Never in the hundreds of annual reports I’ve read over three decades has a chairman or CEO acknowledged that the press could play a pivotal role in framing the conduct of its business. Yet Lloyd Blankfein, CEO of Goldman Sachs, conceded that the tsunami of negative press heaped on the 131-year-old firm was threatening its viability. This concession, in its annual report and SEC filings, puts an exclamation point to our argument that the biggest risk in risk management is the risk of ignoring forces alien to the conventional lists of calamities, physical and personal. Time and again we witness the de-canonization of iconic CEOs for hubristic behavior as much as for financial recklessness. Yet the issue is never examined at the board level before an ultimate decision has to be made and the CEO departs.
Nor have directors viewed public relations as a proper management function worthy of their oversight. Yet here in Goldman Sachs we have the incumbent in that function, a partner, being a large part of the problem, not aiding in the solution. The global head of communications, aka public relations, is reportedly abruptly dismissive of the press, combative, smug and condescending feeding tabloids and the blogosphere juicy morsel demeaning the company by his arrogant attitude. For example, its recent charm offensive via multiple philanthropies, was brushed aside as merely obligatory. A graduate of a revered British university, he might have prepared better if he’d majored in English literature rather than economics and perhaps caught the drift of English poet Samuel Butler’s cautionary comment, “For as you sow, ye are likely to reap.”
It’s a pity that any company should be brought to its knees through acute astigmatism. Ignoring the ultimate impact of today’s invasiveness of the media is irresponsible. It’s immaterial whether the barbs are factual or fabricated, the public’s perception is the bottom-line that must be addressed. Boards may honestly feel they’ve addressed every contingency yet leaving open the only unscripted function of management, the matter of public relationships. It is time to separate the policy from the communications process, the former well within the purview of boards.
In a similar vein the widespread criticism of Toyota’s ineptness in crisis communications during the recall of millions of its cars for product fixes will no doubt bring this matter to board attention. Unfortunately the emphasis will be on reaction more than on prevention. The board’s scrutiny should be on the mindset that birthed the issue. Attitude before aptitude is the relevant maxim.
John F. Budd Jr. is chairman and CEO of Omega Group, and editor of Observations. This commentary was originally published in the March 2010 newsletter.