Smart CEOs Should Be Begging for Stricter Regulations

John Gilfeather knows more about corporate reputation than most, having spent a lifetime in the reputation research business, so when he says "I have never seen this level of vitriol aimed at larger corporations" it's time for corporate communicators to pay attention.

Gilfeather's latest survey of corporate reputation turns up the finding that most Americans now think most corporations are "idiots"--a catch-all term they use to describe a pattern of behavior that combines arrogance, greed and secrecy.

Meanwhile, another recent survey by economists at the University of Chicago and Northwestern University found that just 26 percent of Americans say they trust the American financial system, and 45 percent think the stock market will drop by 30 percent or more in the next 12 months.

When trust is so low, there are real consequences for financial companies, and the Chicago survey provides plenty of guidance about what needs to be done to restore confidence: 59 percent of respondents want stronger regulation of the financial sector.

And yet most companies continue to lobby intensely against stronger regulation. Most on Wall Street seem to consider the toothless regulatory package approved by Congress two weeks ago too much. One CEO complained of "an increasingly hostile environment for investment and job creation" and lambasted an administration that is "reaching into every sector of American life" and "making it harder to raise capital and create new businesses."

A New York Times op-ed by investment banker and Clinton administration veteran Roger Altman makes the case that President Obama has a pretty good record when it comes to business (while arguing that the administration could do more).

But the reality is that most of the wounds that have caused American business to hemorrhage trust are entirely self-inflicted. And if smart CEOs want to heal those wounds, rather than pass the buck, they should be begging for even stricter government oversight.

Even in the Digital Age, Speed Is Not Everything

It is, of course, conventional wisdom that in the digital age, it's even more important to move quickly when crisis strikes. But I'd suggest that the opposite is true: because things move so fast, it's important for organizations to make sure they are not being stampeded into hasty but ill-conceived decisions based on transient events.

A perfect example occurred last week, when a video surfaced at a conservative website purporting to show Department of Agriculture official Shirley Sherrod confessing that she gave preferential treatment to black farmers. Agriculture Secretary Tom Vilsack, apparently under pressure from a hypersensitive White House, responded quickly and forced Sherrod to resign.

The next day, White House deputy chief of staff Jim Messina reportedly praised the decision, telling colleagues: "We could have waited all day, we could have had a media circus--but we took decisive action, and it's a good example of how to respond in this atmosphere."

Or it would have been, had the video not been exposed as a total distortion of what Sherrod actually said. By the end of the week, the White House and the Department of Agriculture were furiously back-pedaling, but the damage had been done: by panicking as it did, the administration was made to look craven and weak.

Sometimes it's worth weathering an initial storm of criticism--however uncomfortable it may be for a few hours or even a few days--rather than to blunder badly because you couldn't wait for all the facts.

Quick Hits



  • Attempting to explain the disappointing results at Goldman Sachs during the second quarter, chief financial officer David Viniar made the extraordinary assertion that the company's performance is "not driven by management", but by customers and blamed "very, very largely reduced client activity" for the 83 percent fall in the bank's profits. If he's right, and management doesn't drive the company's performance, can we look forward to an explanation of why members of the management team are earning seven or eight figures? Don't hold your breath.

  • A brilliant FT feature looks at the response for current and former BP employees to the company's shattered reputation and says its interviews "reveal a company where many are fearful about jobs and savings, dismayed at their employer's part in another terrible accident, and furious at management's handling of the crisis." Says one interviewee: "The question [employees] are asking is: am I working for the company I thought I was working for, with the right values?" That's pretty much what the rest of us are asking too, and it seems as though BP has not provided the answers internally any better than it has externally.

  • I'm not sure I agree with the British government's austerity policy--at a time when the economy still seems to need stimulating--but I understand it. What I don't understand is the urge to cut health education initiatives like this one encouraging kids to drink more milk. It might save a few thousand pounds now, but it's the kind of campaign that pays for itself in the long term, because it results in healthier kids. Shutting it down looks like an ostentatious "we're-cutting-back" gesture rather than a well thought-out policy.

  • A Washington Post article makes the case that "a veritable deluge of crises since 2008 has shown that crisis PR is no longer up to the job," and concludes: "The lesson now for companies that screw up is that you really have no chance: The currents are against you from the get-go. The courts of Twitter and online video sites, along with Facebook groups that deplore the transgressions, will overwhelm even the most elaborate crisis battle plan." It's nonsense, of course: the principles of good crisis PR haven't changed: it's just that bad crisis PR is discovered much more swiftly and punished much more severely.

