Tobacco Warriors Set Their Sights on the Grocery Store Proxy Advisory Firms Don’t Have to Have the Last Word Samsung: The Decisive Campaign is Yet to Come Five Ways Defense Subcontractors Can Remain Relevant in the Sequestration Era You Are Who You Fund: What Todd Akin Teaches Us About Campaign Contributions www.levick.com/insights

1. EDITION 6
Weekly
August 31, 2012
Tobacco Warriors Set Their Sights on
the Grocery Store
Proxy Advisory Firms Don’t Have to
Have the Last Word
Samsung: The Decisive Campaign is
Yet to Come
Five Ways Defense Subcontractors
Can Remain Relevant in the
Sequestration Era
You Are Who You Fund: What Todd
Akin Teaches Us About Campaign
Contributions

2. Tobacco Warriors Set
What do tobacco and food labels have in cant case to date, a federal court in California
common? Not much, unless you consider has been asked to do just that by halting sales
the successful attorneys who beat the tobac- of ConAgra products ranging from Pam cook-
Their Sights On The
co industry a decade ago for record sums. ing spray to Hunt’s canned tomatoes.
Now these very same plaintiffs’ attorneys--
What is perhaps most troubling in corporate
Grocery
indefatigable and brilliant--have zeroed in
circles is that the fight isn’t limited to the food
on a new frontier: the grocery store aisles.
industry. Just a few weeks ago, Pfizer Con-
They smell liability over what’s labeled Ko-
sumer Healthcare agreed to discontinue claims
sher, all natural, real fruit, or whole grain,
that its Centrum vitamin supplement products
and they believe they have a compelling
support “breast health” and “colon health” af-
case to make.
ter the Center for Science in the Public Interest
This summer, consumer activists have teamed threatened another high-profile lawsuit.
Store
up with these powerful allies to launch an all-
At the same time, other activists are attacking
out attack on product labels they believe to be
the product labeling issue from the other flank.
misleading and tantamount to false advertis-
This November, California voters will consider
ing, if not a crime. General Mills, for instance,
a ballot initiative that would require food
is facing a lawsuit from two California moth-
manufacturers to label products that contain
ers who have the Center for Science in the
ingredients enhanced via biotechnology.
Public Interest in their corner. They want the
“natural” label removed from the company’s All the while, major news outlets are pay-
Nature Valley products because they contain ing a lot of attention to these activist salvos,
processed ingredients. The suit is only one of which have been increasing in frequency over
Richard S. Levick, Esq.
Originally Published on Fastcompany.com 25 cases that, according to the New York Times, the past three to four years and are just now
have been recently filed against companies reaching critical mass. That’s because media
such as ConAgra, PepsiCo, and Heinz, over al- interest is a lynchpin in the activist strategy.
legedly deceptive labels. Consumer groups see high-profile lawsuits and
ballot initiatives as a way to force the issue into
Plaintiffs’ attorney Don Barrett, who won
the public spotlight and compel reforms with-
record settlements from Big Tobacco ten years
out having to rely on government regulators,
ago and is among a host of lawyers seeking
whom they see as too often colluding with big
big paydays over the labeling issue, summed
corporations on labeling issues.
up the activist position in just two sentences,
stating that mislabeling “is a crime” and Traditionally, food and pharmaceutical com-
that “these products should be taken off the panies have worked with the Food and Drug
shelves.” In what amounts to the most signifi Administration (FDA) to reach compromises
on labeling rules that balance the need for ef-
fective marketing with concern for consumer

