Nov 26

Promotion or Bro-motion: The danger of exclusionary advertising

Nick Gilyard was one of Peppercomm’s finest interns ever. In this guest blog, the Western Kentucky University star waxes poetic on gender bashing in advertising. You go, Bro!

brogurt_productMy friends and I were dining at a local establishment recently and moments after we were seated we discovered an interesting ad. The trifold that sat in the middle of our table would become the catalyst to an in-depth dinner conversation.

The advertisement was for a frozen cosmopolitan that included a description and great photo of the drink. What was unusual about the ad was a smaller and very targeted ad for the same drink in the lower right corner. If you are thinking it was promoting a skinny-cosmo for those watching the calories, think again. The first sentence in the box read “Not just for the Ladies!” Ladies and Gentlemen (but really gentlemen), I give you *Drum Roll* the Frozen CosBro! A “more generous” version of the frozen cosmo- the same delicious flavors served up in a “more guy-friendly” glass.

When our waiter came over to ask what we would like to drink, I uncontrollably blurted out “Well definitely not the CosBro,” which elicited a very perplexed look from the waiter.

When I first read the text I was in complete disbelief that a chain restaurant would have such a blatantly sexist ad. There are three major issues I have with this advertisement:
1.    The rhetoric “Not just for the Ladies” implies that a cosmo is a drink only to be enjoyed by women. Which subsequently suggests that every man who has or will ever order a cosmo should be embarrassed by his drink choice.
2.    The name CosBro is offensive and stupid. Not all guys are bros and adding bro to a product does not make it more masculine. By this logic we should have Brolish (clear coat nail polish– not just for the ladies) or Broatmeal (oatmeal– not just for the ladies). I think the reason that these silly and unnecessary products do not exist is quite Bro-vious .
3.    It’s bigger and only $1 more. The ladies receive a roughly 8oz glass for $5.99 while the “bros” are offered nearly double the amount for only $1 more. Perhaps this is retaliation against 2 for 1 ladies’ night.

Although Carrie Bradshaw popularized the cosmo on “Sex in the City”, the company was wrong to decide that the drink is exclusively for women. There are similarly sexist ads all over the web and, after facing backlash from customers or the media, companies often issue apologies or pull the ads altogether. But one would hope that in 2013 our ad professionals would be wiser.

How do you feel about the CosBro or any other ads you’ve seen with similar, exclusionary messages? Is there a better approach to gender-targeted marketing?

Nov 25

Is product tampering to blame for Millennial Malaise?

Slide1I was about to delete yet another article about needy Millennials and their enabling Baby Boomer parents when I was stopped short by a quote naming the original 1982 Tylenol crisis as being the cause. Say what?!?!

Yes, Virginia, according to Tim Elmore, founder and president of a non-profit called Growing Leaders and author of the ‘Habitude’ series of books, DVDs and survey courses, the Tylenol crisis single-handedly changed childrearing forever.

Says Elmore: “It began in the Fall of 1982, when seven people died after taking extra-strength Tylenol laced with poison after it left the factory. Halloween was just around the corner, and parents began checking every item in the loot bags. Homemade brownies hit the garbage; unwrapped candy followed close behind.’

This, says, Elmore, led to Baby Boomer parents obsessing with their child’s safety in every aspect of their lives. So, they kept them indoors, did their homework for them, and began the enabling process that has led to today’s generation of pampered, self-obsessed, live-for-the-moment Millennials. Or, so says Elmore.

I say, ‘Balderdash.’ Or, words to that effect.

While a single event CAN impact a future, entire generation (Think: the assassinations of Lincoln, Austrian Duke Franz Ferdinand and JFK, among others), there is NO way the Tylenol crisis changed child rearing.

My two Millennials were born years after the Tylenol crisis. And, if Chris and Catharine were spoiled, it was because I wanted to provide them with some of the things that I missed growing up in a lower middle class, blue collar world. Tylenol had nothing to do with it.

But, I’d like to hear what Boomers and Millennials alike think. The entire Elmore article is contained here.

