AIG CEO’s Comment Goes (Deep) South

 AIG CEOs Comment Goes (Deep) South

THE PR VERDICT: “F” (Full Fiasco) for AIG’s Robert Benmosche.

Five years ago, when AIG was rescued by the US government, the insurer became the poster child for everything that had gone wrong in the financial services industry – inflated balance sheets, insufficient controls, and corruptive bonuses. The company then embarked on the steep path to restore its financial health and reputation. Led by Robert Benmosche, appointed CEO in 2009, AIG underwent a drastic turnaround, with uncompromising cuts to its balance sheet and work force. As a result, the US government was able to exit its investment with a profit of $22.7 billion and, in August this year, the company announced higher profits as well as its first dividend payment and share buy-back since 2008.

All’s well that ends well? Not quite. Benmosche managed to turn his interview with The Wall Street Journal from a PR opportunity to a disaster by comparing the 2009 outrage over AIG bonuses to racism in the Deep South. The uproar, he said, “was intended to stir public anger, to get everybody out there with the pitchforks and their hangman nooses, and all that – sort of like what we did in the Deep South…and I think it was just as bad and just as wrong.”

AIG’s staff undoubtedly worked hard; without them, the government bailout would have ended in tears for shareholders and tax payers alike. Nevertheless, the public cannot be expected to offer sympathy or gratitude. If Benmosche wanted to make employees feel better, he achieved the opposite. After a long crisis, all they wanted was to get on with their jobs, without battling constant controversy around their employer. Hard luck.

THE PR VERDICT: “F” (Full Fiasco) for AIG’s Robert Benmosche.

THE PR TAKEAWAY: Some fights can never be won. Executive interviews have some absolute “don’ts.” The most important is to never – ever! – compare anything that happened in an industry or in a company to a historic event rife with human suffering. The comparison will always sound deluded and bring out debate that widens the issue not narrows it. Compensation is also better left untouched, especially if it has already been under fire in the past. Executive pay was a PR battle AIG lost years ago. When coming back from a crisis, remember no headline is always preferable over a bad one.

For New Fed Chairman, the Message is the Medium

 For New Fed Chairman, the Message is the Medium

THE PR VERDICT: “B” (Good Show) to Janet Yellen (right; with Larry Summers) for her methodical approach and realistic expectations.

As President Obama prepares to name a new Fed Chairman, he may be well advised to look closely at the communications skills of the candidates. Ben Bernanke dragged the Fed into the modern age of communications and institutionalized commonplace PR strategies to the Fed’s tool kit.

A comparison of the two leading candidates, Larry Summers and Janet Yellen, suggests that both have communications know-how. No doubt Summers is a more practiced communicator, but Yellen has fully embraced today’s communications/transparency paradigm. Under Bernanke, she led a subcommittee on communications and presumably developed the playbook for publicly releasing FOMC minutes, issuing monetary policy “guidance,” as well as establishing a schedule of post-FOMC-meeting press conferences.

But despite Yellen’s studious approach to communications, Bernanke has had trouble staying on message. Bernanke suggested accelerating QE “tapering.” Markets reacted badly, and at his next press conference, Bernanke pushed back. The Fed would “continue to support the recovery,”  but his message was lost in the media glare. One live blogger wrote: “Bernanke seems frustrated that markets and pundits don’t understand the point of policy guidance.”

THE PR VERDICT: “B” (Good Show) to Janet Yellen’s methodical approach and realistic expectations.

THE PR TAKEAWAY: The best communicators focus on long-term objectives. While she has had some bad breaks managing her Chairman’s PR with the financial markets, Yellen believes good communications can support monetary policy and reinforce the Fed’s leadership. As she told journalists in April, “I believe further improvements in the FOMC’s communication are possible, and I expect they will continue.” No PR plan can work flawlessly. The institution you speak for is the message, not how aggressively you handle the media or how articulately a spokesperson expresses a viewpoint.

Facebook Finally Saves Face

 Facebook Finally Saves Face

The PR Verdict: “B” (Good Show) for Facebook and their stock.

