Bell Pottinger – what went wrong?

12 October, 2017

The recent Bell Pottinger public relations scandal is a cautionary tale of how professional risk and reputation can be overridden by the interests and objectives of clients. In the absence of proper safeguards and reporting it really highlights how an ill-judged campaign managed by a few individuals can jeopardise the reputation and ultimately bring down one of the UK’s most well-known public relations firms.

Bell Pottinger’s UK operations entered administration on 12 September 2017 following revelations that rocked the PR world and led to their ejection from the Public Relations and Communications Association (PRCA) in early September on the basis that it had “brought the PR and communications industry into disrepute”.

60 staff were immediately made redundant, leaving around 100 staff in the business in the UK, with tax bills of up to £1m and debts totalling a reported £6m. Bell Pottinger’s Asian subsidiary, Bell Pottinger Middle East, was the subject of a management buyout (and re-brand to ‘Klareco Communications’) around a week after its parent went into administration, and both founder members of the business, Lord Timothy Bell and Piers Pottinger, have now resigned.

Bell Pottinger’s collapse was triggered by the release of a report on 4 September by Herbert Smith Freehills LLP, who was commissioned to conduct an independent review into Bell Pottinger’s account with Oakbay Investments Pty Limited (controlled by the wealthy Gupta family). The report found that the Oakbay campaign run by Bell Pottinger in South Africa “was potentially racially divisive and/or potentially offensive and was created in breach of relevant ethical principles”.  Oakbay has widely been accused of exerting undue influence over South African President Jacob Zuma.

BDO, the administrators appointed, have shored up the UK business by taking steps to prevent staff from taking business away with them and preserving rights against those individuals responsible for the failure of the business. Work for existing clients will continue during the administration, though much of its client base, including a number of high-profile clients such as St James’s Place, Carillion and HSBC, departed in the wake of the release of the Herbert Smith Freehills report.

Action taken by Bell Pottinger executives came too late when it left the Oakbay account in April, and subsequently fired one partner and suspended another, as well as 2 other employees in July as a result of the campaign.

Bell Pottinger was no stranger to controversy, having acted for the Pentagon following the US invasion of Iraq in 2003 (being paid at least $540m over 4 years), Oscar Pistorius, the former Chilean President Augusto Pinochet and Alexander Lukashenko. The Oakbay scandal was a step too far, however, and illustrates the fine line to be trodden between lucrative and high profile accounts, and PR disgrace.

For many in the industry, the cause of Bell Pottinger’s demise was who it chose to represent. Lord Bell’s justification for such ‘challenging’ clients was, interestingly, that everyone had the right to the best PR representation they could afford – not dissimilar to the stance taken by the legal and accounting professions.  The difference here, perhaps, is that PR work is less tightly regulated than the legal or accountancy professions, and so the internal safeguards and processes around risk management that exist in those sectors are not as well-established in the PR industry.

Ultimately, the management of Bell Pottinger did not really know what its account managers and employees were doing, and the Oakbay campaign took an ill-judged path without proper oversight or consideration of the wider implications for the firm (a key factor highlighted by both the Herbert Smith Freehills report and the PRCA).

If you are interested in advice on reputation management and brand protection please contact Joanna Ford at joanna.ford@crippspg.co.uk.