3. Weekly
2. Speak directly to consumers. Labeling
issues are no longer being settled behind
food and supplement products really are all
they are labeled to be.
closed government doors; they are being debat-
ed under a glaring public spotlight. That means
what used to be a “grasstops” play has evolved
5. Target California. The Golden State is
ground zero for movements such as
these, which often gain momentum among
into a grassroots imperative. The issue is an
friendly audiences out west and then spread
example of how the line between public affairs
across the country. That means companies
and public relations is getting more blurry ev-
need to emphasize California media and geo-
ery day. As such, food and pharmaceutical com-
target their Search Engine Optimization (SEO)
panies need to make the most of social media
and Marketing (SEM) campaigns for the region
connections and optimized Web properties that
as a means to nip the movement in the bud.
allow them to take back control of the conversa-
tion—even as they bypass the an increasingly The fact that more than a dozen high-profile
skeptical traditional media filter. attorneys that used to sue big tobacco are
migrating toward food and pharmaceutical
safety. The process is slow, as evidenced by the dards don’t exist and ‘piling on’ where FDA has 3. Understand that emotions trump science
on issues of health and safety. The FDA
labeling issues speaks volumes about what lies
in store for the food industry. The sooner that
fact that it took nearly a decade to reach final issued a Warning Letter or taken other enforce- seal of approval and the mountain of scientific ev-
target companies—and those that will become
agreement on the ingredient and nutrition ment action.” idence that support companies’ labeling practices
targets in the coming months—begin to con-
labels we now see on our beverage cans, pasta aren’t enough to assuage fear and anxiety where
What all of this means is that the companies in trol this highly threatening conversation, the
sauce jars, cereal boxes, and just about every consumer health and safety are concerned. Emo-
the crosshairs—and those just outside them— better positioned they will be to win in the
other product we see on store shelves. Frus- tion, not logic, is what will win this debate. That
must think differently about labeling practices courtroom, the Court of Public Opinion, and
trated by both the length of the process and the means companies can’t just tell consumers their
and how they communicate with consumers among regulators that are closely monitoring
resulting rules, the activists are now stepping products are healthy and safe; they have to show
on a level above the customary marketing the outcome of what could be an epic legal and
up their activities in the courtroom, voting them with heavily optimized and engaging im-
relationship. They themselves must act like reputational battle. L
booth, blogosphere, and newsroom. ages, video, and stories that drive home the ways
consumer advocates, describing their labeling
their products contribute to healthy lifestyles, Richard S. Levick, Esq., President and CEO of LEVICK,
Further complicating matter is the fact that practices and explaining their ingredients represents countries and companies in the highest-stakes
something that can now be more easily done as
companies don’t always know what’s consti- with greater clarity and crediblity. Specifically, global communications matters—from the Wall Street
Google analytics increasingly optimize for the
tutes compliance. “The FDA hasn’t set clear they must: crisis and the Gulf oil spill to Guantanamo Bay and the
spoken word. Catholic Church.
enforcement standards for claims like ‘All
Natural,’ ‘100 percent Whole Grain,’ or ‘Made
with Real Fruit,’” says Richard Frank, a lead-
1. Accept new levels of transparency.
With new levels of consumer aware-
4. Enlist third party support. In many
cases, the best third-party advocates hail
ness around labeling issues comes a new level
ing food labeling, advertising, inspection, and from the credibility-rich realms of academia,
of responsibility for food and pharmaceutical
safety attorney with Olsson Frank Weeda PC. government, or Washington D.C. think tanks.
manufacturers. If a claim on a label can’t be eas-
“As a result, we are seeing plaintiff class action This is not one of those cases. Consumers need
ily justified or substantiated, it is best not made
attorneys filling in the gap where clear stan- to hear from others among their ranks that
in an environment rife with intensified scrutiny.