I’d also encourage you to read a fascinating e-mail from my long-time friend, and colleague, Chris Tennyson. Chris finally puts to rest the myth about which PR professional REALLY played the key role in counseling Johnson & Johnson’s CEO to do the right thing . As Chris hints (and JFK noted): ‘Success has many fathers. Failure is an orphan.’

Subject: The Truth About the Tylenol Recall
You may have missed this obituary in Tuesday’s New York Times. Lawrence Foster was the head of communications at Johnson & Johnson in 1982-  the time of the much-studied, much-applauded Tylenol recall. Over the course of my checkered PR career I have met dozens of PR practitioners who claim to be the driving force behind the company’s bold decision to pull Extra Strength Tylenol from the shelves and reintroduce the product in tamper-proof packaging.  These PR guys always point out that the company was reluctant to take this expensive course and but for the wisdom of whatever agency the PR person I was talking to worked for in 1982, Johnson & Johnson would never have have done the right thing. I always doubted the veracity of these stories (I have only met more people who claim to have been at Woodstock than people who claim to have counseled J&J through the Tylenol recall). Well, now we know the truth. Larry Foster, VP Public Relations, had the trust of his chairman and  convinced him to do the right thing, based on the long-standing credo of the company.  As an eye witness says in the obit, Foster was “the strongest voice in the room . . .” So now we know the real story. Good work, Larry Foster-  rest in peace. Three quick lessons here: Companies in crisis do better when the internal PR head is trusted by senior management . . . look for first principles and core values to guide you out of crisis . . . and agencies always take more of both the blame and credit then they deserve.

As for Boomers being at fault for what the HuffPo article calls ‘A generation of Helpless Kids,’ we’re neither responsible nor are they helpless.

Having said that, if you don’t feel better after reading this blog, take two Tylenol and call me in the morning.

And a tip o’ the Catamount hat to Peppercommer Nick “The Knife” Light for suggesting this post.

Nov 22

The proof of the pudding is in the eating

bobblehead_jesus

I don’t like Bill O’Reilly, his bombastic, vitriolic ways or his divisive cable talk show. But, that hasn’t prevented me from buying ‘Killing Lincoln’ and, more recently, ‘Killing Jesus.’

The former is a ludicrous examination of the Lincoln assassination, and concocts a bizarre, Oliver Stone-like theory that the Great Emancipator’s Secretary of War, Edwin Stanton, was the mastermind of a conspiracy to kill Honest Abe in order to ensure Lincoln’s vow to ‘show towards none and charity to all’ wouldn’t happen. O’Reilly says Stanton wanted Abe whacked to ensure the South would be severely punished (which Radical Reconstruction must assuredly accomplished).

Killing Jesus is an equally lightweight, superficial account of the historical Jesus of Nazareth. Relying almost solely on the gospels of Matthew, Mark, Luke and John, O’Reilly recounts the same, basic story we lapsed Catholics know all too well.

The only contributions, if they can be called that, are disturbing and all-too-gory details about the punishment meted out by Romans to revolutionaries such as Jesus. In fact, anyone wanting to know exactly how to recreate a crucifixion at home would love Killing Jesus.

O’Reilly’s Cliff Notes stand in stark contrast to the meticulously researched examination of the same, historical Jesus by Reza Aslan in Zealot.

O’Reilly ignores much of Aslan’s research (which was based on the incredibly thorough records kept by the ancient Romans who occupied Judea when Jesus did his thing).

In fact O’Reilly either overlooks, or fails to mention, such documented Roman facts as these:

- Jesus of Nazareth was one of hundreds of self-proclaimed messiahs who roamed the Judean countryside with one, single-minded goal: the overthrow of the Roman oppressors. The word messiah meant king of the Jews, and was intended to indicate a man who would one day restore home rule of Judea to the Jewish populace.

- Jesus attracted throngs of followers to his various sermons NOT because of the words, but because of the miracle-making. In fact, miracle-workers were highly paid professionals in those days and considered the professional equals of doctors and lawyers. Aslan says Jesus’s marketing genius was to not limit his wondrous acts solely to a few, well-healed one-percenters but, rather, to perform them in front of the masses. Along with John the Baptist, Jesus of Nazareth understood the power of word of mouth.

