Goldman Sachs’ Bonus Quagmire: PR Overhaul Needed

All eyes will be on Goldman Sachs this week as it gets ready to reveal employee compensation details—after postponing the announcement last week.

Given the ongoing public distrust of the financial sector and some questionable PR strategy moves, PR News asked three crisis management and reputation experts the following question: In the lead-up to the release of Goldman Sachs’ final compensation pool and bonuses, how well is the firm reacting to public sentiment and what could they do differently?

Jim Lukaszewski

â–¶ Jim Lukaszewski, CEO and President, The Lukaszewski Group: For U.S. bankers and Wall Street, shame has become the name of the game. And it’s going to get worse before it gets better. [JPMorgan Chase CEO] Jamie Dimon whines about “being tired of public vilification...we paid the money back, with interest,” he says. “Now leave us alone,” [he seems to be saying]. What planet are these people living on?

Goldman Sachs, as though living in the 1950s, persists in pushing out tens of billions in bonuses. Never mind the hundreds of thousands of families in America and millions of Americans suffering, homeless and jobless, largely because of the greed and excesses of the financial sector. Goldman’s response is to give its top 30 managers an even bigger windfall: stock redeemable in five years. This apparent concession to public outrage will probably result in five to 10 times the compensation Goldman was originally proposing to provide.

Only in America would such arrogant institutions expect to survive with their management largely intact and applaud each other for so few screwing so many so completely and profitably. Here’s what is needed:

1. Voluntary community-based actions everywhere that demonstrate some recognition by these fat cats of the pain felt by the public.

2. A massive financial industry private sector effort to help Main Street (like approving a lot of loans).

3. Stop the whining and phony apologies. Put a face and a voice to Wall Street that people can trust.

Jason Karpf

â–¶ Jason Karpf, PR/marketing consultant: Goldman Sachs’ bonuses have become a regularly scheduled crisis for the company (and who says you can’t plan for a crisis).

The delay in making the announcement and double-talk [illustrate] Goldman Sachs’ continued disconnect from PR reality. The fall 2009 furor over Goldman’s bonuses prompted its $500 million small business assistance program, equal to 3% of the payouts, according to The New York Times. The belated offering did not stem popular ire, media bloodletting or political denunciations.

Can monolithic corporations repair bad reputations? Wal-Mart has improved its image, an effort aided by public familiarity with the retailer. Relatively few people could explain what Goldman Sachs does, inspiring detractors’ descriptions like Rolling Stone’s “great vampire squid.”

Recommendation: Donate a sizable portion of the bonuses and promise to do so every quarter until the financial crisis has abated. More huge and mishandled bonuses will encourage President Obama’s “Financial Crisis Responsibility Fee” and chronic congressional grilling of CEO Lloyd Blankfein.

Dan Simon

â–¶ Dan Simon, Managing Director, Cognito Americas: Thanks to its niche client base, Goldman Sachs has traditionally managed to avoid proactive engagement with the wider world, a strategy that served it well until recently. But times have changed and the public and the government can now exert a much greater influence.

Goldman has had 18 months to roll out a holistic PR strategy, but teaching an old dog new tricks has clearly been difficult. The steps taken recently have been the right ones: trumpeting the firm’s philanthropic efforts, engaging in a new $500 million small business initiative and converting a greater percentage of its cash bonuses to equity.

Goldman is a cautionary tale on the value of building long- rather than short-term relationships with the public. If we are to avoid the kind of populist 50% bonus tax being levied in Europe, Goldman and other investment banks are going to need to rethink their engagement strategy. PRN

[ Editor’s Note: If you have a question that you would like to have answered in an upcoming installment of “PR Advisers,” e-mail Scott Van Camp at [email protected].]

CONTACTS:

Jim Lukaszewski, [email protected]; Jason Karpf, [email protected]; Dan Simon, [email protected].