Ford (NYSE: F) vehicles, Ford offered to replace tires, while Firestone at first blamed consumers for underinflating them.
There are lots of other examples: Dow Chemical (NYSE: DOW) subsidiary Union Carbide's 1984 pesticide disaster in Bhopal, India; ExxonMobil's (NYSE: XOM) oil spill in Alaska, and so on. Studies have suggested that Americans tend not to trust companies to tell the truth or do the right thing. When companies do so, they stand to earn a lot of goodwill.
Learn more about how good management is the secret of superior stocks.
What do the unfolding financial crisis and ongoing market volatility mean for your money? The Fool's here with answers. Get the best of our daily commentary and analysis in your inbox simply by entering your email address in the box below.
Terms & Conditions
RSS Headlines
Fool UK