- Roman records contain no record whatsoever of the beheading of John the Baptist by Herod or Pilate’s ceremonial washing of his hands and offering the throngs in Jerusalem a choice between Jesus and Barrabas. John and Jesus were just two more revolutionaries who were quickly dispatched with no ceremony or histrionics.

Last, but not least, O’Reilly never mentions the intense schism that divided the apostles in the immediate aftermath of Jesus’s crucifixion.

James (who was most likely one of Jesus’s many brothers and sisters) wanted to keep the flame alive. But, he never suggested his older brother was the son of god.

Luke, on the other hand, was interested in publicizing the brand of Luke (and, indeed, proclaimed himself Jesus’s favorite disciple in his gospels). Indeed, it was Luke who decided to bestow the surname Christ on Jesus, and proclaim him the son of god.

Not surprisingly, Go B Love, the Born Again Christian website, worships Killing Jesus and, dare I suggest it, is making a killing by offering the book on its website.

In my mind, though, and as Cervantes wrote long ago in Don Quixote, ‘The proof lies in the making of the pudding.’ The proof of the academic rigor ANY author applies to his or her subject is always found in the source notes and appendix. O’Reilly’s is only five pages long; Aslan’s is 63 pages.

And, to put the final nail in the cross (to mix metaphors), one of O’Reilly’s asterisks speaks volumes: In describing the type of primitive hut Jesus, Mary and Joseph inhabited in ancient Nazareth, he notes, ‘There were no indoor bathing or restroom facilities.’ Do tell. And, here I’ve thought all along that Jesus showered and sat in a hot tub after returning from 40 days and nights in the desert.

It’s a sorry statement about modern society that many Americans have crucified Aslan’s book solely because of his Arab descent. Yet, O’Reilly continues to rake in millions for hastily written, sensationalized books that capitalize on the deaths of Lincoln, Jesus and John F. Kennedy.

There ought to be a law. Or, at least a parable.

Nov 21

An open letter…

Today’s guest post is by Peppercomm President Ted Birkhahn.

How-to-write-a-cover-letter Dear CEO,

It’s not easy being you in today’s economy. Regulatory demands are fierce. Investors are unforgiving. Attracting and retaining talent is a struggle. Competition comes in all shapes and sizes. And in the social economy, customers have seized control-  dictating when, where and how they want to deal with your brand.

But, no need to fret. Help is here. You’ve resisted it over time but now you have no choice. It’s a brave new world and you need help navigating the turbulent and unforgiving waters of listening  and understanding your audiences, and making sure your brand, products and services remain relevant. You come from the old school and you need new school support.

What’s this solution you’ve been resisting? Which group within your organization have you been keeping out of the Boardroom? Who are the people you’ve been treating as doers instead of thinkers. It’s your communications team.
Not sure how to change? Can’t figure out the best ways to start using your communications team more strategically? Here are a few suggestions:

1.) Buyer beware: Hire the right people. Having worked in the PR industry for 15+ years, I can assure you there’s a fair amount of mediocrity. But there are plenty of proven and aspiring professionals that I work with everyday who absolutely have the strategic chops to sit at your table and talk about the impact of business on communications and vice versa. Go find them and your business will never be the same.

2.) Chief Decision Officer: Over the years, any number of clients have come to me saying their CEO has made a business decision and it was now our job to communicate it. We are not miracle workers and we can’t play the role of the “cleaner” a la Harvey Keitel in Pulp Fiction. Instead, your chief communications officer should be present when you and your leadership team are making decisions about the future of the business. Their role at these meetings should be an simple one: Illustrate how audiences will perceive the change and the impact each decision will have on the company and it’s brand. Then decide if the decision is still worth pursuing.

3.) Filter everything though your comms team: In today’s 24×7 grind, mistakes are amplified and sometimes met with irreversible backlash. All communications- no matter how small and seemingly insignificant- should cross the desk of the CCO or their team. One of the most egregious examples of this involves J.P. Morgan’s #AskJPM Twitter chat debacle. I’m not privy to what happened inside the halls of JPM that led to the decision, but I’d bet the ranch that the comms team was left out of the decision process. Once the crisis began to unfold, they were probably called in to clean up the mess. Remember, the best crisis management strategy is to avoid the crisis altogether. If it doesn’t happen, it isn’t a crisis.