  • Automotive World has an interesting interview with Mary Henige, who directs social and digital communications for General Motors. "The social web is hungry for content. If we are excellent content providers, then we are adding value for our consumers."

  • When Political Reporting Ignores Policy

    Clive Crook, who blogs for The Atlantic and writes a column for The Financial Times is one of the most intelligent--and least partisan--observers of the American political scene. Which makes his latest FT column an even bigger disappointment.

    Under the headline "Obama Has Angered the Centre and the Left," Crooks demonstrates just what is wrong with so much of political journalism, viewing every policy decision through the prism of what it means in electoral terms. Politicians themselves can be forgiven for seeing politics primarily as a horse race; surely it is the job of responsible journalists to remind them that what really matters is whether the policies they enact are effective and how they impact the lives of real people.

    Crook argues that "If Mr Obama had followed the advice of the party's progressive wing, he would have killed his administration's electoral prospects--and his own hopes of a second term--stone dead."

    He doesn't actually spell out why he believes that statement to be true, but reading the rest of the column the logical conclusion is that Crook believes embracing the policies of the left would have further alienated "centrist" Americans. After all, the president has compromised with moderates in his own and the opposition party and still been branded a "socialist" by the far right.

    But as Crook himself acknowledges, the dismal prospects of the Democrats in this year's mid-term elections are largely the result of a lousy economy. And his column doesn't begin to address the economic implications of Obama's decision to reject the policies of the left.

    That's unfortunate, because it leads Crook to ignore the fact that the kind of stimulus package urged by left-leaning Democrats--economist and New York Times columnist Paul Krugman is the most visible proponent of such policies--would almost certainly have resulted in a much more robust economic recovery than the one we are seeing right now. It was an approach focused on creating jobs rather than appeasing big business or addressing exaggerated concern over future deficits.

    The weak stimulus package that the Obama administation enacted worked, but only weakly. The jobs it created barely made up for the jobs being shed by state governments and the private sector.

    A strong stimulus package would almost certainly have worked better, on policy terms at least, since it would have put more Americans back to work more quickly. Regardless of what it did to Mr. Obama's election chances, it would have been a better policy.

    But what about those election chances: does Clive Crook really believe that the Democrats' prospects would be worse if unemployment today stood at 7 or 8 percent today rather than 10 percent?

    Steve Jobs Should NOT Have a Blog

    At the Online Social Media blog, Debbie Turner makes an argument I have also heard from several public relations experts, that "Steve Jobs Should Blog."

    No, he shouldn't. In fact, if there's one American chief executive whose PR people should keep him far away from social media, it's Jobs.

    Turner herself acknowledges that "Jobs can appear somewhat aloof" and that "the problem with the way Jobs handled the situation is that it looked as though Apple didn't actually care about customers complaints."

    Slate's Farhood Manjoo makes the case in more detail in a column about the Apple press conference at which Jobs managed to neither acknowledge nor apologize for the reception problems experienced by some iPhone 4 users: "I just wish Jobs could have handled this mini-crisis in a classier way. He could have admitted a problem, offered a fix.... Instead, he sounded wounded and paranoid, as if we were all being ungrateful for not recognizing Apple's contributions to the world."

    Look, you only need to study Apple's advertising ("I'm a Mac...") to understand that the company's dominant personality trait is contempt for others. Contempt for PC users defines the company's branding; contempt for its own customers--as soon as they demonstrate any independent critical thinking about the products the company sells--came through in this week's press conference.

    Give Jobs his own blog, and that contempt would permeate every post. Sooner or later, even the company's most ardent fans would get the hint.

    Number One Rule of CSR: "Do No Harm"

    In an otherwise intelligent analysis of social responsibility--he points out that business leaders have almost unanimously rejected the Freidmanesque view and says the new emphasis on sustainability has the potential to "produce the happy marriage between profitability and a clearer conscience that champions of corporate responsibility have long sought"--FT columnist Michael Skapinker makes one bizarre observation.

    Toward the end of his column, he argues that "companies committed both to traditional corporate responsibility and sustainability can still fail." I don't deny that its possible for such companies to fail; anything is possible. The bizarre part is that Skapinker tries to justify his assertion by pointing to Enron and BP.

    Enron, he points out "was a benefactor to its home city of Houston," while BP "promised a sustainable future beyond carbon."

