Directors and the Media

MOST OF THE DIRECTORS I've spoken with about George Keyworth's now-infamous leaks from the board of Hewlett-Packard were unanimous in condemning his conduct. Nearly every director believes that what happens in the boardroom stays in the boardroom.

But it's not that simple and here's why. Boards are being drawn into the public debate about how America's companies are governed. Sarbanes-Oxley means they now are much more active in managing earnings releases and issuing guidance to Wall Street. And the activist groups, whether single-cause advocates in the religious or environmental realms, or more financially oriented hedge funds and pension funds, are targeting boards. They are adept at using the media to frame the debate. They are, for example, demanding "accountability" from boards of directors. Who can be against "accountability?"

So in this climate, it's inevitable that boards are being drawn into the public marketplace of ideas. A chairman or a lead director may be designated to be a spokesman. And more public relations firms are spending time advising boards on how to communicate publicly.

Here's where this will inevitably lead. Whomever is the designated spokesperson or spokespersons from the board will have to learn how to develop and maintain relationships with reporters. That's just the way this game is played. To be effective in shaping media perceptions, the most sophisticated players know how reporters work, they understand what kind of pressures they're under and they know how to tell reporters what they need to. They can speak the language.

That's exactly what the vast majority of activists know how to do. In spades. They have allies in the media that they've been feeding with information for years. That's one reason the media coverage of many major companies has been so negative. The company's own internal PR people are embattled and paralyzed, caught as they are in the crossfire. Senior management avoids dealing with the press and directors have been entirely invisible.

So if directors are now going to join the fray, they will have to manage relationships with reporters. Some information will be entirely on the record and can be authorized and approved in advance by either internal PR people or by PR advisers to the board.

But inevitably, the reporters are going to ask other questions. Directors will then have to learn how to go "off the record." If they stonewall and keep repeating the officially sanctioned answers, they'll lose credibility. They will have to learn how to spin.

If they do it well, they can prevail in the media wars because the media is malleable. But how will directors learn how to do this? And what if their communications with reporters are construed as "leaking?" Will they be violating Regulation Fair Disclosure? Will the class action lawsuits start flying?

All these tough issues are developing and they can't be avoided. Boards are going to simply have to pull their heads out of the sand.