4.) Use your comms team as your chief listening agents: No one understands the wants and needs of your audiences- and how to communicate with them- better than your CCO and his/her teams. So why not tap them for more than communications. Get them involved in product & service innovation, customer service issues, risk management and the other disciplines that make up your business. They’ll provide a perspective that’s fresh and- wait for it- completely in line with the reality swirling around your brand and its stakeholders.

Globalization. The social web. Massive leaps in technology. Rapidly changing business models. Evolving customer expectations. These are just a few of the things keeping most CEOs awake at night. They are also issues that a smart, dynamic and sophisticated CCO can tackle for you. They won’t cure all your ills, but they just might make your life a bit easier and your business better. So, please, let your comms team into the room. Give them a seat at the table. Get them involved earlier in the decision-making process. And watch the world around you change.

Nov 20

Obama’s Middle East Mistake

Today’s guest blog comes from Chris “Repman, Jr.” Cody, and addresses a surprising cultural misstep by President Obama. It’s just one proud dad’s opinion, but I found his research fascinating…”

imagesDid you know that 18 of 19 U.S. ambassadors to Arabic speaking countries aren’t of Middle Eastern descent?  That’s like Major League Baseball sending all-white recruiters to inner cities in hope of attracting urban kids to consider a career in what once was America’s pastime.

I find it ironic that our nation’s first black President isn’t more sensitive to the cultural nuances essential to connecting with an Arab world in total flux.  Sensing that I was on to something, I spoke to my good friend, and Arabic professor, Ahmed Eissawi.

Ahmed is an Arabic language professor at both the United Nations and NYU.  Moreover, he is an Arab-American community leader, and a respected intellectual.

I brought up the ambassadorial “gap”, and asked Eissawi how the U.S. should address it AND improve its image in the Middle East.

He suggested the following: “Instead of launching drone strikes and threatening military interventions President Obama should, instead, tap into loyal, intellectual Arab-Americans such as academics, Middle Eastern experts, journalists and lawyers.  These individuals could bridge the gap that currently exists because they know both the Middle Eastern and American mentality.”

I agree with my professor (I better. He grades my papers). America needs far fewer individuals such as James B. Smith (our ambassador to Saudi Arabia) and many more diplomats like the current U.S. ambassador to Qatar, Susan L. Ziadeh. To Professor Eissawi’s point, Ambassador Ziadeh is the daughter of noted Palestinian-American scholar Farhat Ziadeh. She was born and raised in the U.S., where she earned a PhD in Middle Eastern History.

I know President Obama is rightly concerned with his legacy in light of the Obamacare website fiasco. But, he risks losing the respect of far more than Americans if he doesn’t wake up soon to the realities of the new Arab world.

Appendix:
Our current ambassadors to the Middle East:
Iraq – Robert S. Beecroft
Egypt – David M. Satterfield,
Libya – Deborah K. Jones
Yemen – Gerald M. Feierstein
Oman – Greta C. Holtz
Jordan – Stuart E. Jones
Lebanon – David Hale
Tunisia – Jacob Walles
Algeria – Henry S. Ensher
Saudi Arabia – James B Smith
Turkey – Francis J. Ricciardone, Jr.
Syria – Robert Ford
Bahrain – Thomas Krajeski
Qatar – Susan L. Ziadeh
Kuwait – Matthew H. Tueller
UAE – Michael H. Corbin
Afghanistan – James B. Cunningham
Pakistan – Richard G. Olsen
Morocco – Matthew Lussenhop

Nov 19

A memorable advertising campaign? I’ll drink to that!

Bacardi promotion in Havana, circa 1920.

Bacardi promotion in Havana, circa 1920.

I believe advertising has become the least influential marketing channel. Sure, it’s still fundamental to creating awareness, but consumers of all kinds simply delete digital ads, flip past print ones or fast forward TV commercials.

I’m one of the biggest culprits in causing advertising’s demise. I simply don’t pay attention unless the highly-influential advertising trade media call my attention to something unique. Such is the case with Bacardi’s newest global campaign.