    It requires a pretty narrow definition of corporate responsibility to apply the term to a company that made a few charitable donations while committing fraud on a massive scale, and a pretty superficial definition of sustainability to a company that promised investment in renewables while lobbying against environmental regulation and systematically failing to adhere to any limited regulations that remained in place.

    Neither Enron nor BP provides any evidence that a genuine commitment to responsibility or sustainability carries any risk. Rather, they demonstrate that business observers and reporters are easily fooled by superficial commitments unmatched by any genuine change in behavior, and that such cosmetic approaches to CSR are almost always doomed to failure. (And further, that a company that overstates its record in this area will be more severely punished than a company that makes more modest claims.)

    The most significant guiding principle of CSR should be the same as the guiding principle of medicine: "First, do no harm." Neither Enron nor BP seemed to understand this.

    A Question of Personal Principle, Not Industry Ethics

    In this week's newsletter, Arun Sudhaman reports on the controversy over Washington, D.C.-based Fenton Communications--known for its representation of liberal causes--going to work for a Qatari group that is trying to turn public opinion against the Israeli blockade of Gaza. Fenton has come under fire from former Counselor's Academy chair Bruce Rubin, who believes its decision to work for a group that "portrays the U.S. or any of its close allies as an enemy."

    We'll get to the specifics of this case in a second, but first it's important to look at the general principle here, since it comes up fairly frequently in our business.

    Lawyers justify their work for unpopular causes, companies and individuals by pointing out that everyone is entitled to legal representation. As Rubin rightly points out, there is no similar entitlement to public relations counsel. PR people are under no professional obligation to represent causes they find abhorrent. But they are entitled to work for any cause, company or individual they choose. This seems to me to be a matter of personal conscience.)

    The sole exception, I believe, would be when the State Department or some equivalent, raised an official objection--and even then I would argue that if a PR person believes a cause is just, he or she should be prepared to challenge the State Department view.

    As I may have mentioned before, I am pretty much a First Amendment fundamentalist. There are few if any issues that do not benefit from a full and frank discussion and robust public debate. If PR people believe anything, they should believe that. It's the core principle of the profession.

    Furthermore, I believe the core ethical issues of our profession are defined by what we do, not who we do it for.

    It is quite possible to do ethical public relations for clients whose ethics are questionable. Rubin, for example, asks whether it would be right to do PR for a "Charles Manson-type mass murderer." It seems to me that if this Manson type wished to apologize sincerely to victims, make some kind of restitution, or educate others to seek mental help when they start hearing voices, then a PR person would be well within his or her rights to take the account.

    Similarly, it is quite possible to do unethical PR for a client with the noblest motives. Lying is wrong, whether it is done on behalf of a giant oil company or an environmental group.

    In the case of this Qatari group, there is no allegation that Fenton has done or said anything dishonest.

    Indeed, the issue in question seems to me to be an almost classical example of one on which reasonable people can disagree. The United Nations, for example, has called for an end to the Gaza blockade. Would working for the UN be "unethical"?

    It's important to differentiate between attacks on the U.S., or one of its allies; and attacks on a specific policy of the U.S. and its allies. Companies hire PR firms to attack government policies (environmental regulation, trade policy and more) all the time. If a group wanted to hire a PR firm to oppose the invasion of Iraq or the war in Afghanistan, it should be entitled to do so, and any PR person who agrees with that view should feel free to offer professional counsel to such a group.

    Bruce Rubin has a right to criticize anyone who advocates a position with which he disagrees. And Fenton Communications has just as much right to argue a cause it believes to be a just one, to try to stimulate and influence public debate around that cause. That's what public relations does, and should continue to do.

    Public Affairs People Can Improve Transparency

    The media's predictable objections notwithstanding, I don't see anything egregiously wrong with the new Department of Defense guidelines for interaction with the press, issued in the wake of the series of massive indiscretions on the part of General Stanley McChrystal and his staff that led to an extremely unflattering Rolling Stone article and the General's subsequent dismissal from his role at the U.S. commander in Afghanistan.

    Reporters expressed discomfort with Defense Secretary Robert Gates insistence that the Pentagon's public affairs unit be notified "prior to any interviews or any other means of media and public engagement with possible national or international implications." At a press conference after Gates' memo was made public, reporters made the case that almost every story they worked on had "national or international implications" and suggested that the new guidelines contradicted the Obama administration's pledge to be more transparent than its predecessors.

