Friday, March 29, 2019
New Metric
Corporations base investor relations and executive compensation on GAAP -- generally accepted accounting principles. But, that may be about to change. ISS, a leading adviser on corporate governance, has announced it will start valuing CEO compensation on Economic Value Added metrics (EVA). This includes the cost of capital taken from the company's after tax earnings. It is a more rigorous -- and some say, more fair -- way to value the work of the CEO. CEOs might wish to reject ISS calculations but for one fact -- institutional shareholders listen to ISS and often vote ISS recommendations. It almost certain, then, that boards will fall in line and directors set CEO compensation according to EVA. The change might be profound for companies whose earnings look good until a capital charge is taken. If CEOs fall in line and calculate EVA, it is inevitable they will impose the methodology on those below them. This will spark a wholesale change in earnings reporting -- GAAP plus EVA. Look for a new way to position companies in years to come.
Thursday, March 28, 2019
Fraud?
Some people can project themselves into the media's consciousness with ease. That doesn't mean they are better or more talented than others but they have a knack for publicity. However, when they do so, they had better be prepared for scrutiny, because it will come sooner or later. That is why this is a cautionary tale. Michael Avenatti was most recently a national name as he represented a prostitute who claimed to have an affair with President Trump. Now he is under indictment for extortion and under pressure from the IRS for failing to pay taxes. He might beat the raps, but his reputation is ruined, especially should a jury decide he has been a fraud. In the internet age, one needs a clean past to survive public attention. Avenatti apparently didn't understand that or ignored it in his pursuit of a wealthy lifestyle. Now he is about to pay the piper and from the evidence, he might not have the wherewithal to do it.
Wednesday, March 27, 2019
Oops
NASA launched a fanfare of publicity for the first all-women space walk then at the last minute, it cancelled the effort. It belatedly realized it didn't have enough space suits of the right size. This bonehead mistake has created a furor and the obvious question of why the space agency didn't know that beforehand. NASA is a brilliant purveyor of publicity. It has managed through decades and lean budgets to keep the public attuned to space and its achievements there. One might forgive this error in light of everything else NASA has done, but the glaring nature of the goof calls into question of who is minding the agency. The public might not readily grasp large technical problems but anyone can relate to apparel that is the wrong size. NASA will make good eventually but by then it will be too late to garner the publicity it sorely wanted. All anyone will remember is that it should have happened long before.
Tuesday, March 26, 2019
Ugly Past
This family business is admitting that its two owners cooperated with the Nazis and used slave labor during World War II. It is donating $11 million to charities in reparation. One could ask why its members did not know of the complicity long ago. The explanation is that the two miscreants never spoke about their involvement. It was only after the family hired a historian to examine the issue independently did they learn the truth. It is hard on their reputation, especially since they control well known food brands and are subject to boycott for past transgressions. It was a good public relations for the firm to admit publicly of the collaboration and to condemn it. Even though the war ended decades ago, its impacts are still felt.
Monday, March 25, 2019
Spin, Spin, Spin
The Mueller report determined that the President did not collude with the Russians to poison the presidential election, but it was less clear about an obstruction of justice claim. This has set off a barrage of spin from Democrats and Republicans. The elephants are claiming complete exoneration. The donkeys want to look further into the unclear obstruction of justice. Senators, Congressman, staffers are seeking cameras, microphones and print columns to make their cases. It is Washington at its worst. Everyone wants to be heard, Everyone has a spin. The result is to confuse issues even more. The barrage of communications will continue, and the Democrat-controlled House will hold hearings. Ultimately, nothing will be decided but reputations will be smeared to the best of a politico's ability. It makes one want to avoid the news.
Friday, March 22, 2019
Reputation By Extension
Amazon Air is not owned by Amazon. It is a subcontracted shipping service. However, that makes little difference when there are problems with it, such as this crash. Amazon cannot hide and claim the problem was not its own. The company has the influence to make sure pilots are paid more and qualified pilots are hired. A hands-off approach is not reason enough to claim the problem is not Amazon's. It is reputation by extension. The carrier has the Amazon name even though it is not run by the company, and hence, it also has Amazon's responsibility. The company wants to compete with UPS and Fedex without paying the extra costs of those services. That is good in the marketplace, but it is not better by stiffing pilots on wages and increasing risks. The company will have to decide what to do, especially if there is another accident, but wrecked planes and dead pilots should not be deciding factors.
Thursday, March 21, 2019
Credibility?
How does a company that reports financials in a suspect way maintain credibility as a security firm? This is a challenge for ADT. The corporation would have you believe it is trustworthy to protect your property, but at the same time, it wants you to accept that its way of calculating income is better than GAAP and SEC regulations. ADT was fined by the SEC last December for non-standard reporting. It is apparently persisting in its course of encouraging reporters and analysts to look at it differently. Most consumers won't pay attention to income and balance sheets so ADT has room for maneuver. But, at some point a journalist is going to point out the hypocrisy and will assault its credibility. ADT would be better off if it started with transparency and accepted that it is not doing well as a business. This would give it impetus to change. Fiddling the numbers ultimately fools no one.