Entitled: ‘Untameable’, Bacardi’s advertising doesn’t try to sell rum. Instead, it informs, and educates, the reader about the countless battles Bacardi has fought over the years to stay on the shelves and in a drinker’s hand. To wit, Bacardi has survived:
-    A fire in 1880
-    Prohibition
-    An earthquake that destroyed its facilities
-    Fidel Castro’s seizing of Bacardi’s Cuban assets in 1960.

One ad is headlined, ‘Some men are kicked out of bars. Others are kicked out of countries.’  Another reads: ‘Earthquakes, fires, exile, Prohibition. Sorry Fate-  you picked the wrong family.’
Here’s why Bacardi’s advertising worked for this advertising hater. It didn’t talk at me. It didn’t try to be like every other liquor campaign and, critically, I learned a few things about a fabled brand. That’s very cool for someone who prides himself on lifelong learning.

Too many advertisers and too much category advertising looks, feels and sounds alike. Insurance is a great example. Since Geico’s pioneering use of comedy in its ads, every single competitor has followed suit (Think: Progressive’s Flo, Allstate’s Mayhem, etc.). While everyone chuckles at the TV spots, no one remembers who was selling what. And that, my friends, is death for a chief marketing officer being pressured to demonstrate ROI.

So, lift your glass to the marketing folks at Bacardi. They’ve accomplished something rare in advertising: a credible, informative and edgy campaign that engages me. Barkeep: another Bacardi and Rum, please. And, no prohibition on doubles, please.

Nov 18

Are you afraid of being afraid?

donotfeedthefearsMalcolm Gladwell’s ‘David and Goliath‘ is chock full of fascinating anecdotes explaining why so many weaker, smaller people have defeated larger, stronger opponents.

In many instances the various ‘Davids’ succeeded because they stopped being afraid of being afraid.

Here are three, brief examples:

1.) The Nazis assumed they’d kill hundreds of thousands of Londoners during the Blitz, and crush Britain’s will to fight. Instead, hundreds of thousands of Londoners came close to dying but, because they’d survived, they lost their fear of being afraid. In fact, Gladwell says, Londoners became ebullient, felt impervious to injury and went about their everyday lives as bombs continued falling all around them. The Battle of Britain ended up being Nazi Germany’s first setback.

2.) Segregationists in Birmingham, Alabama, figured they’d easily crush Dr. Martin Luther King Jr’s Civil Rights movement by killing him and intimidating his followers. Instead, King and his lieutenants, Wyatt Walker and Fred Shuttleworth, literally dodged one bullet and bomb after another. Like the Brits, they experienced a state of near euphoria as a result of the near misses. King, et al, lost any fear of fear, and persevered in their struggle. The rest is history.

3.) In 1969, the British Army thought they could easily suppress a Catholic uprising in Belfast, Northern Ireland, by sending 30,000 troops to restore peace. While many Irish Catholics were killed, far more experienced near misses. Like the Brits and black activists before them, the Irish lost their fear of fear, and resisted the invaders. After three decades, the British threw in the towel, and withdrew their troops.

I was once afraid of being afraid.

But, I experienced a near miss that ended up being just as transformative as the ones above.

Back in the mid-1990s, I endured a horrible, 15-month stint as president of Brouillard Communications, a now defunct division of J. Walter Thompson.

I won’t bore you with the details, but it was the worst period in my life. When it ended, though, I felt a sudden euphoria. While I’d been badly bent, I hadn’t been broken. I’d experienced Gladwell’s near miss.

I felt liberated. I no longer cared what other people thought of me. I no longer worried about failing because I’d already failed.

So, I strode confidently into Ed’s squalid, one-bedroom apartment in September of 1995, and we created Peppercomm. And mind you, at that point in time, I was married with two young kids, two mortgages, two car payments and two dogs. Yet, there was no fear of failing. It never even entered my mind.

In fact, I tell anyone who asks (as well as those who don’t), that the first year of Peppercomm was the single best year of my life.

How about you?

Have you experienced any near misses that enabled you to overcome the odds and slay your personal Goliath? If so, I’d love to hear the tale.

