My Three Cents

The Boos That Blew It

2008-07-21T17:15:00.005-04:00

Sometimes the enormous pride that New Yorkers take in certain pillars of our city morphs from pride to arrogance. And I have always felt that arrogance warps one's perspectives.

The pillar I am referring to is the New York Yankees. The moment was the All-Star Game (American League vs. National League) at Yankee Stadium in New York last week; the game was located here to celebrate the national esteem in which the Yankees and the Stadium are held before it is razed in favor of a new stadium. Following an impressive pre-game ceremony in which dozens of Hall of Famers marched in a procession, every player was individually introduced to a crowd of approximately 60,000. When each of the three Boston Red Sox players who made the team (the Sox are arch rivals of the Yankees) was introduced, the Yankee fans at this nationally televised event booed them. And the booing was sustained throughout the game, each time each Red Sox player got up to bat, except when a Sox player tied a very close game. Then, of course, our fans cheered because it was a factor in a potential American League victory.

Well, we may have great pride in our Yankees, but we certainly do not have much pride in ourselves. What kind of hosts are we? And to reveal our worst traits on national television. This only feeds the New York reputation for arrogance, which I am not proud of.

At a game where inter-city rivalries within a league are always set aside, it was distressing to see Yankee fans exhibit such poor sportsmanship and commit such a public relations blunder, thereby embarrassing Major League Baseball before millions at one of its showpiece games of the year.

Technorati Tags: New Yorkers, pride, arrogance, New York Yankees, All-Star Game, American League, National League, Boston Red Sox, Major League Baseball, rivalry, business, communications, public relations

Skepticism About Starbucks

2008-07-14T10:14:00.010-04:00

This one is hard to fathom: Starbucks falls into a trap with Wall Street that I thought was usually the province of the inexperienced and unannointed.

What did it do? Something we always counsel client companies not to do: make promises to Wall Street, setting unrealistic expectations, and then not having the courage to say, “We blew it” early on. Pressure builds and suddenly Wall Street is “running a company’s business.”

A Makovsky + Company investor relations principle and one that I believe is shared by all investor relations counselors: always advise clients to run their businesses in the best interests of the shareholders -- or better yet stakeholders -- rather than by creating long shot promises which would make Wall Street happy, unless both coincide. By doing such, everybody wins. Why put a company in a vise?

According to The New York Times business section article, July 4th, commercial real estate brokers nationwide, on the heels of Starbuck’s announcement that it would close 600 U.S. stores, said that “the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations.” To meet the obviously impossible goal meant putting stores or leased operations within yards of one another.

The story noted that in 2004 Starbucks said it would double its pace of expansion with a goal of reaching 15,000 stores in the U.S., when it now has only 7000.

Since this was a company known by Wall Street for its rigor in selecting locations, the decision to close 600 stores, while partially related to the economy, is a blight on Starbuck’s reputation beyond Wall Street. By “living a lie” – in one fell swoop – the firm negatively affected its economic fortunes, its standing with Wall Street, and even potentially impacted the consumers who support it.

Now, of course, Wall Street should applaud the reality of its decision. Reality-based management, of course, in both the long and short-run is the best for the shareholders, Wall Street, and overall reputation.

Starbucks’ analysts will now approach the company with a level of skepticism, which did not exist before.

Technorati Tags: Starbucks, Wall Street, investor relations, reality-based management, The New York Times, analysts, business, communications, public relations

The Answer May Be in a Smile

2008-07-07T09:53:00.002-04:00

Like so many other fans, I was totally disgusted with the manner in which the New York Mets fired manager Willie Randolph. First, speculating about it for so long in the media ("twisting in the wind") and then, rather than terminating him in New York, having Willie take the trip to California where he led the team to victory and then, firing him ... at 11PM Pacific Time (that's 2AM in New York). Can you imagine! We all know what should have been done – the corollary of what was done. There have been endless articles about it. There's not much more to say.

While I periodically disagreed with his managerial moves, I continue to wonder how much was Willie's fault - and the tone he set - and how much was the poor chemistry among the players which produced all the errors, poor pitching, lack of hitting, etc. Without being in the locker room, I will never know.

What I do know is that in photographs and interviews, this is a team (and I mean each and every one of them) that rarely smiles. It hit me about a week or so ago in the midst of all the "Willie tumult" when Carlos Beltrán hit a home run and broke out in a big grin as he cleared the bases. Previously, I never saw him do that. "Wow." I said to myself, "what a great smile!" And we know that David Wright and Jose Reyes have poster boy smiles. But poster boy or not, this generalization about not smiling applies to almost all of these guys. You rarely see them smiling when the camera is focusing on them during games (okay, I can understand that) - but not even in still photos in the print press - even when they win.

One can conclude that they may not be happy, that they are a downbeat bunch. Think of the impact an occasional smile would have on the fans and perhaps on the players themselves. It's an image advantage. It stimulates attendance. It's contagious. It changes attitudes toward oneself and each other. It possibly could have an effect on the team's won-loss record. The Mets need a shot in the arm ... or maybe a tickle!

After all, despite the ho-hum first half, the Mets are only 3 ½ games out of first place. They could turn it around in no time.

But I bet it's not going to happen without smiles.

Most of us believe that happiness is the result of a lot of things: good health, happy home life, a fat wallet, a World Series championship. But according to a study spearheaded by Sonja Lyubomirsky, a professor of psychology at the University of California, people aren't happy because they are successful. They're successful because they are happy.

I've personally found that smiling forces optimism and confidence and that the latter two breed success. So how about it, guys?

Technorati Tags: New York Mets, Willie Randolph, Carlos Beltrán, David Wright, Jose Reyes, smile, happiness, Sonja Lyubomirsky, University of California, success, business, communications, public relations

Why Corporate Reputation Crises Are Years in the Making

2008-06-30T12:37:00.006-04:00

For many years – from my own experience as a public relations counselor (and that of friends in this field), I know that when the issue of proactive crisis planning for the management and prevention of potential threats to companies’ reputations, senior executives often would listen, nod, then stare silently into the distance. In contrast, any discussion of sales and profits engaged them immediately, eliciting an enthusiastic response.