4. Weekly
Proxy
Advisory
Firms
Don’t Have to Have
the Last Word
Kathleen Wailes
Originally Published on LEVICK Daily

5. Weekly
Rare is the corporation that has tions follow ISS voting direction, this
not paid close attention to the rec- is no small matter. The consulting firm
ommendations of proxy advisory Semler Brossy reported in May that
firms—those organizations that ad- 52 companies had filed supplemental
vise investors how to vote on proxy proxy materials this year—about dou-
issues. The two principal firms, ble the rate in 2011—and half of that
Institutional Shareholder Services activity stemmed from disputes over
(ISS) and Glass Lewis, wield in- peer groups.
creasing power, with thousands of
Marriott International was a promi-
institutional clients that often fol-
nent example, since ISS suggested that
low their recommendations to vote
Marriott’s compensation rates should
against management’s proposals.
be compared with those of companies
The consequences of these votes can
outside the hospitality industry—com-
affect everything from a company’s
panies such as Penske Automotive
independence to how its executives
Group and Icahn Enterprises. As these
are paid. Increasingly, however, cor-
so-called peers were wildly inappropri-
porations are hitting back and chal-
ate, Marriott won the day. In March,
lenging the unbalanced influence
the Center on Executive Compensation,
these firms wield.
which had called for greater account-
It’s important to know that corpora- ability on the part of proxy advisors,
tions can fight and win when ISS or applauded the establishment of an ISS
Glass Lewis is wrong. Major compa- “Feedback Review Board” that would
nies are taking on the proxy advisory afford issuers and investors the oppor- hard—with the backing of ISS—to gain act assertively when challenged by
duopoly and holding it accountable tunity to rebut ISS positions. The Cen- seats on the AOL Board. It was soundly proxy advisors. Do not hesitate to
for its statements and actions—and ter previously had brought to light the defeated. In a memo posted by the law parry each objection and assertion
such challenges to both the proxy ad- conflicts of interest in firm structures firm Wachtell Lipton, attorney Martin forcefully so that your investors clearly
visory firms’ objectivity and accuracy and inaccuracies in reporting by both Lipton noted that “The victory repre- understand management’s point of
are succeeding. ISS and Glass Lewis. sents a clear and powerful message view. Follow Mr. Lipton’s advice, and
that a well-articulated business strat- spell out your strategy for building
Recently, ISS took heat from com- Regulators also have stepped up their
egy for long-term success will be sup- shareholder value. Don’t wait until
panies regarding its recommenda- attention to proxy advisory firms,
ported by investors notwithstanding ISS or Glass Lewis comes calling—
tions on executive compensation. with new rules expected for the in-
activist generated criticism and get out in front of the issues and you
The companies believe that ISS is dustry this year. Executive pay is not
ISS support.” will succeed. L
choosing inappropriate peer groups the only area in which ISS and Glass
against which to compare pay. Since Lewis wield considerable clout. The All of this leads to the conclusion that Kathleen Wailes, Senior Vice President & Chair, Financial
Communications Practice
25 percent to 35 percent of institu- hedge fund Starboard Value LP tried managements should take heart and

6. Samsung
The Decisive Campaign
Is Yet to Come
Richard S. Levick, Esq.
Originally Published on Forbes.com
Question: what might Samsung have in com- Apple patents, including the rectangular shape
mon with both the Prophet Mohammed and and rounded edges of the iPhone and Apple’s
Chairman Mao? pinch-to-zoom image magnifier. Pending ap-
peal, Samsung must pay $1.05 billion.
Think “retreat.” In 622 AD, Mohammed fled
from Mecca to the city of Medina and, as a On the face of it, it looks like an unequivo-
result of that tactical withdrawal, one of the cal triumph for Apple, which may now have
world’s five great religions was born. Just over enough legal weaponry to discourage all com-
thirteen hundred years later, Mao and his panies from manufacturing products that use
cohorts took flight on the Long March. Only Google’s Android operating system. But there
around 10% of them finished the trek but, is a sub-text here that speaks to the fundamen-
at day’s end, Mao was firmly in control and tal brand identities of both the winner and
would stay that way. loser—so much so that, if played right, Sam-
sung can use its position as courtroom loser
The point is that the most arduous retreat is
to great advantage, emerge as a marketplace
by no means a decisive defeat and can even
winner, and hopefully serve the interests of the
sow the seeds of historic success. True, one can
consumer in the process.
call the August 24 jury verdict against Sam-
sung a defeat in the sense that the company
was found to have willfully infringed multiple