Wednesday, March 20, 2019
Cruel And Evil
A mother loses her infant son to flu. Then, she starts to get messages that accuse her of murdering him, that say her son never existed, that charge she is a terrible mother. This is a communications campaign waged by anti-vaxers who believe militantly that vaccinations are harmful. Their messages are cruel and evil. There is too much science behind vaccinations to lend credence to those who condemn them. Yet, they persist, and some of these misguided believers are well educated individuals. They have let fears distort their perception, and they attack whenever presented with evidence to the contrary of what they hold true. There is a massive publicity campaign and PR effort to get children vaccinated, but anti-vaxers are fighting both. There is no reason to accommodate them any longer and authorities are taking punitive action. Well they should, especially when anti-vaxers attack grieving mothers.
Tuesday, March 19, 2019
Can't Go Back?
Walmart is ending a popular price-matching program and customers are furious. The company's explanation is that it already offers the lowest price on most items so there is no longer a need for the comparison check. That is not what its customers say. They claim Walmart is greedy and trying to hide price increases. They have presented online their savings from the program as proof that the company doesn't always offer the lowest price. Walmart might wish now that it had never started the service. It can't go back without losing some shoppers or at least ruining its reputation with them. It's a lesson that not all customer aids are desirable. Some can box a company in like the price-matching program. Walmart is big enough that it can tough its way through this contretemp, but it might be asking why it had started price matching in the first place.
Monday, March 18, 2019
It Starts
There are still months before full-throated campaigning begins for the Presidency. That, however, hasn't stopped sniping, which is coming early and often. Consider this. Joe Biden hasn't officially declared he is running for the White House, and already he is being criticized for new-found wealth. It is a PR challenge he has to meet sooner rather than later. He has cashed in on his long political career during which he was avowedly and actually middle class struggling to make ends meet. Now he is wealthy from speaking tours and a best-selling book. His likely opponents for the Democratic nomination are holding that against him. Can he overcome the charge? Only time will tell on the campaign trail, which is long, strenuous and exhausting. It isn't for the weak. Reputations are torn down, insinuations made, lies told. Campaigners will use any trick or technique to win, dishonest or not. Biden understands this, but can he survive it?
Friday, March 15, 2019
No Shame
What can be said about a company that is caught multiple times doing wrong yet persists? It has no shame. This is the situation with Huawei and its advertising of its cell phones. Huawei persists in using DSLR images to hype the quality of its cell phone camera. It's as if the company doesn't trust its own product. The problem with that is that Huawei has been caught each time it has tried to trick the public. One would think that if you can't away with something the first time, you wouldn't want to try it again. Not so. This leads one to wonder how the rest of the company operates. Is it an amoral, win-at-all-costs organization? If so, why would anyone want to deal with them? If a company can't be honest in little things, what can be said for its stance in the marketplace? This, perhaps more than its affiliation with the Chinese government, might be what to worry about.
Thursday, March 14, 2019
Scandal And Reputation
The Roman Catholic Church is learning the impact of scandal on the tolerance of believers. A recent Gallup poll in the US "found that 37 percent of respondents said 'recent news about sexual abuse of young people by priests' has them personally questioning whether to remain Catholic — a 15 point increase since 2002." The results were predictable. The issue affecting every level of male clergy from Cardinal to parish priest has struck at the heart of an image of dedication and holiness. It makes no difference whether a minority of malefactors caused the problem. The entire body of the Church is smeared. It will take decades to dig out of this crisis and regain a semblance of moral stature. It might take generations. Meanwhile, the faithful who remain must endure questioning, suspicion and mockery. Perhaps Church authorities have learned that transparency is best. Secrecy has caused a meltdown of historic proportions. Surely, the pope, cardinals and bishops understand that?
Wednesday, March 13, 2019
Changed PR Forever
Yesterday's Google Doodle celebrating the birth of the World Wide Web was a reminder of how radically it has changed PR. Those of us ancient enough to remember the days before the Web will recall how difficult it was to convince CEOs of reputation issues, of persuasion that did not include advertising and the power of third party credibility. Today, especially with social media, reputation protection and advancement is a major thrust of corporate communications. Response times have moved from hours to minutes. The Web has given voice to millions of individuals who were unable to express themselves in the media because it was not available or was too expensive. We use to worry about letters to the editor. Today we are on alert for Tweets, for Facebook messages, for blogs, for complaints on consumer sites such as Yelp. Youngsters in the business look at the past as a time of leisurely response by comparison to today. It wasn't laid back. Pressure was intense to communicate but we lacked the media we have now. The old days are gone, and that's a good thing. The Web has thrust PR to the fore in the battle for reputation, perception and persuasion. It's a relief not to have to justify oneself day after day. We should thank Tim Berners-Lee for doing that for us.
Tuesday, March 12, 2019
Regrettable
Political operatives are opening fake local news websites. They are attempting to mislead voters into thinking stories on them are objective when they are nothing more than partisan propaganda. It is regrettable and dishonest. There is nothing wrong with taking sides. Newspapers in America started that way, and some still survive with a political bent. What is wrong is a pretense of objectivity when there is nothing of the sort in online columns. The publishers have no scruples, but that's not unusual in politics. The lowest forms of persuasion and publicity have all found their way into campaigns. There is no dignity in doing anything to win, which is the way many campaign operators act on both sides of the political spectrum. The malefactors this time are Republicans. Look for Democrats to follow suit.