These days, at least, leadership is likelier to say: “Advance planning would be a good thing to do.” Yet, as I watch their eyes, it’s clear that that they still view planning as pie-in-the sky … an intriguing idea, but down fairly low on their list of communications priorities. It’s pretty clear that most have no immediate plans to spend any dollars today on possibly life-saving planning for tomorrow.

However, the minute an oil field has to be shut down, a product has to be recalled, there is a security problem at the airport or an unethical act by a key member of a company — only then does corporate reputation rise to the top of the board’s agenda.

Obviously, the middle of a crisis is not a good time to be doing crisis planning, as it is strategy formulation under pressure. Management then publicly displays anxiety when they should be conveying calm. Far too often it’s in the midst of a crisis when the conversation begins for many companies … and that’s why so many fail to come out with their reputations intact.

It was not the fact that there were weather delays that ultimately cost David Neeleman, the founder and former CEO of JetBlue Airways, his job. He described the problem as one of faulty communication.

“We had so many people in the company who wanted to help who weren't trained to help," Neeleman said. "We had an emergency control center full of people who didn't know what to do. I had flight attendants sitting in hotel rooms for three days who couldn't get a hold of us. I had pilots mailing me saying, 'I'm available, what do I do?'"

This is a problem that could have been avoided by advance planning.

In truth, most “sudden” crises are predictable. Could the famous Tylenol tampering case have been predicted? Could the “Wendy’s thumb in the chili” scam have been predicted? Could the defects in the batteries used in Dell notebooks have been predicted? A good “potential crisis” discussion at any one of these companies with smart, creative public relations professionals most likely would have yielded these and many other risk-oriented scenarios.

Indeed, the reality is that all of these “sudden crises” were predictable with optimal planning. That is the point: very little happens suddenly. Most disasters are years in the making — be they managerial, product oriented or even natural disasters.

Certainly there are exceptions to the rule, but we often do not hear of these because the crises are avoided or minimized. Any solid reputation manager needs to employ a “Risk Vulnerability Test” with top management at least monthly. This is where potentially sensitive issues for a particular company are reviewed, possible scenarios are visited, and it is determined “how we would address them if…” A priority ranking system of red light, green light, yellow light could help establish which issues require immediate action.

Obviously, a strong reputation is the key to survival. It wins allies, encourages endorsements, expands business and attracts employees. Today most CEOs realize that and many work hard at building reputation. However, many fall short in the crisis planning dimension of the task. They have only themselves to blame if a crisis tarnishes what they’ve labored for years to build.

Technorati Tags: reputation, corporate reputation crisis, public relations counselor, proactive crisis planning, David Neeleman, JetBlue Airways, Risk Vulnerability Test, strong reputation, business, communications, public relations

Top 10 Writers’ Resources on the Web

2008-06-23T17:12:00.007-04:00

Lifehacker — a blog that focuses on techniques for increasing the productivity of your life (and software!) — recently published a list of the “Best Online Language Tools for Word Nerds”.

I’ve distilled the best-of-the-best from writer Gina Trapani’s list and added a few of my own to create my own list of the top 10 writers’ resources on the web. My selection criteria were simple: in addition to meeting the needs of people who write on a regular basis, my recommended websites had to be reliable, easy-to-use and free of cost. Here they are:

1. Google is a great first step when you’re looking for the spelling or meaning of a word. Just type “define:[word],” hit the search button and, almost instantaneously, you’ll get list of definitions. If you misspell the word, Google will helpfully ask, “Did you mean [correct spelling]?”

2. Acronym Finder is a searchable database of more than 610,000 acronyms and abbreviations.

3. Bartleby is one the most comprehensive reference libraries on the web. It allows you to search an array of books — including nonfiction, fiction, poetry and classic reference texts — all for free.

4. Common Errors in English was developed by Professor Paul Brians of Washington State University to help professionals avoid “lost employment opportunities, lost business, and titters of amusement at the way you write or speak.” It’s useful … and fun.

5. Confusing Words is great when you are trying to negotiate “confusables” (i.e., words commonly mistaken for each other, such as their, there and they’re or eminent, imminent or immanent).

6. TheFreeDictionary, another of those amazing Internet-enabled reference resources, includes medical, legal and computer dictionaries, a multilingual dictionary tool, a thesaurus, several encyclopedias and a literature reference library.

7. ThinkExist is a quotation search engine and directory with more than 300,000 quotations by over 20,000 authors.

8. Urban Dictionary is a collaborative community dictionary of pop culture and urban slang. NOTE: Because slang terms can often involve vulgarity, some listings on Urban Dictionary may be NSFW (Not Safe For Work).

9. Merriam Webster’s Visual Dictionary is an incredibly useful reference tool when you know what something looks like … but not what it’s called, or when you know the word … but can’t picture the object.

10. Visuwords not only defines words, it also allows you to see the relationships among words by way of an animated graphical node map that you navigate by clicking related words.

Technorati Tags: Lifehacker, Gina Trapani, writer's resources, Google, Acronym Finder, Bartleby, Common Errors in English, Confusing Words, TheFreeDictionary, ThinkExist, Urban Dictionary, Visual Dictionary, Visuwords, business, communications, public relations

The Ideal Education for Public Relations Professionals

2008-06-12T11:15:00.010-04:00

What’s the right education for someone who wants to enter public relations?

In my opinion, it would encompass a wide range of disciplines not currently unified in one program at the vast majority of universities offering degrees in communications in the U.S. … or anywhere else in the world, for that matter. What is needed is a School of Public Relations (at key universities) that broadens its curriculum to include more diverse subject matter than the more traditional “vocational courses,” (PR advocacy, writing, PR programs, creativity, media relations) which are of course, important as well.

