Two senior Chaffetz Lindsey partners share some thoughts on operating a business during a financial crisis. This page: Thoughts from Sandy Litvack, former General Counsel, Chief of Corporate Operations at the Walt Disney Company. Next page: Innovation and Opportunity in a Crisis. (Charlie Scibetta, Chaffetz Lindsey Managing Partner)
Mobilize Quickly. Form and Deploy a Strong Team. Develop a Problem-Solving Strategy.
Several years ago, the Walt Disney Group looked forward with great anticipation to the opening of Euro Disneyland. Every Disney Park had opened to instant success, and this new Park located just outside Paris and catering to all of Europe seemed destined to be among the most successful—well worth the $4 billion price tag.
However, a series of unexpected obstacles (lower than expected demand, labor strikes, protests, and a French economic recession) combined to throw Euro Disneyland into crisis shortly after it opened. Within less than a year, the Park’s creditors were threatening foreclosure. The Disney name and reputation were on the line.
Disney’s top management (its CEO, President, CFO, and I) immediately formed a team that included key internal financial people, as well as outside financial advisors, lawyers, and media advisors. We quickly formulated a strategy of proactive outreach to achieve a structure whereby the lenders, the shareholders, and Disney all contributed to assure the Park’s solvency and ongoing operations. We avoided bankruptcy, and there was no litigation at all.
The crisis response protocols we followed became standard practice for Disney whenever it is challenged, and I have regularly called on the lessons from that crisis while advising companies in the years since as a board member or outside trial counsel.
How do I sum up? Communicate and coordinate promptly, honestly, and effectively with all stakeholders. Establish a crisis response team, with clear responsibilities and lines of authority. Prepare for the public response as well as the legal response. If legal proceedings become necessary, showing your adversary you are ready for the fight, is one of the best ways to avoid it. Negotiated resolutions, to the extent they are available and attractive, are always best. And the best way to get them is to be prepared.
— Sandy Litvack, Partner, Chaffetz Lindsey; former General Counsel, Chief of Corporate Operations at the Walt Disney Company
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