Facebook’s return to its IPO price is gratifying to investors, as well as to the firms on Wall Street that  set a price of $38 per share. But the comeback was more than just a successful resolution of a key business problem (mobile revenues). It was a case study in PR perseverance.

On May 18, 2012, after a 30-minute delay, the stock opened on NASDAQ and reached a high of 48. That’s where it stalled, and by the close of the first day of trading, finished flat. One month later, FB had fallen to $28, and reached an all time low of $18 at the end of August.

The level of criticism directed at all parties – underwriters, NASDAQ, and the company management – was overwhelming. The Wall Street Journal labeled the deal “a fiasco,” while others invariably referred to the deal as “botched.” Even the New York Stock Exchange publicly called out its rival, suggesting that NASDAQ may have set a “harmful precedent.” Facebook CFO David Ebersman and Morgan Stanley’s tech bankers took the most heat. Assessing the underwriters’ brand reputation, one Wall Street expert wrote: “…Morgan Stanley will take a hit for it, deserved or not. That’s a big break for Goldman Sachs and JPMorgan Chase.”

And yet, months later, all that has changed. Media criticism eventually lost steam, and the serious investors who held on to the company’s stock were vindicated over time. (Moreover, the JPM and Goldman reputations did not enjoy a “big break.”)

THE PR VERDICT: “B” (Good Show) for Facebook and Morgan Stanley.

THE PR TAKEAWAY: Don’t react; just act. Sure, Facebook management might have made more of an effort to embrace Wall Street. Mark Zuckerberg didn’t need to wear a suit and tie during the roadshow, but the hoodie and declarations that the company was “in no rush” to go public may not have sent the right message. But this was all on brand and contributed to Facebook’s business-as-usual unflappability. Given disclosure restrictions, defending Facebook’s pricing and underwriting process after the fact required consistency and patience. Over time, that strategy – which may have been no strategy – paid off.

Royal Baby Gives Royal Boost to UK

royal baby 150x150 Royal Baby Gives Royal Boost to UK

The PR Verdict: “A” (PR Perfect) for the new prince’s effect on UK economy.

Economy ailing? Country need a financial boost? Just get your beloved monarchs to give birth to a future king. That’s exactly what Prince William and the Duchess of Cambridge did for the United Kingdom when a new prince was born.

Though at press time the baby was still unnamed, the financial figures from the birth of His Royal Highness were already in. The Center for Retail Research estimated that Royal Baby Watchers would spend upward of $420 million in celebration over the birth of the third in line for the throne. There was a boost in visitors to London, not least of which from the media, camped out for weeks to get shots of the royal trip to the hospital and the first photos of the future queen or, as it turned out, king. Commemorative merchandise was for sale, along with donuts iced with baby footprints, and, of course, a lot of alcohol for toasting.

This boost in economy is yet another part of the re-branding, if you will, of the monarchy. In the past, Britain’s royals have struggled with scandal, but recently that has changed. William bucked Buckingham to marry his choice and when Kate was caught topless by paparazzi, the verdict was shame on the magazines that ran the snaps. Now, a baby brings glad tidings during an ongoing worldwide recession. The royals are on a roll.

THE PR VERDICT: “A” (PR Perfect) for William, Kate, and the UK’s warm, PR-savvy welcome to the royal baby.

THE PR TAKEAWAY: Accentuate the positive. In a time of a struggling economy, good news – from any source – is always welcome. The British Royals have always grabbed the headlines, occasionally like some sort of reality show meets romance novel. William and Kate are playing their PR cards well. It’s called making hay while the son – sorry! – shines.

Does Microsoft Need to Think Different?

Ballmer MSFT tablet Does Microsoft Need to Think Different?

The PR Verdict: “D” (PR Problematic) for Steve Ballmer’s Microsoft.

Pity poor Microsoft – no, really. Tech’s original 800 lb. gorilla may have shed a few pounds since its heyday, but it continues to punch well below its weight. And its PR strategy, such as it is, doesn’t seem to be helping much.