When I think back on my own long career — and the myriad client problems I’ve had to solve — I’d say the perfect course of study for a public relations practitioner (in no order of importance) would include classes on:

Business

Business planning and strategy
Project and people management
How to negotiate
The techniques of persuasion
Marketing, sales and word-of-mouth
Financial skills (e.g., budgeting, accounting, reporting, billing and forecasting)
Economics
Human resources
The workings of Wall Street
Corporate governance
Database management
Mergers & Acquisitions

Social Sciences

The sociocultural and psychological dynamics of group behavior
The political science of interest group formation and survival
How to craft opinion and product studies
The impact of communications on society
Ethics
Government relations

Communications

Specialty writing (e.g., memos, speeches, reports, video scripts, blog copy)
Journalism (press releases, feature stories, editorials)
The art and science of media relations
Technology-driven communications (e.g., the internet and the social media)
Trend-spotting
Issues management
Communications and the law
The elements of advocacy
Understanding and reaching influencers
Communicating in a global, multicultural market
Event marketing
Creativity
Internal communications

Graphics

Graphic design and visual identity

Government

Understanding the Federal government (e.g. 3 branches, FDA, SEC)

The above is just a stream-of-consciousness sampling of the formidable skill sets required of today’s public relations professionals, and it is far from all-inclusive. This kind of training provides a basic foundation for intellectual agility: the ability to grasp complex information and act on it, quickly and efficiently. This skill is effectively learned in Schools of Arts & Sciences, where students are required to delve in to various subjects, learning and applying the knowledge rapidly. This is a fundamental need in public relations and should be addressed in a School of Public Relations, perhaps through joint programming with Arts & Sciences. In fact, mastering a diversity of subjects is one of the factors that led me into this field. And my intellectual desires have been more than fulfilled through the myriad subjects via clients I have tackled over the years…everything from computer, chemicals and automobiles to finance, hotels, aerosols, prescription drugs and robots.

Training alone in the more “vocationally tilted” communications schools is simply not enough to create a new generation of exceptional practitioners. The essential topics I’ve noted above are being taught in many parts of the University. The students, the profession and the clients are being disserved when the academic world can’t bring these pieces together in one School or develop joint programs with other Schools.

Unlike advertising, public relations not only builds awareness and promotes sales, it opens doors, triggers discussions, connects people, builds support, enhances credibility, changes cultures (and minds!), solves financial problems and creates political victories. The top public relations practitioner has to be more than “just” a communicator. He or she must be able to deploy a vast array of additional skills to master the problems confronting corporations these days and counsel a CEO.

As these proposed Schools of Public Relations become more demanding and stringent about who is admitted, we will gradually raise the level of people entering the field. Attracting top quality people to the field is an ongoing concern.

With more comprehensive and relevant training, more of us will be invited to have a “seat at the CEO table.” Because we will have been “table trained” from early on.

Technorati Tags: public relations professionals, education, School of Public Relations, social sciences, graphics, government, arts and sciences, PR skill sets, media, business, communications, public relations

Communicating Bias

2008-06-09T16:15:00.010-04:00

You’ve got to be taught
To hate and fear,
You’ve got to be taught
From year to year,
It’s got to be drummed
In your dear little ear
You’ve got to be carefully taught.

Way back in 1949, Richard Rodgers and Oscar Hammerstein explored the issue of racism and prejudice in their brilliant musical, South Pacific, which included the song “You’ve Got to Be Carefully Taught.”

You might have thought we’d have learned something in the intervening 59 years. Not so, according to a very persuasive New York Times op-ed, "Boys on the Bias," by former Governor of New Jersey Christine Todd Whitman, a Republican, who headed the Environmental Protection Agency from 2001 to 2003.

Whitman writes about the “images and expectations” of women candidates as communicated by the press throughout the Hillary Clinton campaign. Gender bias is still very much with us, she says, and it’s creating challenges for every female candidate. It is a problem that we must address and correct “if we want all people represented in public service,” Whitman points out. Her brief article is quoted below:

“Fifteen years after I was elected New Jersey’s first female governor, women running for office continue to face huge obstacles. Indeed, watching Hillary Clinton these last few months, it’s clear that voters and the news media still struggle with images and expectations of women as candidates."“When Mrs. Clinton made points forcefully, people called her shrill, not bold and determined. When Mitt Romney teared up, he was described as compassionate, while she was labeled weak.""For its part, the news media paid too much attention to Mrs. Clinton’s haircuts and jackets, ignoring the male candidates and their endless parade of blue suits and red ties. The press presented Barack Obama with his two years in the Senate as an agent of change, not a novice. In contrast, ABC’s Charles Gibson asked Mrs. Clinton if she would ‘be in this position’ if it weren’t for her husband."“To this day, a businessman with no elected experience is considered qualified for high public office; a woman with the same background is called unprepared."“Mrs. Clinton’s sex was not solely responsible for her loss, but the implicit and explicit challenges that women face are such that we as a country must take notice if we want all people represented in public service.”If we can be taught to hate and fear, it should follow that we can be taught to love and respect our fellow human beings. It seems to me that those of us in the communications professions — including public relations practitioners, mainstream media and members of the social media — should always try to keep that higher calling in mind.

Technorati Tags: racism, prejudice, Richard Rodgers, Oscar Hammerstein, South Pacific, Boys on the Bias, Christine Todd Whitman, Hillary Clinton, gender bias, media, business, communications, public relations

Pay Employees To Quit:A Public Relations Strategy to Consider

2008-06-03T13:46:00.004-04:00

Say you want to staff your call center with friendly, high energy, intelligent people who want to help customers and who enjoy their job. How do you find them? Well, apparently you hire people, train them, then offer them $1,000 to quit. Read this story from Harvard Business Publishing:

“It’s a hard job, answering phones and talking to customers for hours at a time. So when Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period.”

“After a week or so in this immersive experience, though, it’s time for what Zappos calls ‘The Offer’. The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit!”

“Why? Because if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for. It’s hard to describe the level of energy in the Zappos culture—which means, by definition, it’s not for everybody. Zappos wants to learn if there’s a bad fit between what makes the organization tick and what makes individual employees tick—and it’s willing to pay to learn sooner rather than later. (About ten percent of new call-center employees take the money and run.)”

Zappos employees also have no scripts, no call time metrics, and are empowered to do whatever it takes to make them happy.

Now you understand why Zappos pays new employees to quit – and it is a public relations strategy move all companies need to consider.

