Within the past 10 days I have told someone “Don’t put into an e-mail, chat, a tweet, a Facebook status update or anywhere else something you don’t want on the front page of the New York Times.” It’s classic communications advice.

And yet, Goldman-Sachs executives are apparently too stupid and too arrogant to show any such restraint. The U.S. government has launched a fraud lawsuit against Goldman-Sachs for, among other things, misrepresenting to the federal government the company’s losses during the mortgage crisis, and according to the New York Times, “creating a (financial) product secretly designed to fail for the benefit of a favored hedge-fund client.”

In email messages, “Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November 2007 that the firm had lost money initially. But it later recovered by making negative bets, known as short positions, to profit as housing prices plummeted. ‘Of course we didn’t dodge the mortgage mess,’ he wrote. ‘We lost money, then made more than we lost because of shorts.’”

According to the times, Fabrice Tourre, a Goldman-Sachs trader and a defendant in the SEC’s suit, wrote in an e-mail to a friend:

“I’m still stuck at work at 10PM, but it’s been six years since I’ve been functioning on this @!$#@!$@$# schedule, so who cares. I feel like I’m losing my mind and I’m only 28!!”

It’s not as if Americans like the investment community right now, and this sure isn’t helping.

In so many stories of corporate malfeasance, reaction to the facts surrounding a company’s misbehavior (whether alleged or proven) is so often overshadowed by damning information that comes through other, informal communications channels, like remarks made at a company party, or in an e-mail.

In 2003, jurors watched a portion of a four-hour videotape of a company-paid $2 million party in Sardinia thrown by Dennis Kozlowski, then CEO of Tyco, for his wife’s 40th birthday, which included “Margaritaville” singer Jimmy Buffett and an anatomically correct statue of Michelangelo’s David spewing vodka. Kozlowski and his CFO were on trial for looting the company of $600 million. Who’s brilliant idea was it to videotape the party? Kozlowski apparently laughed about the video after leaving court for the day.

More recently, Phil Jones, head of the Climatic Research Unit at the University of East Anglia, set off a storm of media controversy over global warming when he sent a series of emails with some ill advised (though apparently somewhat true) remarks about the quality of certain research on the topic, giving detractors a golden opportunity to call into question the validity of all global warming research.

It’s hard to give everyone media training, but that’s the only way to avoid these situations. A company must be truthful. It must communicate on a timely basis any circumstances that must be brought to the attention of regulators or law enforcement. But there is no rule that says the company must allow every employee to publicly say anything he or she wishes. And that’s what being careless about informal communications amounts to.

I’m not suggesting cover-ups. The only thing worse than writing a dumbass email is deleting it to hide a smoking gun. In fact, deleting emails brought Arthur Andersen, a multi-billion dollar company, to its knees. Don’t do it! It’s probably illegal. (And deleted emails aren’t deleted any way. Another story for another time.) But save yourself from embarrassing the entire company and imagine every email, every tweet, and every café remark you make is public.

Again, I’m not saying informal communications are the problem. Unethical and illegal behavior are the problems. But companies are compounding the problems with ill advised informal communications that always seem to come out.

A little commonsense will allow you to retain some degree of control over a crisis, or avoid it entirely. As soon as there are emails containing a company executive’s claims that it made billions of dollars when it told the government exactly the opposite, and videos of the CEO’s anatomically correct sculptures with their, um, er, well you know as a spigot, you’ve lost in the court of public opinion.

Tags: Goldman Sachs, enron, email, Arthur Andersen, crisis communications, tyco, party, Sardinia, global warming

What are the legal and ethical considerations to consider when launching a social media initiative? Where does a company draw the line between risk and reward when trying to get the most out of its social media marketing or PR?

I’ve had dozens of great conversations about this in the past few weeks, and I have been thinking about a framework for ethical and compliant social media marketing. My intent was to create a simple way of thinking about the legal, ethical, business and reputational aspects of a campaign to evaluate its potential impact, positive and negative, on the company and its brand.

Here’s what it looks like so far (click to see it larger, or download it on a slide below):

Everything a company does represents behavior, and social media communications is no exception. Every behavior signals something about the company, and affects a variety of measures.

Good for Business & Bad for Business
On the top and bottom of the chart are two rectangles representing those things that are either good for business or bad for business. Everything a company does (except perhaps some completely unselfish philanthropic efforts) is either good for the company or bad for the company in a measurable way. Some of these measures include revenue, margin, customer base, subscriber base, etc. Longer term measures may be market capitalization and brand valuation. Every communications effort is either good, that is it improves one of these measures, or bad, in that it does not. Some initiatives can live in both quadrants, because they have some degree of badness, for example, but are good overall.

Ethical & Legal Behavior
At the top left are two circles representing ethical and legal behavior. They do not overlap perfectly, because there is behavior that the law allows which is not ethical, and behavior which is ethical, but not legal. A company or organization should apply both tests to its behavior, but these tests are not enough to give a green light to a program. There are those initiatives which are legal and ethical, but completely ineffectual, and should be abandoned. This is why the legal and ethical circles dip slightly into the area designated Bad for Business.

Unethical Behavior
Though I am sure to get an argument here, unethical behavior is the area that will require the most thought, and probably, the most discussion in your organization. Unethical behavior is represented by a grey circle, which is charitable at best. An ethical organization should not have too much trouble making ethical decisions. Don’t ask whether a campaign will deliver the results, but ask if it deceives people, gives an unfair advantage, or fails to represent the highest ideals of your company.