Nov 15

John Q. Public should be penalized 15 yards for piling-on

In today’s Repman guest blog, WalekPeppercomm’s Dmitriy Ioselevich provides a unique perspective on the Richie Incognito bullying brouhaha… 

self centeredsssssssReputation management typically comes in one of two forms—corporate or individual. But with today’s movement towards increased transparency and communication one group has gotten a free pass—the general public.

I bring this up in light of the ongoing Miami Dolphins bullying saga. For those not up-to-date on the goings on of the Dolphins locker room, the controversy began on Halloween when former Miami lineman Jonathan Martin announced that he would be leaving the team to receive help for emotional issues. According to a statement made by Martin’s attorney, David Cornwell, the 6’5”, 312-pound Martin was the victim of frequent harassment and bullying, including “a malicious physical attack” and “daily vulgar comments,” courtesy of his 6’3”, 319-pound teammate, Richie Incognito. Incognito was subsequently suspended by the team and the NFL is currently investigating the allegations.

In short, one very large man hurt another very large man’s feelings and then we all talked non-stop about it for the next two weeks. We asked questions, but not before first pointing fingers, and in the process we eagerly tore up the reputations of everyone involved and fed them into a shredder.

These are all quotes from journalists, other players and fans. Everyone is entitled to their opinion of course, but the last one in particular stands out because it is the furthest from the truth.

The first reaction most people had to this story, including Dolphins general manager Jeff Ireland, was to wonder why Martin didn’t just stand up to Incognito and “punch him.” It’s a case study into human emotion that these observers equate aggression with strength and mental illness with weakness, and a poor reflection on fans in general.

Football fans, the same ones who have been clamoring for the league to do to something to protect players from head trauma, must suffer from short-term memory loss. Less than a year ago another troubled player, Kansas City’s Jovan Belcher, murdered his girlfriend, drove to his team’s practice facility and then shot himself in the head.

An increasing number of football players are choosing to walk away from the game before they end up like Belcher or Aaron Hernandez, and nobody calls them weak. But because Martin’s reason for leaving is some supposedly innocent bullying, then people naturally question his manhood.

Thankfully not everyone holds this view. Grantland’s Brian Phillips wrote a scathing article on the bullying scandal, making the point that “when a player says he needs time off for mental reason – again: in a sport with a suicide problem – it shouldn’t spark a national conversation on whether he’s soft.”

But in today’s machismo-fueled culture, that’s exactly what it does. As communicators we spend so much time and energy trying to educate the public about the newest trends or regulations, yet rarely do we step back and consider what the public actually believes. In the case of mental illness, scientific research and public perception are on completely different wavelengths. Most people probably know that the insane asylum glamorized by the TV show American Horror Story is barbaric, yet when a man like Martin asks for help the first reaction is to criticize, rather than to help.

This reality is a stark reminder that perception works both ways. While Corporate America is under increasing pressure to be more ‘community-friendly,’ it may be time for the public at large to share some of the responsibility. After all, communication is a two-way street.

Nov 13

Digital Data Diva

Marissa-Mayer-CEO-Barbie-communicationMarissa Mayer is Silicon Valley’s answer to Richie Incognito. Her latest employee-bullying tactic is something special (and uber retro, to boot).

According to published reports, the same Yahoo CEO who ended telecommuting at the dysfunctional technology company, has now installed an employee ranking system that most experts say is the worst thing that could happen to an innovation-driven culture.

Taking a page out of ‘Neutron’ Jack Welch’s 1980s playback, Mayer is forcing all employees to be ranked on a bell curve. Then, based upon the results, she’ll promote the top performers, fire the bottom-feeders and send a wake-up call to the mediocre Yahooligans (as they call themselves).

Employee rankings worked a generation or so ago. But, that was before competition for talent became white hot. It was also decades before enlightened management saw the benefit of investing in training programs and providing the best possible workplace culture. FYI, I know of what I speak. Peppercomm is this year’s top NYC workplace, according to Crain’s New York Business.

Mayer is famous for her data-driven, 24×7, the devil-is-in-the-details management style. It’s what initially made her successful at Google. And, until now, it’s delighted Yahoo’s Wall Street watchers.

