Reputation Management Rule #1: When something bad—large or small—comes to light relating to your organization, alert the media, put it up on your website, put it out on Twitter and all the other social media; disclose it before an outsider hits you with it. Do not listen to your legal department; do not worry about how it happened, or who is at fault; instantly move to make it right. Do the right thing!

A second iconic organization fell victim to what happens when reputation gets shoved to the back of the bus, or in this case the backseat of perhaps the most admired automobile company in the world, Toyota.

Johnson & Johnson led the dumb response parade. They ignored a foul odor emanating from J&J consumer products ranging from Tylenol to Rolaids and St. Joseph Aspirin. After delaying a recall for a ridiculously long period of time, they came out with the lamest excuse ever. Somehow, a preservative chemical banned in the United States had found its way into their wooden shipping pallets and then through multiple layers of cardboard and plastic and into their products. Even if true, so what! If your products stink, recall them, think of the customer. At least no one seems to have been seriously harmed by the stinky J&J pills. Upset tummies and other intestinal problems seem to be the worst of it.

Not so in Toyota's case. It appears that an uncontrolled acceleration problem resulted in several serious automobile accidents. If the reports are true, people were injured and killed. Back in 2002, when the problem first surfaced, Toyota said it was driver error. More recently, they claimed it was connected to an improperly installed floor mat. It turns out that while they were talking driver error and floor mats, they suspected all along that they had problems with the electronic throttle control system used in a wide range of Toyota models. Now they have been forced to recall millions of cars, shutter factories and advise their dealers to stop selling some of their most popular models.

Let's go back to Rule #1. What if Toyota had jumped on this problem right away? Electronic throttle controls were probably not that widely in use six or seven years ago. It would have cost them a lot of money and thrown a monkey wrench into a promising technology. But it would have preserved their reputation and the trust of their worldwide customer base.

Instead, they now face perhaps the most costly recall in history. One analyst in Japan estimates that this issue will take over—wait for it— "a billion dollars a month off Toyota's bottom line." That, however, is peanuts in comparison to the long-term loss of reputation and trust that Toyota will suffer.

It's crushing to have two great companies stumble; they will pay the price for many years to come. Hopefully, others out there will observe and learn.

Reach W. T. "Bill" McKibben at WT@McKibben.com. His website is www.Ethics-Guru.com, and his blog is http://ethics-central.blogspot.com/.