In her article, “Dizzying PR Binge,” which currently appears under the “Considered View” banner on breakingviews.com and on The Huffington Post, Correspondent Lauren Silva Laughlin takes AIG to task for having multiple public relations agencies on retainer.
Ms. Laughlin suggests that hiring a public relations firm is just another prime example of AIG squandering government bailout funds and sticking taxpayers with the bill. She seems to view public relations as a corporate frill, just like a management “retreat” to a fancy spa, or a private jet, or a million dollar bonus given to an overpaid and unrepentant top executive.
Ms. Laughlin’s is an ill-considered view, and further proof that too many media outlets still do not understand public relations’ roles, outcomes, and value proposition.
For example, when public relations professionals are offered a seat in the executive suite, one important role they play is helping companies avoid the sort of catastrophic costs that AIG is facing.
Mark Weiner, North America CEO of Prime Research and author of “Unleashing the Power of PR: A Contrarian’s Guide to Marketing and Communication,” illustrates this brilliantly. Writing for American Executive, he explains:
“Take for example a Fortune 500 power utility that discovered that it would miss its quarterly earnings forecast. The company’s legal team urged the CEO to remain silent on the issue while the PR team recommended that the CEO get out in front of the issue by being proactive, accessible, and open. Within 24-hours, a content analysis of news coverage tracking six utilities—each of whom had missed earnings—indicated that those companies who avoided discussion of the earnings shortfall saw a steady decline of their news coverage and a similar decline in stock price and market capitalization.
“In more than one case, the utility companies with poorly defined communication strategies and inaccessible CEOs lost as much as 50 percent of their entire market value in just a matter of weeks. Conversely, those companies whose CEOs were transparent in describing their company’s issues and their plans for remedying the situation saw a only a short-term decline in stock price before a net gain of 12 percent in 12 month’s time. The potential risk to the company was so great that the CEO took no chances and took the PR team’s advice. The alternative strategy could have been catastrophic, costing the company billions in market capitalization.”
So, the more appropriate issue for Ms. Laughlin to explore might be whether or not AIG’s management sought the advice of its public relations counsel before placing catastrophic bets on the subprime mortgage market. Did they ever think to ask what effect such a meltdown would have on AIG’s operations, corporate reputation, and trust? Would AIG’s reporting relationships have permited such a dialogue?
I also doubt very seriously that AIG is engaging public relations firms to soothe the taxpayers’ souls, or portray the company as just another innocent victim in the current economic meltdown. My guess, as it would be in any crisis, is that the reputable and highly qualified public relations firms working on AIG’s behalf are tasked with explaining what happened, what AIG is doing to fix it, why such steps will be effective, and why those steps will prevent future such occurrences. Only then can the process of rebuilding AIG shattered image begin.
Ms. Laughlin does note that, “Despite a series of massive bailouts, the company has given little clarity on taxpayer losses to date or indeed much communication directed toward taxpayers at all.” Which is all the more reason why, in times of crisis, the role of public relations is more important than ever.
Michael Cherenson, APR, is PRSA’s 2009 Chair and CEO.