Monday, March 11, 2019
Crisis
When two of your newest commercial aircraft crash in just a few months, you have a crisis of major proportions. This is what Boeing is facing. The company's reputation is on the line since its 737 Max jets have gone down and killed all on board. Suspicion has focused on new flight software that pilots might not have understood but the company says is designed for extra safety. Under certain circumstances, it will force the nose of the plane down and pilots lose control. No one is sure yet what the cause might be although the black boxes have been recovered. If Boeing is shown to be at fault, the plane maker has years of litigation facing it and a real possibility that airlines will stop buying its workhorse aircraft. Already nations have grounded their fleets of 737 Max airliners. The company is treating the situation seriously as it should, but there is no comfort for the families of the deceased.
Friday, March 08, 2019
Credibility?
Does a wealthy heiress have the credibility to damn CEOs for their high pay? Abigail Disney thinks so. The granddaughter of the co-founder of the cartoon kingdom has long been outspoken about the issue. However, CEOs can respond that she hasn't had to work for her fortune while they have risen through the ranks for 30 or so years and grasped the golden ring. They earned it and are not apologetic. Who then might be credible critics? Boards have tied CEO performance to pay but that hasn't ameliorated outsized compensation. A push to gauge CEO remuneration against a ratio of what workers receive hasn't been successful so far. Increased taxation results in ever more clever ways around the system. Perhaps this is an issue without resolution in the short term. Let the wealthy speak. They are as believable as anyone.
Thursday, March 07, 2019
Great PR
This article is great PR for the computer game, SimCity. The tale that it influenced a generation of city planners is a testimony to its power. It is also a reminder that games can be for good rather than just shoot-em-ups. I used to play SimCity but it has been a decade or more since I launched it and started terraforming land for a new town. I remember that it was a challenge putting in housing and commercial blocks, getting mass transit started, supplying electricity from power stations, building sewer and water connections, deciding on whether to put in a sports stadium and most importantly, doing all this while not going broke. The game teaches balance among opposing demands. One must proceed with care to build a city of several thousand. While critics note that the game is not perfect, it is good enough to inspire people to go into urban planning.
Wednesday, March 06, 2019
Empty Gesture?
Eli Lilly has announced it will make a generic version of its diabetes drug, Humalog. that will sell for half the price of its branded product. It seems like a good PR move until one examines the price -- $137.35 a vial. That's still too steep for diabetics who must pay for the treatment out of their pockets and need more than one vial a month. It also overlooks the fact that Humalog's list price has risen more than 1200 percent since it was approved for use in 1996. While patients will be happy to get a price break, they won't be satisfied for long, knowing that the generic version could and should be much less expensive. Lilly's move is close to an empty gesture. It looks good but there is little to it. It is also unlikely to appease Congress and the White House who are both pushing for pharmaceutical manufacturers to lower the cost of their drugs.
Tuesday, March 05, 2019
Man Bites Dog
Google said it discovered it was paying some women more than men for similar jobs. This is a man-bites-dog story. It is so unusual that it garnered headlines nationally. While it is never good to have pay inequities, it is a sign of company concern for women that it inadvertently got itself into this position. This comes in spite of multiple claims against it for discriminating against women. From a PR perspective, the company needs to do a better job of policing its compensation policies. It shouldn't be caught on either side of the pay question. Software engineers with the same responsibilities should be getting equal remuneration. It is good PR that the company is examining wage scales at all levels and trying to balance them, but one can ask why it wasn't done before now.
Monday, March 04, 2019
Great PR
When a company pulls off something spectacular, it is great PR for the organization and its employees. This is great PR. SpaceX has demonstrated flawless flight and docking of its crew capsule that is now locked to the international space station. It was five years worth of work and untold man hours to reach this success. and if the Crew Dragon returns to earth without trouble, the spaceship will be ready for regular service. One can criticize Elon Musk for arrogance and insensitivity but his company has triumphed. That is the measure of the business. Along with reusable boosters, SpaceX has dramatically changed the economics of space flight. Musk's car company might not be doing that well but his space company is hitting new targets again and again.
Friday, March 01, 2019
Arrogance
When a leader publicly criticizes a government agency that regulates him, it is dangerous. The agency can strike back. That is the position Elon Musk is in. He has attacked the SEC and says he doesn't respect it. The SEC in turn has asked for a contempt judgement against him. Musk is arrogant and seems to think that rules for other leaders of public companies don't apply to him. He is about to find out that they do. Will it restrain him in the future? Time will tell. He could find himself outside of the companies he founded and in a wilderness of irrelevance. If it happens, it will be his own fault, but he probably won't see it that way. Those affected with hubris tend to blame others when they fail. "It can't be me." Musk's board of directors must be in a quandary. How do they tell him to restrain his willful tweeting, especially after the SEC censured him for it? It is shaping up to be a PR disaster for Tesla and SpaceX.
