While contemplating an ethical or legal gaffe or some other action that might discredit a company or organization, many executives forget that their actions will long outlive the media frenzy in the days and weeks after they are disclosed. Some will be forever branded with a scarlet “S” (for screw-up) monogrammed on their blazers and shirt pockets.
Amidst a less-than-stellar earnings announcement by Hewlett-Packard today, new CEO Leo Apotheker blamed the company’s services division and its “missed opportunities” under his predecessor Mark Hurd. Reuters goes on to say “Apotheker indirectly blamed the services unit’s problems on Hurd, who left the company in August amid allegations of sexual harassment.”
It’s been less than a year since Hurd was gently escorted to the door, but his tech media legacy is clear: he’s a cheating lowlife who incidentally ran one of the world’s largest and successful (over the long haul) companies. And the new CEO is also blaming him for the company’s financial woes.
More recently, Kenneth Cole committed an online faux pas that illustrated the blinding speed with which social media transmits news of reputational screw-ups.
We do forgive some who commit ethical blunders, and time seems to help. Nixon was the center of of some of the dirtiest tricks in American politics, yet many have softened their stance in light of his 1972 trip to China, which led to the establishment of formal ties between the U.S. and China. And sometimes we forget. Who ever mentions the late Kenneth Lay, convicted of fraud and conspiracy just five years ago?
What is clear, is that at least for a time, we label people who commit legal and ethical missteps with their deeds, a phenomenon that should be considered carefully before proceeding along any questionable path.
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.
Domino’s Pizza’s new Pizza Turnaround campaign set off a wave of discussions in the social media world. The Pizza Turnaround video, which was produced by Domino’s, features Domino’s employees, including its head chefs, and some of the company’s marketing executives, admitting outright that the pizza sucks. Some of the quotes in the video include “Domino’s pizza crust is to me like cardboard,” a sentiment expressed in a focus group but echoed by Domino’s executives. “Doesn’t feel like there’s much love in Domino’s Pizza,” says another focus group participant.
This is, to be sure, a bold move, and many are applauding Domino’s for publicly owning up to making bad pizza. Everyone’s talking about transparency, but not many companies are really doing anything about it.
There’s a reason for that, of course. Only an idiot is 100% transparent.
Setting aside literal definitions, what does “transparent” mean? For publicly held companies, “transparent” has come to mean conducting business and doing accounting according to GAAP (Generally Accepted Accounting Principles). Every company is supposed to report its financial situation using the same measures as every other company, and using the same measures every quarter, to ensure that shareholders and regulators can read them and make valid judgments and comparisons.
In the social media world, transparency extends beyond finance, meaning something like “using social media to expose to the public the inner workings of the company and the candid thoughts of its executives and employees.”
So where does the publicly held company draw the line? The CEO can’t be 100% transparent on his or her blog. Comments about the company’s finances are regulated by FASB and the SEC. Comparisons to competitors are regulated by the FTC. When, what information, and in what format an officer of a publicly held company can disclose information is all strictly regulated.
One could argue in fact that Domino’s admission that its pizza isn’t up to par is contrary to its obligations to shareholders to maximize value. In fact, Domino’s stock traded around $11.39 today, not far from its 52-week high, and nearly triple its 52-week low of $4.76. So how bad can the pizza be?
Maybe we expect too much transparency from the companies we do business with. How transparent are you? Do you tell everybody everything you are doing and thinking, or are there some things you might omit? If you want to be 100% transparent, you would have to walk down the street saying out loud, “That’s an ugly shirt.” “You look so cool with your Bluetooth.” “Your girlfriend is way too hot for you.” We wouldn’t call that transparency, actually, we’d call it Tourette Syndrome.
Why then do we expect the companies we do business with to overexpose themselves? I think the social media “movement” has pressured companies to act irresponsibly. OK, the Domino’s thing is clever and is attracting a lot of attention. And maybe Domino’s feels it’s “working.” But I think these guys are subjecting themselves to an unnecessary beating. The following (with one letter masked) was displayed by Domino’s on its Pizza Turnaround site:
When counseling clients on blog commenting policies, and the use of RSS feeds and Twitter feeds on their corporate sites, I remind them that they still own that real estate, and while they can’t control what people are saying about them out in the blogosphere, they can control their own Web sites. For example, no public company should permit racism, gratuitous obscenity, out-of-control bashing of the company or its competitors, etc.
I used to argue that companies should not surrender their brand to consumers, but should share it. Some things require careful branding and messaging, some things should be more open and participatory and a lot of things are simply beyond the company’s control. Domino’s has raised the stakes by inviting consumers to trash talk the company and its pizza. I wonder what’s next?
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.
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: reputation management, executive, ethics
