I recently sat down with WSJ author Ben DiPietro to discuss the ongoing crisis around paints and coatings manufacturer PPG.
Paints and coatings maker PPG Industries Inc. launched an internal investigation in April into accounting irregularities, delayed the filing of its quarterly earnings report for the period ended March 31 and fired its controller, Mark Kelly. The company said earlier this month it had evidence that some of its employees had made improper accounting entries at the direction of the company’s now-former controller. As a result, PPG said its financial reports for 2017 “should no longer be relied upon.”
PPG announced its internal investigation in its April 19 earnings report, then issued a statement on May 10 outlining the steps its taken after receiving information through its internal reporting system about the irregularities. PPG said the audit committee of its board is leading an investigation that involves assistance from outside counsel. “The investigation has found evidence that the improper accounting entries were made by certain employees at the direction of the Company’s former vice president and controller,” the company said. PPG also shared with WSJ two letters sent internally to its employees.
Adele Cehrs, chief executive, Epic Real Time Marketing: “Based on initial evidence PPG should have fired Mr. Kelly immediately in late April. His discrepancy was either fraudulent or incompetent behavior, [both of] which are fireable offenses. By placing him on leave PPG seemed to be jeopardizing the company’s values and reputation.
“PPG needed to be more decisive in its termination of a key employee; as a result of its hesitancy, the company put its reputation and financial stability at risk. By saying its financial statements “should no longer be relied upon,” PPG’s actions made them seem like they were unfit to manage the crisis.
“While the company’s response to its employees was effective at taking some responsibility, the approach appeared more like an excuse rather than an effort to take accountability. There was a textbook crisis communication misstep with this phrasing: ‘We hold ourselves to a very high standard of business and professional conduct…’ The situation proves otherwise.”