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#Envelopegate Is a Giant Headache for Accounting Firm PwC

#Envelopegate is a giant headache for accounting firm PwC. It just had to get the right name in the right envelope, say experts.
89th Annual Academy Awards - Show
Jordan Horowitz holds up the card saying best picture winner 'Moonlight' with actor Warren Beatty and host Jimmy Kimmel. Kimmel had come forward to inform the cast that 'Moonlight' had indeed won, showing the inside of the envelope as proof. 'I knew I would screw this up,' said Kimmel, a first-time host.Kevin Winter / Getty Images

As accounting crises go, it's hardly the Enron scandal that brought down Arthur Andersen, but PricewaterhouseCoopers' big "oops" moment at the Oscars could imperil its standing with the Academy of Motion Picture Arts and Sciences, branding experts say.

"This, fundamentally, isn't that difficult a task. You just had to get the right name in the right envelope and hand it to the right person," said Tim Calkins, a clinical professor of marketing at Northwestern University's Kellogg School of Management.

The Academy released a statement Monday night apologizing for the gaffe that saw Warren Beatty and Faye Dunaway incorrectly award "La La Land" the Best Picture award — instead of "Moonlight."

The Academy said it had been investigating the mistake and would "determine what actions are appropriate going forward."

"For the last 83 years, the Academy has entrusted PwC to handle the critical tabulation process, including the accurate delivery of results," the Academy said in a statement on Medium.

"We are unwaveringly committed to upholding the integrity of the Oscars," it added.

PwC almost would have been better off if it were facing a legitimate scandal in accounting or auditing, Calkins noted.

"An accounting mistake is very bad, but the only people who hear about those usually are business executives and a few investors, [and] that's fundamentally very complicated stuff. ... This is different," he said.

"This is a huge black eye for the firm. You almost couldn't imagine anything worse in terms of branding," said Calkins, since the error was for the most anticipated award of the entire evening.

Related: Oscars Screwup Gives 'Moonlight's' Best Picture Award to 'La La Land'

The problem is that unlike with an accounting error, there really isn't a fix for this bungling, so salvaging the brand reputation depends on swift action and owning the mistake.

"They should be out in front of this in a big way. Their executives should be conducting media interviews throughout the week to lessen damage to their brand," said Mark Serrano, chief executive of ProActive Communications.

PwC issued an apology via Twitter in the overnight hours Sunday and was promptly savaged for its use of passive voice, saying the mistake "was made" after the presenters "had been given" the wrong envelope.

It wasn't until late Monday night that the firm took full responsibility, issuing a new tweet that directly blamed PwC partner Brian Cullinan for handing a backup envelope for a different category to Beatty and Dunaway — and for not following "protocols for correcting" the error.

Not Funny

Comparisons were drawn to comedian Steve Harvey's crowning the incorrect Miss Universe in 2015, but Calkins said this incident poses a bigger challenge for PwC to get past.

"That's very different because Steve Harvey can respond and make light of it... I don't think PwC can joke about this one. The problem is, PwC is not a funny brand," he said, leaving sincerity and humility as their best option.

Related: Steve Harvey Names Wrong Miss Universe Winner

"The important thing is they rectified it immediately and publicly," Scott MacDonald, Professor of Cinema Studies at Hamilton College, said via email.

That's a good start, experts say, but the equally important next step in image rehabilitation is for PwC to reassure everyone from corporate clients to ordinary Americans watching the Oscars on their couches that this kind of blooper will never happen again.

"Transparency into how it happened can help," said V. Kumar, a professor at the J. Mack Robinson College of Business at Georgia State University. "They [have to] come across as knowing what really happened and how to fix this in the future," he said, if the company wants to regain the Academy's — and the public's — trust.

Celebrity Worship

Upping the awkward quotient was the fact that PwC had been presenting the two executives in charge of the awards tabulation and distribution — Brian Cullinan and Martha Ruiz — in a manner that made them into Oscars-night personalities in their own right.

"A lot of times there'll be a kind of reversal of roles where sometimes celebrities will come over to us and ask if they can get their picture taken with us," Cullinan told the U.K.-based Financial News in a February interview.

PHOTOS: Oscars Best Picture Fiasco Unfolds Onstage at Academy Awards

The accounting firm would be better served to put its resources towards rebuilding public trust going forward, Kumar suggested.

The fact that PwC isn't a household name also is a double-edged sword. "I don't think this will ultimately hurt them with their vast number of corporate accounting clients," Serrano said. Although the Oscars are watched by TV audiences the world over, Serrano said PwC faced the biggest reputational risk in the United States.

Final Curtain?

The incident, however, could put the Academy's long-standing relationship with PwC in play.

"If I was their competition, I would be pitching people at the Academy today to get a chance at that contract," Serrano said.

Although some suggested that the infraction was severe enough that PwC might lose the academy as a client, others opined that they would be spared, given the firm's 83-year track record with the awards ceremony.

The fates of Cullian and Ruiz are another story, if the company decides that the incident is enough of a black eye that keeping the pair on is a liability.

"Someone really blew it. PwC is either going to have to fire those CPAs or reform their entire approach to security around the Oscar picks, or both, as a gesture to renew trust in their brand," Serrano predicted.

Related: How Did the 'Moonlight' Mixup Happen?

"I think it's very important for those two partners to step forward and explain what happened," Calkins said. "If you're PwC, you want to highlight that this is an isolated incident," he said. Dismissing the two, or removing them from their joint role as guardians of the award results, would send the public a clear signal.

Something else that might have to be sacrificed in the aftermath is the notorious atmosphere of secrecy that surrounds the Academy voting and tabulation proceedings.

"Even though it's supposed to be a secretive process, I think they're going to have to lift the veil a bit and provide an explanation," said Marcia Horowitz, managing director at public relations firm Rubenstein. "There's going to have to be some explanation for what happened."