7. Weekly
“ Concern over the impact of the case on innovation was
quickly voiced throughout the technology industry,
which means that Samsung has the enviable advantage
of simply seizing on what people are thinking anyway. ”
It is a definitive precept of “litigation commu- Much of the response to the verdict has, in
nications” that legal outcomes and business fact, put patent law itself on trial, castigating a
outcomes are not necessarily congruent. stiflingly arcane system that has become “dys-
functional,” as the New York Times opined,
Never mind its mighty size and global reach,
adding that, “By one estimate, as many as
Samsung can turn retreat into triumph be-
250,000 patents can be used to claim owner-
cause, like Mohammed and Mao, it has found Yet those specific issues of the case comprise Samsung’s opportunity is all the more signifi-
ship of some technical or design element in
itself cast as an underdog, pitted here against a separate narrative from a broader brand- cant because it is responding to a public senti-
a smartphone. Each patent is potentially a
a company now viewed as a borderline mo- enhancement potential that Samsung has ment that exists independently of any efforts
license to sue.” In such a litigious quagmire,
nopolist. The concomitant message is that already begun to mine. In this corollary com- by the company to foster such sentiment. Con-
there can be no meaningfully determinative
innovation itself depends on such underdogs munications campaign, Samsung plays its cern over the impact of the case on innovation
fact-finding, as even some of our finest mag-
having enough free range to invent and manu- underdog role to the hilt, underscoring its own was quickly voiced throughout the technology
istrates agree. Thus did Judge Richard Posner,
facture products unencumbered by the mere innovativeness, bloodied but not bowed by a industry, which means that Samsung has the
in the recent Apple and Motorola case, deplore
technicalities of patent law. The August 24 jury legal process that top courts like Posner’s have enviable advantage of simply seizing on what
the misuse of patents governing smartphones
verdict, according to this narrative, fed on such themselves decried. people are thinking anyway. There’s no need
and, in no uncertain terms, chastise both sides
technicalities at the expense of the spirit of the for spin. Whatever Samsung has to say on
as he dismissed their respective claims. Given this climate of opinion, an aggressive
law, which is supposed to be all about encour- the subject, consumers will naturally want to
communications campaign can even highlight
aging innovation. To be sure, Samsung may be appealing the hear it, especially since, as the high-authority
specific products. As has been pointed out,
verdict for many years to come, and it can bloggers have duly noted, Samsung was al-
Of course there can be no innovation without some of Samsung’s older products (Galaxy S1
hardly be happy with a decision the jury spent ready well on the way to revamping its mobile
the protections that that law provides, but and S2) were cited in the lawsuit; others were
merely three days to reach. There are further products. The company is thus a credible voice
here the intellectual property regime in effect not (Galaxy S3 and Galaxy Tablet). Connect the
risks ahead as the judge could treble damages in the cause of innovation. L
turned on itself, squelching the very creativity narrative dots: “This jury verdict threatens in-
and grant an injunction to prevent Samsung Richard S. Levick, Esq., President and CEO of LEVICK,
it was designed to safeguard. We take no posi- novation. We who lost the case (and are there-
from selling its wares in the United States. represents countries and companies in the highest-stakes
tion on whether the verdict itself was equitable fore innovative) still produce new products.
Samsung’s communications strategy should global communications matters—from the Wall Street
and reasonable. What’s important from our When you support those products, you support
crisis and the Gulf oil spill to Guantanamo Bay and the
continue to support its specific legal position in
perspective is a general (if not unanimous) per- innovation and yourselves.” Catholic Church.
the case until the last possible appeal is denied.
ception that the decision was neither equitable
nor reasonable.

8. Weekly
Five Ways
Not since the aftermath of World War II has the U.S.
defense industry seen such a precipitous shrinking of
its marketplace. In the years following 9/11, dual wars
in Iraq and Afghanistan and a worldwide effort to curb
Defense Subcontractors Can Remain terrorism essentially amounted to a full employment
contract for those companies that support U.S. foreign
Relevant in the Sequestration Era
policy objectives at home and abroad. Here in 2012,
Richard S. Levick, Esq. those wars aren’t just winding down; they are doing
Originally Published on LEVICK Daily
so at a time when budget deficits have reached crisis
proportions and introduced the very real possibility
of sequestration across the federal government.
Already, we’ve seen proposals put forth by maintain lucrative Pentagon procurement
Congress and White House that would slash deals. All in all, as many as one million jobs
core Department of Defense (DoD) spending have been estimated to be at risk.
by as much as $5.2 billion. Unfortunately, even
How can defense subcontractors compete and
that figure falls well short of the cuts called for
remain relevant as critical national security
in 2011’s Budget Control Act (BCA), which re-
priorities take a back seat to widespread calls
quires Congress to identify $1.2 trillion in fed-
for fiscal restraint?
eral deficit reductions over the next ten years.
If Congress fails to pass a FY2013 budget in line In order to take advantage of the radical
with the BCA (an increasingly likely scenario change in the marketplace, defense subcon-
in this polarized political environment), the tractors need to think differently about their
worst case scenario kicks in as sequestration is communications and marketing initiatives.
triggered and DoD procurement is slashed by Their brands matter more than ever—and as
as $600 billion. such, they need to expand their spheres of
influence by engaging not only policy makers
That’s bad news for defense contractors—and
and primes, but the constituencies these audi-
it’s even worse for the subcontractors at the
ences listen to as well.
mercy of their customers’ ability to win and