Consider this: While its Q4 2013 earnings, announced last week, showed enviable revenue and income gains year over year, they also included a $900 million writedown on unsold inventory of its Surface RT tablet computer, a hoped-for iPad killer. In response, it announced a management shake-up of its hardware division. Its stock tanked anyway, dropping 11 percent  and erasing $30 billion in value.

From a PR standpoint, Microsoft continues to fare the worst among seven tech giants caught up in an ongoing debacle over the US government’s Internet eavesdropping program known as PRISM. It ill-advisedly sought to use the breach to stoke competition, going after Google in a PR campaign promoting online privacy. That proved embarrassing after new disclosures surfaced that Microsoft helped the government circumvent its own encryption methods.

Institutional investors, dismayed by the company’s strategy and execution, want a seat on the board and a say in management. Of particular concern is succession planning for CEO Steve Ballmer, who has led the company since 2000. Microsoft says it has a plan but won’t disclose it.

THE PR VERDICT: “D” (PR Problematic) for Microsoft. Its half-measures, hubris and haughtiness suggest the need for a full-on PR intervention.

THE PR TAKEAWAY: Take a hard look within. A periodic full-scale review of PR strategy is essential, and best conducted by an outside consultant free from corporate groupthink, before a crisis. Microsoft is fumbling on basic issues management. It could have given investors succor with a mea culpa on its product writedown. It could allay the longer-term management concerns with greater transparency. It should have seen the folly in trying to capitalize on the privacy issue while damaging disclosures were potentially in the wind. Long-time archrival Apple has maintained goodwill in the past with public acknowledgments and apologies for its missteps. To quote its rival, Microsoft needs to “Think different.”

McDonald’s Budget Tool Doesn’t Add Up

 McDonalds Budget Tool Doesnt Add Up

THE PR VERDICT: “D” (PR Problematic) for McDonald’s.

An attempt by fast food giant McDonald’s to help employees manage their finances has left a bad taste in workers’ mouths. The burger chain is being grilled this week for a sample budget contained in its brochure “Practical Money Skills,” part of a financial literacy program McDonald’s created with Visa and Wealth Watchers International. The budget suggests that an individual who makes $1,105 a month after taxes – about what a McDonald’s minimum-wage worker brings home – would need a second income of nearly the same amount to pay for basic monthly expenses. And even those expenses are debatable: the budget assumes rent or mortgage of a mere $600, health insurance for $20 a month, and a daily spending goal of $25 from which, presumably, things like gas, food, and child care are all supposed to be drawn.

The problem is not that the budget isn’t realistic; it’s that it is. McDonald’s inadvertent message to its workforce is, without a second job, you probably can’t survive on what we pay most of you. And that’s exactly what its workers have been saying in protests across the US. The project’s PR folks clumsily compounded the problem, saying it was only a sample budget (so it wasn’t meant to be accurate?) and that the “second job” was a theoretical partner’s wages (quite an assumption, and all the expenses appear to be individualized). McDonald’s also surreptitiously added in $50 in heating costs after the original plan presumed workers in chillier climates would simply shiver through the winter.

THE PR VERDICT: “D” (PR Problematic) for McDonald’s, which is already fighting wage-related battles with employees in several states. This blunder gives workers some fine ammunition.

THE PR TAKEAWAY: All communications are public relations. The line between internal and external communications is effectively gone; all company materials must be looked at with a critical eye for the PR impact they might have. Most large companies have already learned this lesson – some the hard way – but still don’t understand it applies well beyond the company-wide memo from the CEO. As McDonald’s found out, even such well-intentioned projects as a financial planning tool for workers can cause reputational indigestion.

