Sumantra Ghoshal is a professor of strategy and international management at London Business School. Last week an article that he wrote was published in the Financial Times. It was titled Business schools share the blame for Enron (subscription required). It was an interesting critique of business education, and it occurred to me that his conclusion could form the basis of an excellent final exam question for MBA students:

“By incorporating negative and highly pessimistic assumptions about people and institutions, pseudo-scientific theories of management have done much to reinforce, if not create, pathological behaviour on the part of managers and companies.”

Discuss.

Several years ago the Economist published an interesting series of articles about crisis management. More recently the magazine suggested that it was important for any business in a crisis “to act fast, tell the whole truth and look as if you have nothing to hide” (see Bad for you). So it’s been interesting to watch the self-imposed crisis at the Franklin Mint that has been brewing since last November and developed rapidly during the last 72 hours.

The Franklin Mint, which sells “collectibles” including several Princess Diana dolls, is suing the Diana, Princess of Wales Memorial Fund for “malicious prosecution”, accusing the charity of having “acted in bad faith” when it initially sued the Franklin Mint for the rights to Princess Diana’s image in the late 1990s. The charity lost that case and was required to pay all the legal fees. The Franklin Mint subsequently decided it wanted revenge, and filed suit last November. This week the charity froze all grants to its beneficiaries citing the Franklin Mint’s lawsuit as the reason.

The initial reaction in the press was that the Princess of Wales Memorial Fund is in crisis, but in fact I think the Franklin Mint has more to lose from this unnecessary and wasteful dispute. The charity and its beneficiaries may suffer in the short-term, particularly if the Franklin Mint wins its case, but it’s unlikely that they will be affected permanently. The social problems that they address combined with the public’s collective memory of Princess Diana, will ensure that her favourite causes continue to receive help.

The Franklin Mint on the other hand is playing with fire. The media have cast them as the aggressor in this story, with Princess Diana’s favourite causes as the victims. Can you imagine the dilemma some of the Franklin Mint’s customers now face? Do they boycott Diana dolls in order to support her memorial fund, or do they continue to feed their collecting habit but possibly harm her charitable legacy in the process? That’s a tough call; either way the doll collectors can’t help but feel unhappy, and they may well hold the Franklin Mint responsible.

What was the Franklin Mint’s management thinking by taking on the ghost of a martyred royal celebrity? How could they possibly hope to win?

For more on this story see:

• the Evening Standard for the gossipy background from last November in The ‘vultures’ threatening the Diana fund;
• The New York Times attempts to explain the legal history in Diana Charity Halts Grants, Citing Lawsuit;
• the Philadelphia Daily News provides the local angle in Franklin Mint’s Diana flap.

The irony is that the Franklin Mint is suing for “malicious prosecution”, but what other kind is there? Can you sue someone out of “good faith”?

Yet another scandal hits the unregulated art & antiques industry: Sotheby’s faces probe on sales of temple loot. How long does it take for a company to reform its values?