Technorati Tags: Zappos, Harvard Business Publishing, public relations strategy, commitment, pay to quit, business, communications, public relations

No Good Deed Goes Unpunished

2008-05-27T16:54:00.013-04:00

This is a story of how ethical marketing can become a lightning rod for critics.

Unilever has scored at the top of global ethical and sustainability indexes in the past year, but because activists believe that they get the most traction (and news coverage) by aiming at the biggest name, the company is being attacked because of the public stances it’s taken on environmental and social issues.

Case in point: Greenpeace named Unilever -- along with its global Dove agency, Ogilvy & Mather, and some U.K. PR firms -- as killers of Indonesian orangutans because the company buys palm oil from palms grown where rain forests have been destroyed. (Palm oil is supposed to be a healthful alternative to transfats in food as well as a cheaper alternative to other grain-based oils, as the U.S. government drives up grain prices as a result of its biofuel initiatives.)

Greenpeace sent people in orangutan suits to scale the company's London headquarters last month and unleashed sophisticated parodies of Dove's "Campaign for Real Beauty" on the London Underground and YouTube. I just saw a really scary YouTube video produced by Greenpeace about the Unilever’s responsibility for the deforestation of Indonesia.

I thought about what counsel I’d give to Unilever under these circumstance. I saw that the company responded swiftly on its website, with a video outlining its major new commitment to ensure that all its supplies of palm oil come from sustainable and certified sources. Unilever could also:

Meet with representatives from Greenpeace — invite them for coffee — to find out what actions they think are necessary.

Bring in an expert on the Indonesian rainforest expert to explain sustainability and describe how economic benefits can be delivered without endangering the environment.

Start a reforestation program to make up for what has been lost (if this is really true!) to support orangutan survival.

Promote the company’s standing on the GE+S Index — and all of its support activities to keep that standing.

Build and train an army of third-party advocates to counter the attacks by Greenpeace.

Technorati Tags: Unilever, Greenpeace, Dove, Ogilvy & Mather, Indonesian orangutans, palm oil, Campaign for Real Beauty, business, communications, public relations

Social Media: 19th Century Style

2008-05-19T09:56:00.008-04:00

In this Age of the Internet, when information is being disseminated at the speed of a "zillion" words per minute and crises and scandals can start with the click of a mouse, we understandably forget the 1800's, when social commentators used the medium of paintings to communicate societal concerns... making art among the "social media" of its day.

I was reminded of this when viewing "The Sleeping Spinner" (1853), among other paintings at the outstanding Gustave Courbet exhibit at the Metropolitan Museum of Art in New York City. The painting depicts a well-dressed, plump, middle class woman, yarn in hand, with a spinning wheel nearby, having fallen asleep in the midst of her work. A middle class woman spinning was against the conventions of the day, when such work traditionally was done by the rural poor. Falling asleep in the midst of your labors was a revolt against the work ethic of the day.

Another Courbet painting, "The Peasants of Flagey Returning From the Fair" (1850-55), which caused a scandal because of its huge size (almost 7'X9'), depicts commoners walking through a park, when previously paintings of such size were reserved for historical events. Treating such subject matter in a painting that monumental gave new stature to commoners.

In fact, Courbet became recognized for using paintings to challenge social conventions. Were he alive today, he might well have been a pioneer with a blog or a podcast, as well as a brush.

Technorati Tags: social media, social commentators, painting, Gustave Courbet, Metropolitan Museum of Art, work ethic, social conventions, business, communications, public relations

What's happening to the English Language?

2008-05-12T09:57:00.007-04:00

? where r we mtg 2mor pm
404 SIG2R SUITM :-)

This is an example of a kind of linguistic shorthand commonly used by young people on cell phones, in instant messages and in emails. In plain English, it reads:
I have a question. Where are we meeting tomorrow afternoon?
I don't know (code: 404). Sorry, I've got to run. See you in the morning. >smile<

In his technology blog last month on WSJ.com, Ben Worthen quotes James Billington, the librarian of Congress, who recently expressed concern about what he called "the slow destruction of the basic unit of human thought, the sentence."

Worthen asks the inevitable question: "With these young people set to join the workforce over the next decade, are we headed towards a dystopian office culture in which employees turn in reports and make presentations full of abbreviations and emoticons?"

My opinion? I think chat acronyms are okay for text messaging or informal emails. Teachers and businesses should not accept them. This is possible only if our institutions hold fast to standards.

Technorati Tags: English Language, instant message, WSJ.com, Ben Worthen, James Billington, librarian of Congress, chat acronyms, emoticons, business, communications, public relations

A Social Media Glossary – Part 1

2008-05-05T10:40:00.014-04:00

Before I wrote my first blog, I spent a lot of time looking at other blogs. I found that one of the most daunting aspects of negotiating the blogosphere was the entirely new language you had to master in order to understand what everyone was talking about. (Yes, folks, there was a time when I couldn’t tell an RSS feed from a wiki.)

I would bet that’s true for many CEOs … at least those of us who are not “techno-geeks.” So, in the interest of public service, I thought it might be helpful — and fun — to periodically showcase acronyms, words and phrases that have their own special meaning on the web. Today’s selection:

Aggregator: Also known as news aggregator and feed reader; a tool for gathering updated content from blogs and other websites and posting it to a single location for easy viewing. My Yahoo! and Google Alerts have built-in aggregators.

AstroTurfing: A fake grassroots initiative designed to generate online “buzz” about a product, service or idea. Typically the authors of this kind of campaign try to remain anonymous.

E-mail Bankruptcy: The condition of being so overwhelmed by the sheer volume of the email in your inbox that you just delete or archive everything without bothering to read it.

Folksonomy: Also known as social classification and collaborative tagging; the use of tags, labels or keywords by creators and consumers of content to classify information. Flickr and del.icio.us are examples of websites that rely upon folksonomy to organize their content.

Googleganger: A person with your name who turns up in the search list, when you Google yourself. (I don’t have one myself; but my assistant, Helene, has a googleganger who’s an award-winning weaver in Wisconsin!)

Linkrot: Links that formerly worked, but no longer do, because the original web page has been moved or deleted.