The PRV Report Card: This Week’s Winners and Losers

CHINA articleInline The PRV Report Card: This Weeks Winners and LosersPR WINNER OF THE WEEK: “A” (PR PERFECT) TO New York University, for delicately but firmly pushing back on allegations that it was shoving Chinese dissident Chen Guangcheng out the door for political reasons. The blind legal activist who escaped house arrest in Beijing last year received a law school fellowship at NYU when he arrived in the US. Last week, he claimed the school was forcing him out, worried that his attacks on the Chinese government were endangering the school’s academic aspirations in China, where it recently opened a campus in Shanghai. A school spokesman gave the “puzzled and saddened” response to Chen’s atttack, noting that his fellowship was only ever intended to last one year. Third parties chimed in as well, with one saying no political refugee had ever received better treatment and that Chen had at least two desirable employment options at other universities.

 The PRV Report Card: This Weeks Winners and LosersPR LOSER OF THE WEEK: “F” (FULL FIASCO) TO Charles Saatchi, co-founder of the famed Saatchi & Saatchi advertising giant, for explaining away as a “playful tiff” his apparent assault on his wife, celebrity chef Nigella Lawson, at a tony London restaurant. Photos show the 70-year-old businessman with his hands around Lawson’s neck, something he says he did “to emphasize a point” during a debate over their children. Lawson was seen in tears after the incident, and reportedly has since left their home. For his part, Saatchi accepted a caution from local police, meaning he acknowledged the event and has been warned. For someone with presumably superior instincts about image, Saatchi has badly erred with his outrageous conduct, in public, with implausible explanations.

 The PRV Report Card: This Weeks Winners and LosersTHE PRV “THERE’S NO ‘THERE’ THERE” AWARD TO the latest search for the body of Jimmy Hoffa. Thirty-seven years after the mysterious disappearance of the union leader, authorities dug up a field in Detroit in search of Hoffa’s body. The tip seemed viable, coming from a former Mafia underboss, though one with a book to publicize. Embarrassment over the lack of body was mitigated by authorities’ assurance to taxpayers that the cost of the search was only for three days of digging machinery and rental of portable toilets.

Royal Bank of Scotland’s Hester No Fool

 Royal Bank of Scotlands Hester No Fool

THE PR VERDICT: “D” (PR Problematic) for the UK government. (Pictured: Royal Bank of Scotland’s Stephen Hester)

Government, it seems, is no match for bankers and executives who run the world’s most powerful financial institutions. The world got another reminder of this on Wednesday when Stephen Hester, Chief Executive of Royal Bank of Scotland, abruptly tendered his resignation. The news might have slammed Hester as another wealthy banker too arrogant to work under government supervision. Instead, Hester left his post like a hero, with lavish praise from the folks who fired him and the admiration of shareholders.

News of his departure sent the stock down, triggered headlines about bereft employee morale, and prompted a Treasury minister to address the UK’s House of Commons with a statement full of hyperbole about Hester’s success at getting the job done.

The reason for the departure? Apparently the government wants to “turn the page” on RBS and divest itself of the business it bailed out. Investors in a privatization deal will not view Hester’s leadership favorably, reckoned the bureaucrats. Instead, so their thinking goes, the market wants to see a leader who represents the future, not the past. Fair enough but for the unanswered questions: Who is Hester’s replacement? And if he’s as good as you say, why show your most capable leader the door? Why not let him help you through the “transition?”

THE PR VERDICT: “D” (PR Problematic) for the UK government for badly mishandling an announcement with a communications strategy that begs many questions.

THE PR TAKEAWAY: Before firing, have a replacement lined up, or suffer the consequences. The RBS privatization has a chance to succeed, but the government just raised its cost of capital unnecessarily by showing the current CEO the door, with no apparent plan for replacement. Once the press statements were finalized and the polite, politic resignation letter released, Hester told the truth that he’d wanted to stay after all. While he got to appear as though he’d orchestrated an effective career transition, Chancellor of the Exchequer George Osborne et al were left holding a bag of empty words. Next time, think before you pink slip.

 Royal Bank of Scotlands Hester No FoolPRV Contributor Pen Pendleton is a communications professional with 20 years experience in business and financial public relations. He began his career as a newspaper reporter and now works as a consultant in New York. 