    There is no reason why the involvement of Defense Department public affairs professionals should mean less transparency. In fact, there is no reason it should not mean greater transparency. Talking to those who have experience working with the military, the general feeling seems to be that PR people are more often advocating for better communication. Of course, that advocacy stops short of the kind of colorful, entertaining indiscretion that McChrystal's staff engaged in, the kind of indiscretion that destroys careers and drives magazine sales.

    But Pentagon spokesman Geoff Morrell told reporters: "The bottom line is if we do this properly you will hardly notice the impact." And Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, makes it clear that the military brass understands the importance of good media relations: ""We need to tell our story. It needs to be done well. It needs to be told smartly. We need to learn the right lessons, not the wrong ones."

    The new policy--if it is implemented responsibly and with common sense--seems like an entirely reasonable response to a public relations faux pas.

    Bias and "the Appearance of Bias"

    Still wondering why the mainstream media are having difficulty adapting to the social media world? Check out a thoroughly confused column from the Washington Post ombudsman Andrew Alexander, in the wake of the Post's precipitous decision to fire a columnist because his political views became known.

    On the one hand, Alexander says, the solution to any confusion about reporters who also write opinion pieces, or write opinionated blogs is to be "completely transparent about what people do . . . and completely transparent about where people stand."

    On the other hand, those in traditional reporting positions should remain "nonpartisan, unbiased and free from slant in their presentation in the paper and in any other public forum. There should be no appearance of conflict."

    Am I the only one who thinks that those two statements are contradictory? In the first, Alexander is advocating complete transparency, a principle I support (though I'm not sure how practice complete transparency is. In the second, however, he is arguing for complete opacity: under no circumstances should readers know the political views of people in "traditional reporting positions."

    Unless those people have no political views--something that's virtually inconceivable--that surely requires hiding those views from readers? Surely any attempt to eliminate the "appearance of conflict" must necessarily involve either concealing the real views of reporters or pretending they don't have any? That's the very opposite of transparency.

    Perhaps it's time for the Post and other mainstream media outlets to start treating readers like adults--rather than patronizing them, as the headline to this column does--and to acknowledge that reporters have political views just like everyone else. Preventing a reporter from attending an environmental rally, for example, doesn't make that reporter any less committed to the cause of environmentalism; it merely obfuscates the truth.

    Let's be transparent about that--and then judge the quality of a reporter's work on its merits, rather than on how well he or she conceals his true beliefs.

    PR Needs Its Own Cannes

    I mentioned last week that I was surprised that so many public relations people were enthusiastic about participating in the annual ad industry awards event at Cannes. For one thing, the event is opening itself up to PR people (not coincidentally) at a time when advertising is losing its central role in the marketing mix; for another, it is unlikely, because of its focus on marketing, ever to represent the breadth of what public relations people can bring to the corporate realm.

    It would disingenuous, however, to ignore the one very obvious benefit of attending the event: the ability to mix and mingle with marketing thought leaders who represent--and help choose PR firms for--some of the most significant global brands. (Of course that benefit does not extend to the awards competition; Cannes does not allow clients to serve on the awards jury.)

    But if PR people want a global forum at which they can mingle with clients, perhaps it's time to consider whether it might not be better to create their own than to piggyback on an existing event, the focus of which is far from conducive to the particular strengths of this industry. The time--with social media creating a larger and more central role for the PR discipline--could hardly be more propitious.

    With its focus on advertising--and on creativity, as defined by advertising people, it is unlikely that Cannes will ever focus on the topics that are of most pressing concern to public relations people (and ought to be equally high on the agenda of marketing folks). Among them, off the top of my head:
    • The growing convergence of brand marketing and corporate reputation;
    • The need to harness employees as brand ambassadors;
    • The need to protect brands from and during crisis;
    • The use of social media to build consumer relationships rather than as another communication channel;
    • The need to develop new metrics that emphasize engagement and advocacy over reach and frequency;

    In other words, it's not difficult to imagine an agenda that addresses the most significant issues facing the PR and marketing communities, and would attract the most important corporate communications professionals as well as brand marketers.

    The question is whether the PR industry has the confidence--at this time of unprecedented opportunity--to create such an event, or whether it will continue to ride the coat-tails of an ever-weaker ad industry.

    The large agencies--they are the ones with the money and the motivation to make something like this happen, partnering with groups like the Arthur W. Page Society and the European Association of Communications Directors--need to ask themselves two questions: "If not us, who? If not now, when?"

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