Lurk: To read without contributing or adding comments to online communities, thereby being effectively invisible to the rest of the group. Lurking can be a good thing, enabling you to learn the culture and unwritten rules of the group and the personalities of the other members before you make a comment.

Meme: An idea that seems to propagate itself within a culture or from blog to blog.

NSFW: Not Safe For Work; used to describe Internet content that’s inappropriate for the workplace

SEO: Search Engine Optimization; techniques designed to improve the volume and quality of traffic to a web site from search engines using targeted keywords

social classification

collaborative tagging

How to Handle Internet Rumors

2008-04-28T11:28:00.001-04:00

The new world of the social media can sometimes seem overwhelming. Charges of misdeeds — whether true or not — can spread at the speed of a mouse click. So how do you protect and preserve your reputation?

You do what food giant Heinz did … you set the record straight and you do it quickly.

In its May 2008 issue, English men’s magazine Loaded ran a photo of a faux can of Heinz Alphabetti Spaghetti — featuring tiny pasta shaped like swastikas instead of letters — with copy stating that the food company made the product especially for the German market during World War II. The brief article also bore a stamp claiming it was “100% true.”

It was an old and totally unfounded rumor that had been debunked way back in 2002 by Snopes.com and Heinz was not amused. Its lawyers were on the phone with Loaded immediately, and the magazine issued an apology “to Heinz and to anyone who was offended by the article, which we admit was false and irresponsible.” You can read the apology here; but be aware that, generally speaking, Loaded is NSFW (not safe for work).

British newspaper The Wigan Evening Post quoted a Heinz spokesman who said: “Perhaps the article came from one of those weird Internet rumors that are not based on facts. Whatever the origins, the magazine clearly chose not to check the facts and made this completely erroneous claim.

“We carefully track any references to Heinz and, as soon as the article appeared, we were on to Loaded to make a complaint,” he continued. “We are pleased that the magazine has set the record straight.”

The apology was picked up all over the blogosphere and in publications ranging from The Times to Food Business Review.

It’s a great example of how an image-savvy company that monitors the blogosphere can take control of an issue before it can become a crisis.

SubPrime Mortgages: The Crisis that Doesn’t End

2008-04-21T10:02:00.004-04:00

Crises are rarely monolithic. There are always all kinds of reverberations … and a company (or industry!) that cares about its image and reputation will identify areas of vulnerability, address them proactively and communicate quickly and accurately. If they don’t, it’s likely the problems will continue.

Witness the subprime mortgage crisis.

As a direct result of this fiasco, federally chartered banks held more than $12 billion worth of foreclosed properties nationwide at the end of 2007, about 100 percent more than a year ago, according to a recent story in the Chicago Tribune.

In some parts of the country — where property values are low and there are dense concentrations of foreclosures — there are lenders who foreclose on the formerly overpriced subprime housing and evict the owners, but don't actually take title to the property, to avoid paying taxes on it.

According to some experts, this could create abandoned neighborhoods of boarded-up buildings. Remember the Bronx in the 1970s? Look for suburban neighborhoods to go that way in the future. And that may deal yet another blow to the reputation of the retail banking industry.

To stop this emerging blight and resulting reputation erosion, lenders must organize through their associations to lead the development of financing programs, either through government or private sources — if they can't support the programs themselves.

Action is required now if we are going to halt a wave that will have long-term negative economic impact and further weaken confidence in an important pillar of our society.

Technorati Tags: subprime mortgages crisis, crisis, federally chartered banks, foreclosed properties, Chicago Tribune, retail banking industry, reputation, economy, business, communications, public relations

Olympics: Yes or No?

2008-04-14T15:56:00.006-04:00

“Faster, Higher, Stronger, No Longer,” an op-ed in this Sunday’s issue of The New York Times urges the end of the Olympics because of certain sordid incidents throughout its history. Writer Buzz Bissinger points out that there have been problems at nearly every Game.

The Beijing 2008 Olympic Games are now associated with human rights abuses, air pollution and food purity issues. Among previous games, there were: the bombing in Atlanta, the Munich Massacre (where pro-Palestinians held the Israeli team hostage and 11 people died), steroid use by top athletes, the bribery of judges, a boycott because of the Soviet Union’s invasion of Afghanistan and so on and so forth. Bissinger recommends an American pull-out, asserting that “there is only one way left to improve the Olympics: to permanently end them.”

It is true that the reputation of the Games has suffered from these transgressions and that new rules and regulations are needed to prevent future abuses, through penalty or incentive. For example, it cold be mandated that potential host countries must demonstrate that they do not violate human rights to be eligible.

While there are clearly deficiencies in the Olympics as they are currently constituted, it is very clear to me that the interaction of the thousands of athletes from around the world; the exposure of the fans to other cultures and countries; the good will, camaraderie and hope that are generated far outweigh the defects of the Games. I contend that the Olympic Games demonstrate that the world can come together, that politics can obstruct but not defeat this unity — thereby increasing the potential for friendly understanding among nations.

Not having the Olympics is no solution.

The op-ed quotes sports broadcaster Bob Costas as saying of the participants: “This is their chance to march into the Olympic Stadium. It is the culmination of all their time and effort. Many of them come out of impoverished circumstances, and they are exposed to more in two weeks than they might be in two years.”

The Olympics must remain a symbol of hope and goodwill, and that alone should sustain its reputation, despite the obstacles it may always face. As globalization accelerates, so will the need for greater world cooperation and integration. An American pull-out would certainly represent a rejection of those values as well as being a further blight on our own reputation.

Technorati Tags: Olympics, The New York Times, Buzz Bissinger, Beijing 2008 Olympic Games, Atlanta, steriods, bribery, Afghanistan, Soviet Union, reputation, Bob Costas, hope, business, communications, public relations

Information That Can Save Lives

2008-04-07T16:32:00.006-04:00

People often forget that public relations can save lives. The information that is being communicated is so vital that heeding what is read or seen or heard can have life or death impact. That’s why I’m writing this blog today.