IRS’s Reputation Taxed by Scandal

 IRSs Reputation Taxed by Scandal

The PR Verdict: “F” (Full Fiasco) for the IRS.

The United States Internal Revenue Service has never been the most popular government entity, but lately its reputation has taken a severe shellacking. The first problem came to light a few months ago, when it was revealed that the IRS had been targeting the Tea Party and other conservative political groups, putting their finances under close scrutiny. But on the PR embarrassment scale, that was nothing compared to the Star Trek video.

As the IRS finds itself under close scrutiny, a series of mortifying gaffes are now on public display. An astounding $50 million, all taxpayer money, was spent during 2010 and 2012 on 225 IRS conferences. The expenditures included training – or, rather, a rah-rah ha-ha training video with a Star Trek theme. And line dancing classes at the conferences. And baseball tickets, and stays in presidential suites for conference attendees, and a “happiness expert” who cost over $11,000. The list goes on and, unfortunately, on.

The congressional hearings investigating the conservative targeting are the equivalent of an audit for the IRS, and as with anyone else, the unpleasant receipts are being discovered. Daniel Werfel, the new IRS head, said he took the job because he thought he could be helpful. “The IRS is an agency in need right now,” he said in an understatement, in between apologies and explanations that can’t begin to defray the damage.

THE PR VERDICT: “F” (Full Fiasco) for the IRS. The government entity will have a long road of recovery after shooting itself in the foot.

THE PR TAKEAWAY: Think before you line dance – or make a video of it. The scrutiny of conservative groups is now being blamed on orders “from Washington”; if true, the resulting issues were unavoidable. But the silly, expensive training videos, the line dancing, the happiness expert? Someone along the way must have asked what this would look like to the outside world, or should have. In PR, an ounce of prevention is far more effective than ten pounds of damage control. At this point, confession and sincere apologies won’t make a dent in the IRS’s accounts.

To see the IRS Star Trek video, click here.

Hospital’s Unhealthy PR Response to Lawsuit

HUGUETTE CLARK 150x150 Hospitals Unhealthy PR Response to Lawsuit

PR VERDICT: “F” (Full Fiasco) to Beth Israel Hospital. (Pictured: heiress and patient Huguette Clark.)

The story of copper heiress Huguette Clark (left) has all the makings of a soon-to-be optioned movie. Clark was a Manhattan heiress with an estimated $300 million fortune and no direct heirs of her own, who lived in seclusion on Fifth Avenue. In 1991 she was admitted to Beth Israel, a leading New York hospital, and continued to live there until her death in 2011 at the age of 104. During her stay she gave the hospital some $4 million in donations, not counting the $1,200 a day she paid daily in out-of-pocket expenses.

Beth Israel is now on the receiving end of a legal suit launched on behalf of the heiress’s distant relatives. Their accusation? That the vulnerable heiress was subjected to a relentless fundraising campaign that included showering her with trivial gifts and  exercising undue influence to encourage the donation of cash and highly valuable art. The case will be heard in September.

So far, Beth Israel has declined comment, referring the media to its publicly available legal filings. “Having provided lifesaving and compassionate care to a person of Ms. Clark’s wealth, it would have been surprising if Beth Israel had not approached her for donations . . . the amount of money she gave to Beth Israel was not very large, considering her vast wealth,” the filings state matter-of-factly. Hardly a face-saving PR strategy, for one of New York’s major hospitals.

THE PR VERDICT: “F” (Full Fiasco) to Beth Israel for a truly disastrous response.

THE PR TAKEAWAY: Separate PR from legal. Relying on filed defenses for a PR response is only tempting the fates. While wise to decline to comment on the specifics, why not reaffirm that Clark was a beloved and admired patient at the hospital during her twenty-year stay? Express regret that the distant relatives have decided to launch civil proceedings over donations that have been put to good use (and then mention what $4 million has bought). Above all, avoid saying it wasn’t very much anyway. Huguette Clark is unlikely to have agreed with Beth Israel’s assessment – $4 million, even in her book, was presumably not chump change.

To read more, click here.