For corporate chiefs, PR blunders abound
Auto and union executives, from left, General Motors Chief Executive Officer Richard Wagoner, UAW President Ron Gettelfinger, Ford Chief Executive Officer Alan Mulally, and Chrysler Chief Executive Officer Robert Nardelli testify on Capitol Hill in Washington, before a Senate Banking Committee hearing on the auto industry bailout.
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Jeff Inman's marketing class got to talking the other day about the executive spa retreat at troubled insurer AIG three months ago, which was followed by last month's hat-in-hand pilgrimage of the Big Three CEOs from the Motor City to Washington, D.C.
University of Pittsburgh MBA students greeted their professor's working hypothesis -- that maybe it wasn't a great idea to use private jets when you're a struggling car manufacturer -- with two words of instant insight:
For people who study good public relations as well as those who try to practice it, the missteps of corporate America have been painfully obvious of late. The Wall Street bailouts might've been more welcome on Main Street, they say, had someone gone down Madison Avenue first.
"The thing that shocked me the most was all three of them arrived in their corporate jets," said Dr. Inman, an associate dean at Pitt's Katz Graduate School of Business. "You would've thought one of them would've said, 'Hmm, we probably shouldn't fly the corporate jet to Washington when we're asking for billions in loans-slash-support.' "
"It doesn't take a marketing professor or a Ph.D. in psychology or a PR person," Dr. Inman said, "to connect those dots."
The Motown jet spree last month may be the most startling recent PR blunder in the world of corporate governance, but history would suggest that it's far from the first.
Ray and Larry Werner are retired brothers who for decades were executives at the complementary advertising and public relations arms of Ketchum Pittsburgh.
"When the chairmen of our three biggest automakers flew into the nation's capital on their fuel-sucking corporate jets, it wasn't just dumb, it was totally without imagination," wrote Ray Werner in a recent letter to the Post-Gazette.
"Here's what my clients would have done. They would have driven a hybrid car from Detroit to D.C., stopping only once to fill up, followed by a train of media folks, and arrived at the steps of our Capitol with a kind of engaging humility."
Mr. Werner's advice won some nods around town.
"I read that letter, and I said I should've written that letter," said Bob O'Gara, advertising and public relations professor at Point Park University.
"I think that power corrupts, and if you're a bad CEO, you think you can just order something to happen," as in consumer and employee confidence.
Larry Werner may be a bit more tactful than his brother, but he arrived at much the same conclusion, drawing upon his experience helping to handle one of the biggest PR challenges of them all -- the Exxon Valdez mess of 1989, when oil spilled on Alaskan beaches.
Unlike some, he has a hard time believing the Motor City magnates didn't have plenty of smart public relations guys in the room who voted "yes" to hybrid motorcades and no to corporate jets. What the executives did with the advice is a different matter.
That was his experience with the Valdez situation anyway. The founder of Ketchum's crisis management operation, Mr. Werner recalled that Ketchum was one of four agencies Exxon hired to handle fallout from the oil spill.
"We went up to Alaska [but], again, it was a situation where they didn't have a strategy at the outset, and that cost them," he recalled. "It's still costing them."
Ketchum advised Exxon, Mr. Werner said, to take prompt action to reinforce transparency, credibility and concern for the community. But Exxon's top guns put off visiting the site for a week, he said, plus they didn't offer help to the local fishermen.
"We did put together a plan to make reparations and they chose to not follow our recommendation at the time," said Mr. Werner. "I think it was their lawyers who didn't want to set any precedent."
Larry Werner hailed the 1982 Johnson & Johnson Tylenol scare as a textbook PR success. "They did it right from the very beginning," he said, of the decision to pull all Tylenol from stores once cyanide from tampered capsules was traced to the death of seven people in Chicago.
"They pulled everything from the shelves immediately. They got the situation under control." Unlike the situation in Washington -- admittedly far more complex, noted Mr. Werner -- "they had a plan and executed it flawlessly."
Signs of the latest public relations bailout malaise, he said, were apparent in September when nobody on Wall Street or Pennsylvania Avenue earned much credibility as the FDIC seized the assets of Seattle-based Washington Mutual.
It was the largest bank failure in U.S. history, but somehow the message being conveyed was that it wasn't that big of a deal.
"Our financial system is based on trust," Larry Werner said. "Once WAMU failed, it was like a domino effect. The banks didn't even have faith in the other banks anymore."
Fast-forwarding to the auto executives and their private jets, he said: "It was kind of funny. The people I know who are in the business, even people on the street, were reacting to it. It was a classic faux pax.
"The first thing we said was, 'Where was their communications process?' That was so obvious, anybody could see it."
Anybody, perhaps, except corporate leaders who are loath to lose control or, as was apparent this week with the congressional testimony of Fannie Mae and Freddie Mac officials, are unwilling to utter the "W" word -- as in "we were wrong."
Gergana Y. Nenkov, an assistant professor at the Boston College Carroll School of Management, touched upon the difficulties that many have in weighing the consequences of their actions when she worked on research for her doctorate while at Katz.
One incident that piqued her interest was the headline Wall Street crisis during the spring of 2003 -- the near bankruptcy of American Airlines. The failure of corporate leaders to connect the dots then, she said, was stunning.
In April of that year, the airline's CEO Donald J. Carty was forced to acknowledge a $40 million-plus package of executive bonuses and pension perks -- a revelation that came shortly after he had pleaded with unions to accept $1.6 billion worth of concessions. Within a week, Mr. Carty was forced to resign.
Dr. Nenkov said her research showed the lack of such foresight can strike the board room and the rank and file alike; it has little to do with education level, job status or social bearing.
"It's amazing how people don't think about these outcomes," she said,
As far as how the Big Three CEOs handled their bailout request, she said, "I'm thinking that in this particular case, it's their usual behavior. Right?"
First Published December 11, 2008 12:00 am