Thought Leadership

An Ill-Considered View of AIG and Public Relations

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.

9 Comments

  • You make many excellent points. However, part of the reason PR is viewed with suspicion in this situation is cited in your conclusion: the professionals will be “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.” PR is a management function concerned with building mutually-beneficial relationships between an organization and its constituents. If the PR experts are merely explaining, they fail. It’s only real PR if they listen, question, evaluate, troubleshoot, advise, drive change, start conversations (some of which should be uncomfortable), educate both the public AND the company, and generally help AIG build a relationship that’s actually good, rather than just good for AIG. Real PR serves AIG by helping AIG serve their stakeholders–not just their stockholders.

  • Two for two this past week, M.G.C.

    Heartening to see our two-month-old blog mature already into an impassioned, forceful, authoritative voice for our profession.

    Ms. Laughlin dishes more than “an ill-considered view,” as you characterize it with polite restraint. Misinformed, to be sure, but I believe she deliberately grabs a chance to lob cheap shots at two targets with one toss: AIG and “the spinmeisters.”

    There are carefully considered word choices, in my view:

    * Corporate communications professionals are “the spin machine.”

    * Internal and external advisers are a “PR binge” and a “PR army.”

    * Though she says public communication by AIG is needed, it’s simultaneously dismissed as “artfully crafted rhetoric.”

    Keep engaging with these snipers, Michael. You’ve got good aim.

  • Michael,

    Thank you for the unexpected recognition…I appreciate it very much.

    Let me offer an additional perspective: One of the most difficult challenges in public relations is quantifying the value of good counsel and evaluating the tangible impact of a crisis avoided.

    That being said, and assuming that AIG is the beneficiary of good PR advice, who can say how much more damage might have befallen the company had it not had the benefit of the quality counsel now in place?

    Best regards,

    Mark
    CEO
    PRIME Research North America

  • Whether they have none or a dozen isn’t important. Either they’re not following the counselors’ advice or the agencies should be fired and replaced.
    Example: AIG group met at a Phoenix resort. It was a trade show, and AIG had a legitimate reason to be there.
    A local television station did an investigative report and tried to talk to an AIG executive. All he got was a man running away from him at an airport.
    Days later we find from AIG that most of the cost was paid by others and it really wasn’t what was implied in the story.
    Why did it take days to explain this?
    Why wasn’te there a spokesperson at the site to work with media?
    Why did the executive panic and run? Didn’t anyone train him?
    Why didn’t the company realize how the event would look to the public and have a contingency?

  • These are all thoughtful comments and the type of discussions that our members should be having at monthly programs and the regional and national conferences. It will benefit members and the society as a whole if we engage in converstations about our role and practice the skills necessary to influence our bosses and CEOs. Too many members are recluctant to challenge leadership.

  • Actually, I find today’s anti-businessperson binge distasteful and offensive. Yes, there have been dishonest and unprofessional CEOs, just as there have been (my golly!) dishonest and unprofessional Congressmen, Senators, Presidents, Governors, Mayors, and myriad other civil servants. Singling out CEOs for “retreats” (e.g., sales incentives, conferences, trade shows, and other legitimate investments), private jets (far more flexible and economical when the time factor is taken into consideration; CEO time is valued differently than hourly wage time), and contractual bonuses (which might very well be earned when one considers that saving a failing company doesn’t necessary look like increasing profits at a successful company).

    Businesspeople and the free market did not cause this economic crisis. Government did, and it behooves us businesspeople to educate ourselves on it rather than taking the pablum fed to us by the press.

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