The Economic Crisis and the PR Response

by Paul Bernish

The economic crisis threatens our banking system, our domestic auto industry, and the entire home mortgage business.  It also poses a profound threat to the future of public relations.

The reason is simple:  corporate PR is an abject failure.  All of the businesses that are now in jeopardy employ hundreds, if not thousands, of highly paid public relations specialists or outside counsel, whose job is to manage the reputation — the public “face” — of their clients.  That they have collectively dropped the ball over the past two years as the downturn gained momentum is beyond dispute.  Not only are the companies in deep financial trouble (some close to bankruptcy), they have also in the public’s eye become objects of scorn and hostility.

And no wonder.  When Congress summoned the CEOs of the Big Three automakers to Washington to listen to their requests for huge infusions of capital, the supposedly street savvy bosses flaunted their perks by traveling in plush corporate jets.  Where were the public relations executives of GM, Ford and Chrysler?  As Bank of America swallowed Merrill Lynch with only a superficial due diligence review of the brokerage firm’s books, what role did the banking behemoth’s PR team play in communicating to BoA shareholders, investors and customers?  Is the insurance behemoth A.I.G. not able to muster even one statement explaining the company’s need for even more government funding? 

Can this dismal performance be turned around?  Can public relations make a meaningful contribution as the nation attempts to pull itself out of the economic mess?

It will take, more than anything, a commitment by public relations people and the executives they serve to finally pay more than lip service to the buzz word “transparency.”  Spend two minutes with a veteran PR counselor, and transparency will be mentioned almost immediately as the key to successful management of a client’s public image.  Yet in practice, companies are typically closed-mouth and disdainful of the general public and the news media. That’s a failure of public relations, reflecting one of two unpleasant realities: either the PR advisers don’t have the internal clout to make transparency stick as a corporate value, or else the advisers are just along for the ride and the paycheck.

Ideally, the current mess is humbling corporate management.  If trust is ever going to be restored, CEOs need to be talking, candidly and openly, about their financial challenges to the press.  They need to communicate in detail their business strategies with shareholders, investors and customers.  Those who are receiving substantial stimulus dollars must be willing to describe how those dollars will be spent.

The professional public relations staffs and counselors must be the internal advocates for this emphasis on transparency.  And they need to embrace new channels of communications to insure that the clients’ public constituencies have a way to respond and provide feedback.  Among the best ideas to emerge in this area is using Twitter to enable worried customers, investors and others to engage in back and forth dialogue with company representatives.  But to work, using social networking for business purposes must be honest and open — no corporate Trojan horses posting anonymous information that is misleading or dishonest.

It’s not going to be easy.  New York Times business columnist Joe Nocera described the shattered landscape as a world where “…there is no faith.  There is no trust.  There is no confidence.”  He was writing about General Electric, but his larger point is that the days when business could brush off their responsibilities to the broader public have disappeared.

Quoting Senator Chris Dodd at a recent Congressional hearing, Nocera concludes: “We’re in a new world, and new types of transparency are required.  (Dodd) was speaking at a hearing about A.I.G., but really, he could be talking about any company at this point.”

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