There are companies in which people know they are stepping across the ethical line, and choose to do so knowingly. This is what’s known as an actuarial decision. Someone has decided the potential rewards outweigh the risks of detection or complaint. While I personally do not endorse this strategy, it happens, so the diagram shows it. In some cases, people aren’t aware they are committing ethical gaffes, or they are unaware of changing custom in a particular area.

Illegal Behavior
Finally, the lower right circle indicates illegal behavior. Doing something against the law, like violating FTC or SEC regulations, is never in the best interests of the company. The risk is too great. Companies that get caught pay a huge price in loss of reputation and, often, revenue. And most companies do get caught.

Like I said, it’s just a framework for discussion, and I hope you find it useful. I am sure many of you have pondered the legal and ethical considerations of a marketing or PR effort. I hope you will share these in the form of a comment.

Since everyone loves slides, I’ve put this graphic on a slide. Please feel free to grab the slide here, use it freely, and if you improve it (I’m no Edward Tufte), please send me an updated version.

Tags: social media, public relations, ethics, compliance

Technology has made many things possible, and is enabling unethical people to pay as little as one quarter cent per word for their writing. The Internet is the great democratizer. It is also the great enslaver of the disadvantaged and the marginalized.

Freelance writers, often students, mothers, and older people, are the victims of a global conspiracy to pit people against each other to auction their skills and time for as little as possible.

One of the culprits is Amazon’s Mechanical Turk (MT). Amazon didn’t invent microworking, which is the practice of paying independent contractors by the task instead of by the hour. But they are the first globally recognized company to put their name on the practice, thereby endorsing it and making it an acceptable business practice.

Amazon MT is a service that allows businesses to contract with Amazon to have people perform very brief, discreet operations like manually forwarding an e-mail based on subject matter or moderating blog comments. My son, a student, worked for MT moderating pictures for a social network at the rate of a few pennies each.

ShortTask is another example of a service that brings together businesses and people who want to do microcontract work. In addition to facilitating this process, ShortTask often has questionable tasks like paying for positive product reviews and blog comments, Diggs, Twitter followers, etc.

And last night, someone tweeted a link to Article Slash, which had this posting:

“Hi, I need a group of writers or writing teams who can deliver 20-30 articles of 300 words every day. Payout will be made everyday through paypal.. 0.75$ for every 300 word article.”

Seventy-five cents per article! That’s .0025 per word, one quarter of a penny! If you could write 1200 words per hour (I’m a professional writer and I can’t), you could make $3 an hour doing this.

Our current minimum wage in California is $8, and the federal minimum is $7.25. As bad as that is, there are millions of Californians who would think they had died and gone to heaven to get $8 an hour. The rate at which people work and the quality expected by buyers varies, but the wages offered by these services, like the 75-cent, 300-word article, are equivalent to under $2 an hour. The last time the federal minimum wage was below $2 was in 1974.

Both California state and federal law require* that pieceworkers be paid a rate that is equal to or more than minimum wage, except for students and “new learners” (people who have never done the job before) who are paid at 85% of the minimum wage. Of course this is for regular employees, not contractors.

Some of the inevitable byproducts of this trend are:

• Devaluation of good writing, research and analysis
• Illiteracy
• Theft of editorial content

Microworking is an area in which the law has not caught up with technology and common practice. And the marketplace for these services is mostly underground, so the average person isn’t aware of it or upset by it. The operators of sites like Article Slash and ShortTask may argue that they are merely facilitators, and not responsible for the behavior of their users.

Ours is supposedly a free market economy, but we also have checks and balances so that everyone from the soup kitchen to the boardroom is protected from abuse. As the economic recovery slowly ticks up, one can only hope that supply and demand moderate the wages for microworkers so they are fairly paid for their effort and intellect. Unfortunately, the practices, which may have been made necessary by the downturn, will be status quo for some companies who will be unable to resist the appeal of continued lower operating costs.

* This is based on my research and interpretation of government documents. I am not an attorney and could be wrong about this.

Tags: Microworking, Article Slash, minimum wage, piecework, Amazon, Mechanical Turk, ShortTask, writing, writers

Sun CEO Jonathan Schwartz is unquestionably one of the best, and first, CEO bloggers in the world. He’s not only a pioneer, but an intelligent, articulate, engaging writer who sets a difficult standard for others to match. I was writing a column on CEO blogging this afternoon and noticed that Jonathan’s blog has not been updated since May 18 of this year.

As Jonathan writes on the blog, in the May 18 post:

“I recognize it’s been a while since I’ve posted a blog. For reasons why, just click here to read the background. And before you ask, SEC regulations and securities laws limit what I can discuss about the Oracle transaction, so don’t expect any insights on the topic.”

Oracle announced its intention to acquire Sun on April 20. Whenever companies are in this mode, strict SEC regulations govern all communications material to the deal, so silence is sometimes the best policy. It’s interesting that Jonathan was still active nearly a month after the announcement. Sun’s Twitter account linked to the blog was tweeting six-month old blog posts up until October 15.

I look forward to seeing Jonathan, one of the industry’s unique voices, blogging again.

Full Disclosure: I worked for Sun Microsystems for five years and knew Jonathan. I am a huge fan of the company.

Tags: Jonathan Schwartz, Sun Microsystems, Oracle, CEO, SEC, blog, blogger

I had the pleasure of speaking with Joanne Kisling and a group of Sun people this morning about my book SocialCorp. Joanne asked me about the barriers to corporate social media adoption and how communicators can help overcome resistance from company gatekeepers. Give it a listen over on Sun.com or download the MP3!

Tags: SocialCorp, social media adoption