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PR Communication Memo Essay

Lancaster, PA, June 13, 2013 – JHW Corporation (NYSE: JHW), a leader in textiles, announced today that John Doe, chief financial officer, has resigned unexpectedly while working with the Securities and Exchange Commission. SEC is currently investigating the accounting practices of JHW and recently discovered discrepancies in the company’s revenue recognition. James H. Whoever, president and CEO of JHW, stated he was surprised to learn of the discrepancies discovered by SEC in the company’s accounting practices and regrets that internal controls were not reviewed sooner. At this time it is unknown if John Doe’s resignation is connected to this incident; however, the company is committed to finding a replacement Chief Financial Officer at the conclusion of the investigation. Until further notice the Vice President of Finance will report directly to the CEO.

Additionally, JHW will delay the release of its earnings for the second quarter, pending the conclusion of the investigation relating to accounting practices of revenue recognition. The investigation is overseen under the direction of the Securities and Exchange Commission with the full cooperation of JHW’s internal audit committee and board of directors. As a result of the information discovered the company has broadened the extent of its investigation to include all internal controls for financial reporting. The issues of concern in the investigation primarily involve the proper recognition of revenue. The company anticipates completion of the investigation by the second week in July 2013, and will remedy any discrepancies identified by SEC for the fiscal years affected within the time frame established by SEC.

Because of the recent staff changes, and with the help of SEC, we are looking into the situation to resolve it as soon as possible. We believe these staff changes are for the better, and we will continue to strive to reach company goals and protect our investor’s interests. No further information will be supplied on the status of the investigation or company operations until earnings have been reported.

John Doe, Chief Financial Officer, resigned unexpectedly when the Securities and Exchange Commission (SEC) requested documents that led to the discovery of issues concerning revenue recognition during its investigation of the company’s accounting practices. A press release has been written to inform the public of the CFO’s resignation and how the company is handling this crisis. At this time I want to inform you of the company’s legal requirements, explain the value of public communication, and the ethical concerns during this crisis.

Legal Requirements

As a publicly traded company we have a legal obligation to inform the public of the resignation of the company CFO. It is critical that we handle the CFO’s resignation in a manner that minimizes any long-term effects that could cause lasting damage. Additionally, to avoid further repercussions the company should consider the following legal requirements when handling this situation. Legal counsel should be sought to assist the company during this time to ensure nothing is overlooked, avoid future consequences, and breach of confidentiality. * Disclose any information considered material for immediate release to the public * Company operation filings including Form 10-K and 10-Q; file Form 12b-25 to disclose inability to file report in a timely manner and the reason

* File an 8-K form for the recent changes

* Detailed disclosure on financial condition, including financial statements

* Inform shareholders of potential misstatements on annual reports and rectify any inaccuracies; possible litigation and legal consequences as a result of crisis

* Ensure confidential information is secure, including CFO’s access to privileged information Public Communication

At this time all communications should be directed through the appointment of one spokesperson to ensure facts are consistent and focused on the relevant issues, without breaching confidentiality. Also we need to provide assurance that the company is taking the necessary steps to correct the situation and explain what plan we have to prevent this from recurring. It is imperative that we cooperate with the media to show control over the situation to avoid further rumors of inappropriate behavior. Public communication at this time is invaluable when expressing the company’s concerns and reassuring the stockholders and the public to retain their confidence in the company and its leadership.

* The press release should calm the public by informing them of facts about the situation. The company should respond professionally and in a manner that reflects best practices in managing the situation. To maintain integrity, responses need to be honest and transparent to avoid negative impacts. Management should be proactive by preparing for other attacks that may arise as a result of its response. Address negative comments in a positive way to show the company is listening. Management should consult internal policies and procedures on the proper way to handle this situation.

* Ethical Considerations

Responsible decision making is difficult when ethics tips the balance between calming stakeholders and providing information to SEC. To avoid further concerns in regard to this crisis, the company will provide any information requested by SEC that we are legally obligated to furnish. However, frequent contact and consultation with the “board of directors should be sought to make sure the organization stays focused on objectives in an ethical, legal, and socially acceptable manner” (Cengage, 2006, p. 3) while providing required information to SEC.


It is my recommendation that a successor be appointed as soon as possible, and a meeting should be called with chief investors to smooth any marketplace nerves. Additionally, it is imperative the company develops an action plan to handle the situation in an orderly and professional manner. Staying proactive, calm, and truthful will help reaffirm the integrity of the company and provide reassurance to company stakeholders while impeding further rumors. The press release needs to be delivered to the public and to the NYSE informing them of delayed filings and recent changes to avoid future ramifications, including delisting. The company accounting staff should be available to help answer questions internally as SEC’s investigation continues. I will notify you of any information and developments as they occur. If you have any questions or concerns in this matter, please do not hesitate to contact me.

Cengage. (2006). Stakeholder Relationships, Social Responsibility, and Corporate Governance. Retrieved from http://cengagesites.com/academic/assets/sites/316138_ch02.pdf e-releases. (2013). Press Release Sample. Retrieved from http://www.ereleases.com/press-release-sample.html

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