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.
PRV 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.