9. Weekly
By teaming up with such a politically diverse informational landscape today. Via Search En-
To that end, here are five steps that will and intellectually credible array of potential
allies—and the similarly-aligned unions as
gine Optimization (SEO) and Marketing (SEM)
initiatives, contractors can control the con-
help defense subcontractors demonstrate well—defense subcontractors can help ensure versations surrounding their brands and the
value at time when nothing is more that the jobs message rings out in and beyond
Washington D.C. corridors of power.
issues impacting their industries; elevate the
visibility of their products and services; and
important to their future prospects. 4. Geo-target your efforts.
—as mentioned above—target these outreach
efforts to the local communities with the power
For maximum impact, defense subcontractors to influence defense budget decisions.
1. Articulate your unique selling for instance, maintains its own branded You-
need to aim their communicative efforts at
proposition. Tube channel by which it highlights the ways Of course, contractor social and digital media
two targets; the home districts of the Congres-
its products and services protect and enrich- strategy is more than just optimization. It is
Subcontractors exist because they can do some- sional members who can still be influenced
the lives of brave servicemen and women. reaching out to the blogs that influence defense
thing that primary contractors cannot. What is on defense budget issues; and the districts that
Northrup Grumman’s videos stand out not only industry perceptions. It is engaging the social
it that makes your company stand out and your stand to lose the most economically should
because they are more engaging than the writ- media space to build awareness of, and affin-
services absolutely necessary to achieving mis- sequestration come to pass.
ten word; but because Google and other search ity for, your products and services. And it is a
sion objectives? Are you the top provider
engines are putting more and more emphasis Constituents in these communities need to be strong investment in LinkedIn, which has be-
of cyber-security services? Do you excel in
on pushing the spoken word. reminded of the jobs that defense contracting come the marquee social media venue for B2B
on-the-ground training? Perhaps most impor-
creates; the security threats that still loom at and B2G communicators and marketers today.
tant, have you identified efficiencies that keep Most important, the videos reach audiences on
home and abroad (even though the prior Ad-
costs down? an emotional level—and whether the emotions In the era of sequestration, the defense sub-
ministration’s arguably overplaying of threat
conveyed are pride, security, or even fear, they contractors that take their communications to
When defense subcontractors infuse their issues may slightly diminish those messages’
drive buying decisions in ways that appeals to the next level will not only protect their slice
business-to-business outreach efforts with impact); and the often irreplaceable role that
logic simply can’t. of the Pentagon procurement pie; the will also
specialization messages, they provide primes defense contractors play in keeping America
find themselves well-positioned to dominate
with reason to tell the Pentagon “we need these 3. Recruit influential allies. safe. That means aggressively reaching out to
the market when the budget pendulum
guys on board.” When the same messages are local media in these districts. And it means di-
When the companies that stand to lose money inevitably swings back toward national
disseminated beyond the B2B audience, they recting online optimization efforts toward the
from defense cuts speak out about the dangers security priorities. L
condition procurement officials to agree with local communities that can make a difference
of sequestration, it’s one thing. When respected
that assessment. on Capitol Hill. Richard S. Levick, Esq., President and CEO of LEVICK,
and relatively disinterested third parties do
represents countries and companies in the highest-stakes
2. Tell your story in videos. the same, the message is far more powerful. 5. Dominate social and digital media global communications matters—from the Wall Street
The American Enterprise Institute, the Heri- crisis and the Gulf oil spill to Guantanamo Bay and the
Defense contractors possess a unique commu- And just what are online optimization efforts? Catholic Church.
tage Foundation, and the Center for American
nicative advantage in the Digital Age because They are strategies to ensure that companies’
Progress have all voiced serious concerns about
their work produces such compelling image online properties (websites, social media pro-
what deep cuts to the defense industry would
and video opportunities. Here, subcontractors files, etc.) are highly-ranked by Google and the
mean to the national economy.
can take a valuable cue from the very compa- other search engines that dominate the
nies they need to reach. Northrup Grumman,

