The Taliban resurgent in Afghanistan. The U.S. House wants to spend $550 million on new jets for themselves. Banks fork over billions in bonuses after receiving trillions in U.S. taxpayer funds. How’d you like to be the PR folks who need to handle those issues?
When I was relatively young in public relations, our top-five execs were poised to gather up a prodigious pile of cash, stock and options — they hit their targets, and then some, for the year. The main way they’d done so, however, was to cut headcount by 10 percent across the board. Preparing the internal communications for that proxy release (which would include the compensation details) wasn’t an easy task.
There were good business reasons for the compensation strategy, not the least that there were contractual obligations — they were owed this compensation. The packages had all been vetted by the compensation committee of the board of directors, comprised only of “outside” directors — people who weren’t also employees of the company. The goals for the year were bottom-line oriented, aligning the interests of the executives with those of the shareholders. A substantial amount of the dollar value of the pay was long-term compensation — three years’ deferred. And, the largest portion of the package was in restricted stock and stock options, both of which were designed to keep high-performing executives at the company for several years.
After reading the proxy, I felt reasonably comfortable with the reasons for the high pay. I wrote a paragraph not too different from this last one in a questions-and-answers document for managers, answering the question, “Why did these executives get such high compensation?”
The corporate treasurer called me, with a smile in his voice, and said, “This is an argument you can’t win. Let’s not try to explain the reasons for the packages. Just say that there may be questions as a consequence of news media coverage and refer interested parties to the Proxy.”
I was pretty disappointed. I’m a fan of sharing the reasons behind decisions. Of course, the danger here was the snicker factor.
The snicker factor is the likelihood that that people will snicker when they read the explanation, that the intent of being transparent and honest will instead be seen as spin.
The reality is that executive pay is a tough story. The reality is that contracts tend to insulate execs from downside risk, that the independent directors are execs at other firms, their motives suspect… You can almost hear the conversation around the water cooler, visualize the Tweets… “Yeah, right! These guys all take care of their own, they’ll do anything to get their piece of the pie, what do they do around here, anyway?”
Do we only explain if there is a likelihood of winning the argument? That certainly would simplify the measurement of our efforts in these matters. By the way, I’m aware of at least one company that, as a matter of policy, separates proactive and positive PR from reactive and negative PR. They feel like they have a great track record and lots of positive reinforcement. It’s not exactly what the Excellence Theory calls for (two-way, symmetrical), but it has its fans.
For another firm, staying out of any no-win story was the primary objective, and they did (and do) a fine job of it.
As long as we define our function as one of advocacy — and are above board about it — this makes perfect sense. In those circumstances, we adopt the model that calls for non-participation if there is no objective benefit to our organization. We increase reputation risk by not participating, but perhaps that’s the main question: How risky is participating and explaining compared to staying away from such controversy?
It seems to me to be a question of certain risk versus uncertain risk — we know the snicker factor will kick in if we participate. We don’t know what will happen if we don’t.
Avoiding the devil you know can be a compelling strategy. What do you think?
