The cover story in the current issue of BusinessWeek (October 4) titled "Fuzzy Numbers" posits that despite reforms, corporate profits can be as "distorted and confusing as ever" and today's financial reports are "riddled with jargon that's hard to fathom and
numbers that don't track."
One of the "solutions," says the article, has been the much- bandied Sarbanes-Oxley Act of July 2002. The accounting reform has brought new challenges (and opportunities) for those senior communication execs who are able to turn into English said financial
reports that BW likened to Sanskrit.
But SOX or, the new moniker, SARBOX, doesn't take full effect until next year. It's a serious learning curve, but one that most senior PR executives have to catch up to when you consider that demand for a clear picture of a corporation's finances is at an all-time
high.
With New York Attorney General Eliot Spitzer uncovering wrongdoing in one industry after another (financial, pharmaceutical) and media outlets now considering it their divine right for corporate transparency, the rules concerning corporate information have truly
changed.
SOX and similar issues were discussed in a PR News-sponsored Webinar last week, "From Wall Street to Main Street: Driving Communications in High Profile Litigation and Crisis." The seminar was designed to help senior communications executives navigate
new pressures brought on by Sarbanes-Oxley, Reg FD, and other recent regulations implemented because of the rash of the corporate scandals in the late 1990s.
"Companies have begun to put out everything because they don't possibly want to be the candidate who the SEC or some other regulatory body says, 'You withheld information,'" says Michael Robinson, director of Levick Strategic Communications, who's held
senior communications positions at the Securities and Exchange Commission, Nasdaq and National Association of Security Dealers (NASD).
Reg FD and SOX certainly present some new headaches, but they also offer new opportunities for communications/ investor relations executives. Knowing that you have to get information out quicker allows you to use it to your advantage, for example setting up
separate links on your Web site to push investor information.
In the wake of Enron, Tyco and other front-page scandals, "people really want to know what how make money," Robinson adds. It's one thing to know what a company produces but increasingly stakeholders want more clarity on revenues, expenses and the bottom
line.
What's more -- in the 24/7 news maelstrom -- during a financial crisis a corporate communications exec should be the first person in the boardroom door to tell "CEO, CFO, and the chairman of the board that there's a problem," Robinson adds. "There's nothing
worse both from a strategic sense and a practical sense not to get the unvarnished truth" from PR.
He referred to former White House press secretary Marlin Fitzwater's edict that (the first) President Bush "would hear the good news and the bad news simultaneously and in real time."
Indeed, if the boss happens to hear about critical news from legal or accounting, for example, "you now have to climb back uphill. First you have to explain why you missed [the negative news] and then you have to prove to everybody else that you can solve the
problem even though you didn't find it."
Having some established ground rules -- like unfettered access to the C-level -- enables companies to navigate crises. But there are several things to prepare for ahead of time, such as knowing that "deadlines aren't yours, they're the media's," Robinson says. "That's
why you can never get into trouble by saying, 'We don't know yet, we're working to find an answer.' The minute that pebble gets thrown in the pond the ripples will go everywhere."
Acting fast in a crisis is critical, but only "if you're prepared," says John Mariotti, president-CEO, The Enterprise Group and former president of Rubbermaid Office Products Group. "Acting fast if you're unprepared can be devastating."
A fundamental problem in confronting crises is that the left hand seldom knows what the right hand is doing. Richard Levick, an attorney and head of Levick Strategic Communications, which has handled the communications efforts for more than 3,000 high-profile
cases, says that when the "brand is at stake [PR, legal and, C-suite execs] seldom get together and that's why companies get behind."
Levick recently spoke at a conference in front of 800 general counsels from American, Asian and British companies. He asked attendees how often their lawyers ask them how much the litigation, crisis, etc. will impact the brand. "Only three hands went up. In
other words, the question is never asked. It's up to us [as communicators] to make sure we're part of the dialogue," Levick says.
Although the media tended to build up a lot of companies amid the salad days, they're now more inclined to knock them down. Why? Because it's what they do. Levick points to a recent CARMA study showing the volume of nasty stories on financial services
companies are trumping positive pieces. And at the current rate of the media's preoccupation with litigation, Levick adds, "You know there's likely to be negative stories on your industry and possibly your company."
Contacts: Richard Levick, 202.973.1303, [email protected]; John Mariotti, 614.840.0959, [email protected]; Michael Robinson, 202.973.1303; [email protected]