Makovsky + Company has just launched a campaign and a website for our client, Quest Diagnostics about the critical issue of colon cancer, one of the most common, most survivable cancers in the U.S. … if it’s caught and treated in the early stages.

According to the Centers for Disease Control and Prevention, up to 60% of deaths from colorectal cancer could be avoided if people over 50 received the recommended screening tests.

Every year, doctors across the U.S. provide their patients with millions of take-home colorectal cancer screening tests and remind them that early detection saves lives. Yet, according to Quest, in a recent study, only 31% of 1,818 patients actually completed an at-home colorectal screening test!

There are lots of screening options available. Some — like the FOBT (fecal occult blood tests) and FIT (fecal immunochemical test) — are non-invasive and can be completed in the privacy of your own home, like Quest’s InsureFit™. But they can’t help save your life if you don’t use them!

Approximately 150,000 people are diagnosed each year with colon cancer, and one-third of these patients will ultimately succumb to the disease. These are tragic numbers, considering colorectal cancer is largely treatable when detected early on. Please add to the survival statistics! Join this health initiative to reduce the incidence and death rates of colon cancer.

I can personally attest to the importance of screening. I urge you to start today. Do it – and don’t delay.

Technorati Tags: Do You Have the Guts?, Quest Diagnostics, Centers for Disease Control and Prevention, colon cancer, colorectal cancer screening, FOBT, FIT, health initiative, business, communications, public relations

Battling eMail Overload

2008-03-31T09:19:00.018-04:00

If you're like me, you're drowning in a tidal wave of emails.

In 2006, the average corporate email user received 126 email messages every day ... up 55 percent since 2004, says market research firm The Radicati Group. If you spend just 60 seconds reading and responding to each message, that's two hours out of every eight-hour workday. Moreover, if corporate email traffic continues to grow at its current pace, in 2009 you can expect to be spending 41% of your workday managing your email.

In his Small Agency Diary in Ad Age last month, Marc Brownstein argues that "e-mail is diverting our best waking hours from thinking, conceptualizing and dreaming big ideas."

"It is very easy to come to the office, sit at the computer, and read/respond to e-mail for hours," he says. "Some of it is clearly useful, and maybe even billable. But let's face it -- most of it is tactical. Real thinking occurs when you shut off the digital tools and focus on the challenge at hand with just your mind, and perhaps a fellow collaborator or two."

My top three techniques for managing email overload include:

Setting aside time at the very beginning and end of the day (and a mid-day peak) to send and respond to emails. (The rest of my day is devoted to thinking and interactions with live human beings, in person and on the phone.) Obviously, there are exceptions to this rule e.g. client or organizational crises or other urgent developments.

Never "touching" a piece of email more than once. All emails are answered or forwarded and filed. Conversations are best held over the phone.

Banning "PDA prayer" during meetings. (That's when people in a meeting discreetly hide their Treos and Blackberrys in their laps, under the conference table, while checking their emails. It's just rude!)

What tactics have you developed for minimizing what Brownstein calls "the gravitational pull of email"?

Technorati Tags: email, email overload, The Radicati Group, Ad Age, Marc Brownstein, Small Agency Diary, business, communications, public relations

What Happened to Our Safety Net?

2008-03-24T11:26:00.005-04:00

Ignited by the subprime mortgage crisis, the recent collapse of investment banking firm Bear Stearns — and its rescue by JP Morgan Chase and the Federal Reserve — have raised new questions about our financial system, the credit crunch and what to do next to resolve this economically threatening situation.

At the heart of this debacle is the issue of trust: the borrowers no longer trust the banks and the banks no longer trust the borrowers. Obviously, changes in the financial system are required to restore that trust. Below are excerpts from economist, Paul Krugman’s column in The New York Times (March 21, ’08), “Partying Like It’s 1929,” which cites the cause, the effect and a possible solution to save our financial system. We need to do everything possible to communicate Krugman’s rationale to our congressmen and regulators.

…We’re paying the price for willful amnesia. We chose to forget what happened in the 1930s — and having refused to learn from history, we’re repeating it.

Contrary to popular belief, the stock market crash of 1929 wasn’t the defining moment of the Great Depression. What turned an ordinary recession into a civilization-threatening slump was the wave of bank runs that swept across America in 1930 and 1931.

This banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.

As the decades passed, however, that lesson was forgotten — and now we’re relearning it, the hard way.

To grasp the problem, you need to understand what banks do…

Normally, banks satisfy both desires: depositors have access to their funds whenever they want, yet most of the money placed in a bank’s care is used to make long-term loans. The reason this works is that withdrawals are usually more or less matched by new deposits, so that a bank only needs a modest cash reserve to make good on its promises.

But sometimes — often based on nothing more than a rumor — banks face runs, in which many people try to withdraw their money at the same time. And a bank that faces a run by depositors, lacking the cash to meet their demands, may go bust even if the rumor was false. Worse yet, bank runs can be contagious. If depositors at one bank lose their money, depositors at other banks are likely to get nervous, too, setting off a chain reaction. And there can be wider economic effects: as the surviving banks try to raise cash by calling in loans, there can be a vicious circle in which bank runs cause a credit crunch, which leads to more business failures, which leads to more financial troubles at banks, and so on. That, in brief, is what happened in 1930-1931, making the Great Depression the disaster it was. So Congress tried to make sure it would never happen again by creating a system of regulations and guarantees that provided a safety net for the financial system.

And we all lived happily for a while — but not for ever after.

Wall Street chafed at regulations that limited risk, but also limited potential profits. And little by little it wriggled free…

For example, in the old system, savers had federally insured deposits in tightly regulated savings banks, and banks used that money to make home loans. Over time, however, this was partly replaced by a system in which savers put their money in funds that bought asset-backed commercial paper from special investment vehicles that bought collateralized debt obligations created from securitized mortgages — with nary a regulator in sight.

As the years went by, the shadow banking system took over more and more of the banking business, because the unregulated players in this system seemed to offer better deals than conventional banks…

The financial crisis currently under way is basically an updated version of the wave of bank runs that swept the nation three generations ago. People aren’t pulling cash out of banks to put it in their mattresses — but they’re doing the modern equivalent, pulling their money out of the shadow banking system and putting it into Treasury bills. And the result, now as then, is a vicious circle of financial contraction…

This is no way to run an economy. It’s time to relearn the lessons of the 1930s, and get the financial system back under control.

