Friday, March 16, 2007

Telling On Oneself 

So this is what the Sarbanes Oxley law has become -- forced transparency. Before the law, it is unlikely General Motors would have said publicly that its internal accounting controls aren't working. Such tattletale statements are a new kind of reputational crisis. "Uhh, sorry but we can't add."

Such filings pose an interesting situation for management. It is forcing leaders to say publicly they are incompetent. How does one defend that in terms of public relations? There is little one can do except to report progress in getting problems fixed. It is unlikely, however, that PR had any influence on a press release or other news related to the SEC filing. This is a situation in which the lawyers and CFO controlled what was said and how much. The PR department may not have known the filing was being made. Yet, it has direct impact on the reputation of the company and its managers. GM will now have to keep investors apprised of its progress in fixing its accounting control system in addition to other challenges the firm is facing. Reputation management is more difficult than ever.


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