10. You Are Who
When we examine the Todd Akin saga from businesses and labor unions must make in the
a crisis communications perspective, the Citizens United era—when contributions are
lessons are as obvious as they are numerous. as unlimited as the transparency with which
Avoid inflammatory messaging. Do what’s they are made.
You Fund:
necessary to keep allies by your side. Under-
Our primary system has devolved into a
stand that sacrifice is often necessary if you
race to the fringes, resulting in general elec-
want to fight another day. And so on.
tion candidates whose views are as far from
As Mr. Akin has seen his party funding run dry the center as any we’ve seen (Todd Akin is far
What Todd Akin Teaches Us About
and his party brethren run for cover (when from the only example, and they exist on
they are not turning against him), many have both sides of the political spectrum). At the
asked about a crisis response. Other than same time, the Citizens United decision has
Campaign Contributions spending what remains in his war chest on
ads expressing his remorse, what else can Mr.
opened the floodgates for big corporations and
small businesses to funnel unlimited sums of
Akin do? Much as those outside his state may money to the candidates that will further their
not like it, the congressman is playing it exactly policy objectives.
Richard S. Levick, Esq.
Originally Published on Fastcompany.com right--staying within Missouri. His opponent,
This dichotomy has created a dynamic by
Senator Claire McCaskill, is barely acknowledg-
which businesses and business leaders don’t
ing the controversy in her campaign because it
have to be as outspoken as Whole Foods CEO
has barely moved Missouri voters. For what-
John Mackey to arouse the ire of those who
ever else Congressman Akin may not know, he
might not agree with them. Their dollars
knows that all politics are local.
speak as loudly as their words—and when the
He also knows that he has long held these candidates they support espouse increasingly
views and has been elected to six terms in extreme views, they risk alienating at least
Congress. Further, it was Missouri Republicans half of the consumers, investors, and other
who chose him in the Senate primary—and if stakeholders who won’t hesitate to find them
he believes they agree with his pro-life stance, guilty by association.
even if they are appalled by the way he articu-
Given that direct donations are a matter of pub-
lated it, there is every reason to also believe
lic record, some companies may believe that
that the grassroots will support him, even if the
Political Action Committees may provide some
“grasstops” will not.
cover. But we’ve already seen examples where
At the end of the day, Mr. Akin still thinks he that hasn’t been the case. With intensified me-
can win. And as such, this is not as much a dia and blogger attention to campaign finance
story about the dos and don’ts of crisis commu- issues, the potential exists for any political
nications as it is about the careful calculations donation to be subjected to a harsh spotlight.

11. Weekly
Citizens United provided business and labor didates), companies not only expand their
with the right to make unlimited political dona- sphere of influence; they prevent any single
tions, but with that right comes new levels of donation from standing out amongst the pack.
responsibility. Gone are the days when political At the same time, they provide themselves with
contributions were made in smoke-filled rooms more allies to provide cover should one of their
that provided a modicum of anonymity. Today, donations be criticized.
everything is transparent. That means corpo-
Questions may arise as to why a business
rate donors can and will be held accountable
entity is playing both sides of the fence; but if
for the comments of their candidates.
they do, companies can fall back on messages
So what is the business community to do? about encouraging lively debate, supporting
Companies’ public policy interests demand that public officials, ensuring all that all sides are
they involve themselves in the political process. heard, and, most important, ensuring that all
But in this polarized environment, how can sides hear the company as well.
they avoid being wedded to candidates whose
As Target, Amway, and others have learned in
views may create embarrassment or worse?
the past—and as more are certain to learn in
Balance is the key. Most companies used to this charged political environment—any politi-
give to both sides as means of hedging their cal donation has the potential to create unfore-
bets. Today, some companies still do—and seen business problems. But when companies
while it may seem counterproductive, that infuse balance into their donation strategies,
THE URGENCY
strategy is one that can help protect donors they help themselves steer clear of the extrem-
from being perceived as wedded to potentially ism permeating today’s political discourse. L
uncomfortable statements or policy positions.
Richard S. Levick, Esq., President and CEO of LEVICK,
OF NOW.
By donating horizontally (to both sides) and represents countries and companies in the highest-stakes
vertically (to local, state, and federal can- global communications matters—from the Wall Street
crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.