Technorati Tags: subprime mortgage crisis, Bear Stearns, JP Morgan Chase, Federal Reserve, Paul Krugman, The New York Times, Great Depression, banking crisis, economy, Wall Street, stock market, business, communications, public relations

The Communications Challenge for Argentina

2008-03-17T10:29:00.005-04:00

My wife decided that she wanted to go to Argentina to celebrate a special birthday. Why Argentina? I thought. What did I know about Argentina? What did anyone know about Argentina? Why not Paris? Or St. Barts? Or even Costa Rica?

Admittedly, I had heard good things about Buenos Aires - that it was a charming city, worth seeing. But when I queried friends and acquaintances about Argentina, I usually got a blank stare along with "No, never been there, never thought about it and never really considered it. What's there?"

For all intents and purposes Argentina is a secret in this country.

Having just returned from Argentina and now knowing it is the eighth biggest country in the world - and certainly one of the most beautiful - I believe Argentina is in serious need of a public relations campaign in the U.S. Obviously, Americans do not know what they are missing, because Argentina has not proudly showcased its spectacular scenic vistas in a campaign that would bring flocks of Americans to its shores. In fact, it was the Brazilians we met in Argentina who were the most vocal when it came to singing Argentina's praises.

The graceful city of Buenos Aires with its many parks dotting the concrete landscapes; venerable European buildings mixed with magnificent skyscrapers; the tango, which pervades the city through its clubs and sometimes even the streets; Iguazu Falls, one of the seven forgotten Wonders of the World which makes Niagara Falls seem like a modest dribble; and Bariloche, the magnificent scenery mecca where the Andes Mountains join with other Argentinean mountains and seven lakes to create the lushest scenery I have ever seen. Our guide said, "The Swiss come to Bariloche to take pictures and then put them on their postcards and call it Switzerland."

And then there are the people who are warm and friendly. It is summer there now, and the weather is perfect. Like New York, Buenos Aires has many distinctive neighborhoods that make it a wonderful city to walk through. I had a chance to brush up on my Spanish, and every day it got better. We saw the Eva Peron Museum which gave us a chance to see how she is portrayed in Argentina - as a heroine - compared with her unflattering portrayal in the movie (unpopular in Argentina), "Evita."

Yes, and one thing I forgot which could be a lure for anyone: Argentine ice cream. It's better than gelato, most likely because there are many flavors with dulce de leche in them. The consistency and taste make the ice cream both a habit-forming self-indulgence and a tourist magnet. Of course, there are also the famous beef ("the best in the world") and top-notch wines.

What's more, Americans also ought to know that Argentina is a place where
our dollar goes far!

As if Argentina doesn't already have an embarrassment of natural riches to
talk about, there's also the easy trip to Antarctica, which could be the basis of an exceptional story about this spectacular destination.

According to Argentina's National Institute of Statistics and Census (Instituto Nacional de Estadística y Censos), foreign tourism was up 22% in the first quarter of 2006 over the same period a year earlier. The majority of these tourists (31%) came from Europe. Fewer than one in five - about 108,000 - came from North America.

I think it would be a cinch to promote the story of Argentina with the objective of increasing the number of North American tourists by 25%, to 135,000 a year ... attracting a total of 519 additional visitors there per week.

I would certainly go back again. So will others, once a solid communications program is put in play.

Technorati Tags: Argentina, Buenos Aires, public relations campaign, Brazilians, Iguazu Falls, Niagara Falls, Bariloche, Andes Mountains, Switzerland, Eva Peron, ice cream, Antarctica, business, communications, public relations

A Unique Starbucks Strategy

2008-03-10T10:18:00.011-04:00

Every now and then, a company's management comes up with a simple but brilliant public relations move where the very action itself shows how much it cares about its customers. The move scores a triple whammy: it gets media attention in advance of the action, during the action and afterwards, maximizing visibility. And to add further impact, it has the advantage of potentially building sales. Starbucks' recent strategy had all of these ingredients.

A couple of weeks ago, on February 26th, from 5:30 p.m. to 9:00 p.m. local time, Starbucks closed nearly 7,100 of its stores in the U.S., ostensibly to retrain its baristas in making the best possible espresso shots, steam milk and other drinks for its customers.

The Seattle coffee giant made a public announcement, saying that, starting Wednesday morning, it is promising customers that their drink should be made perfect every time. If not, the company is urging customers to let the barista know and they will remake it correctly.

"Over the years we kind of lost our way," Starbucks CEO Howard Schultz told workers in a video that started the training, the Wall Street Journal reported. Schultz urged workers to "really embrace this moment" and make a more genuine connection with the company's customers, after the training session.

What more can a Starbucks' customer want than a demonstration from management that it desires to produce the best drink possible ... in accordance with its customers' expectations?

Further, think about the transparency of the strategy from a customer vantage point and the support it likely engendered from many quarters. Most of the time management in similar situations does not publicly acknowledge the problem and would conduct such training sessions in secret. In this case, the president openly announced that things were not what they should be and needed to be improved. We can all not only identify with that, but sympathize as well. I have always believed that the truth triumphs. This is a refreshing example of that.

The triple-whammy publicity I saw with my own eyes ... in everything from ABC News and The New York Times to the BBC and Stephen Colbert on The Colbert Report.

Although I do not have access to the sales report, the next day I went into a Starbucks to get some coffee; the product was excellent and the store was as busy as ever. Whether that was true everywhere, I cannot say, but the move did get me into the store. It also told me that this management is "tuned in" in so many ways. Overall - meaningful to the business as well as a reputation plus.