But, she’s stumbled badly as well. In addition to the telecommuting massacre, which was a thinly-disguised excuse to downsize, Mayer also vamped for a lengthy, self-congratulatory spread in Vogue. And, her recent re-branding of Yahoo and Yahoo Mail was savaged by critics everywhere.

Data-driven human resources programs may work in certain cultures. But, they penalize the best and the brightest, who see the rankings and evaluations as purely subjective and politically-motivated.

I predict there will be an even greater brain drain at Y! as a direct result of this data-driven directive. Mayer’s brain may function best when it’s flooded with mathematical equations. And that, in turn, MIGHT result in some great user experiences.

But, it’s a Richie Incognito approach to team-building that will only alienate the superior employees Mayer desperately needs to help her prevent the R.M.S. Yahoo from striking a berg, and sinking beneath the waves once and for all.

And a tip o’ Repman’s official Moe’s Southwest Grill sombrero to Michael Dresner, CEO, Brand² Squared Licensing, A Division of Peppercomm, for suggesting this post.

Nov 12

WALL STREET’S NEW DEATH PENALTY- MANAGING REPUTATION IN AN ERA OF “GUILTY”

Today’s guest post is by Thomas Walek, President, WALEKpeppercomm

_Wall_St_bull_fallenWhile not as final as the punishment meted out by Chinese courts against this investment criminal (“Chinese Woman Sentenced to Death in $200 Million Fraud“) the US Securities and Exchange Commission’s new focus on “guilty” can mean a death sentence for errant Wall Street firms.   Given this new threat, brand and reputation management demands a higher priority among financial and public firms of all stripes.

Under new leadership, the SEC is much less willing to accept settlements allowing defendants to walk away from crimes  “without admitting or denying guilt” and paying token financial penalties.  Friday’s admission of guilt by the founder of hedge fund SAC Capital, similar admissions by other executives at that firm, and the recent guilty plea by the founder of another hedge fund, Harbinger Capital, effectively terminate these businesses.

And it’s not just historically secretive hedge funds who can no longer whistle past the hanging judge. JP Morgan was forced by the Commodity Futures Trading Commission to admit to questionable conduct related to the bank’s London Whale fiasco.  Worse may be coming for that bank, with profound implications for its business.

This tougher regulatory stance is gaining momentum.  Just last week, the head of the Federal Reserve Bank of New York talked about “tough enforcement and high penalties” and pointed to “deep-seated cultural and ethical failures at many large financial institutions.”  The era of the get-out-of-jail-free card is over.

Legal issues aside, companies need to take the offensive in understanding, directing, and managing brand and reputation and do so long before potentially fatal legal problems arise.  A higher level of transparency is a good place to start.  SAC and Harbinger’s closed and adversarial relationship with the media and regulators was both antiquated and shortsighted.

But even the most transparent financial firms will occasionally fall on the wrong side of a lawsuit, and it’s not necessarily “justice” on the part of regulators to destroy an otherwise healthy and productive company. One way that companies can help offset this risk is by engaging in Corporate Social Responsibility (CSR). All of the biggest banks, including Citigroup (Citi Bike) and Goldman Sachs (10,000 Women Initiative), are known for something other than making money — surely an important distinction when nearly all SEC lawsuits have to do with a financial firm trying to bend the rules to make even more money.

Clients and customers will want nothing to do with a company that spends more time in court than in the community. Of course, CSR is but one small part of a firm’s overall reputation management package. Ethics guidelines, improved relationships with the media, appropriate use of social media, improved regulatory relationships, community involvement, mentoring programs, charity outreach, and mock crisis training must be considered and, more often than not, put in place.

Drinks with a reporter or sponsoring a table at a fund-raiser won’t, of course, solve all the business problems created by the criminal actions of employees.   Recent lessons such as those above clearly suggest the threat of a “death penalty” or other severe punishment is just what’s needed.  But as the admission of guilt becomes a more likely outcome of financial malfeasance, brand and reputation can no longer be considered soft issues.  They need to be the ground upon which businesses are built and from which they can be rebuilt, if need be — they demand all the weight, priority and commitment that’s required to safeguard the future of the business.