Technorati Tags: Starbucks, Howard Schultz, reputation, Wall Street Journal, ABC News, The New York Times, BCC, The Colbert Report, business, communications, public relations

Honesty in Advertising

2008-03-03T10:00:00.005-05:00

Under Congressional pressure, Pfizer, the world's largest research-based biomedical and pharmaceutical company, will be pulling its TV ad for Lipitor, its cholesterol-lowering drug. The ad prominently featured Dr. Robert Jarvik saying he's a user of the product and apparently rowing a boat. It turned out the rowing was done by a stunt double; and Dr. Jarvik didn't start taking Lipitor until after he was hired by Pfizer.

The House energy and commerce committee also has suggested that the ad presents Dr. Jarvik as a medical expert, when most of his career has involved the invention of the artificial heart. Ian Read, Pfizer's president-worldwide pharmaceutical operations, said in a statement that "the way in which we presented Dr. Jarvik in these ads has, unfortunately, led to misimpressions and distractions from our primary goal of encouraging patient and physician dialogue on the leading cause of death in the world – cardiovascular disease. We regret this. Going forward, we commit to ensuring there is greater clarity in our advertising regarding the presentation of spokespeople in the statement."

This is a very distressing situation, and obviously a mistake was made. Fortunately, the worldwide president jumped in quickly and appropriately apologized for the error, thereby attempting to recover some of the integrity lost in this incident, and I commend him for that.

Many presidents have been absent at such times of need, compounding their original problems. American consumers traditionally admire the quick admission of a mistake, and if the company has a long history of building trust, as Pfizer certainly does, consumer confidence is usually restored more rapidly.

Nevertheless, when one thinks of all the work that is put into the development of an ad, and the misrepresentations that evolved during subsequent policy discussions, one must question — in this Age of Transparency — Pfizer’s system of checks and balances …especially at a time when outside customer needs and the specter of a declining pharma industry reputation, factor into internal review.

For a company that has made such a significant contribution to medicine in the U.S. — and worldwide! — we know that President Read's statement and his rapid response are emblematic of the standards that we can anticipate and which exist in its medical and scientific areas.

Technorati Tags: Pfizer, Lipitor, Dr. Robert Jarvik, The House energy and commerce comittee, artificial heart, advertising, President Read, Age of Transparency, biomedical and pharmaceutical company, medicine, business, communications, public relations

Take a Hard Look in the Mirror

2008-02-25T11:55:00.007-05:00

In this age of transparency, how do you explain a battle among obesity experts over a New York rule, scheduled to become effective in March, requiring calorie counts per item to be listed on menus at chains with 15 or more restaurants (including fast food restaurants)? Common sense would tell you that the more information the better. Right? Particularly for people trying to lose or maintain weight.

Anyone can understand why Burger King might be against having 990 calories written across from its Double Whopper with Cheese. But really, in today’s world, fast food management has to face a public relations reality: customers can find such information on the internet. And if customers discover that management is opposing such disclosure, they can cause a maelstrom on the web which will likely end up hurting the restaurant more than the calorie listing does. Responsibility for listing the calorie count could also be a factor that encourages restaurants to offer a healthier choice.

But this situation takes an unexpected and challenging public relations twist. The person leading the battle against the New York rule, according to “Conflict on the Menu,” an article in the February 16 issue of The New York Times, is none other than the incoming president, Dr. David B. Allison, of the Obesity Society, an organization of obesity doctors and scientists.

Dr. Allison, the article reveals, is about as conflicted as he can be. He is a paid consultant to Coca Cola, Kraft Foods, Frito Lay and the New York Restaurant Association. In fact, the latter paid him to write and submit an affidavit to the U.S. District Court for the Southern District of New York arguing that the new rules could backfire “whether by adding to the forbidden-fruit allure of high-calorie foods or by sending patrons away hungry enough that they will later gorge themselves even more.” He even cites a study that dieters who were distracted [whatever that means!] while eating were more likely to overeat when presented with high caloric information.

Question #1: Why would the Obesity Society not be more thorough in vetting the background of someone who is elected president?

Question #2: Why don’t the members of the Obesity Society fire their incoming president — someone who is obviously using his new title to merchandise consulting business … to the point of taking a position that appears to be contrary to the basic philosophy of the Society he leads? Dr. Allison says he is “happy to be involved in the pursuit of truth.”

Question #3: Why would the Obesity Society stand by and permit its reputation to be tarnished in broad daylight? One would assume it is dedicated to healthy eating. Why would it sanction someone who feels there may be value in holding back information that helps people make healthier choices?

Fortunately, at least one member of the Obesity Society — Dr. Barry M. Popkin, director of the Interdisciplinary Obesity Center at the University of North Carolina is very angry about what Dr. Allison has done. He is now filing an affidavit supporting the city’s position … but the entire organization needs to take a hard look in the mirror.

Technorati Tags: obesity, dieters, fast food, calories, Obesity Society, Dr. David B. Allison, Coca Cola, Frito Lay, Kraft Food, New York Restaurant Association, Dr. Barry M. Popkin, business, communications, public relations

Thinking Time

2008-02-19T14:56:00.006-05:00

Lately I've been doing a lot of thinking about thinking time. Why? Because more and more I realize how critical it has been to the positive things that have happened to me in my career. I define "thinking time" as that period of the day or week when I can isolate my mind and just focus on whatever I want to think about without interruption. Thinking time is critical for important business or personal decisions, and if there is insufficient time dedicated to it, generally I find important things do not turn out as well. Extrovert that I am, perhaps thinking time appeals to the introvert in me, that wonderful time when I can be alone with my thoughts and really gain a perspective on everything I am involved in.

Nevertheless, with my busy business calendar, it is a real challenge to get adequate thinking time, unless I actually schedule it. When many issues accumulate and there are lots of complex documents to read and think about, I indeed put plans on my business calendar to spend the day out of the office ... usually at the local library. I also address those decisions I need to mull over, when one quick think session is just inadequate to resolve the matter.

Sometimes, great thinking time happens when I take a pause from work, or go out to lunch or dinner alone. The best thinking times for me – and I believe for many people – are short sessions at odd times: walking down the street, taking a shower, working out in a gym, listening to my iPOD, riding a train or subway or just sitting in a comfortable chair, staring into space. Fortunately or unfortunately, I have gotten used to thinking between interruptions at the office, even though I don't like to do it that way, and it is my last resort. But I don't always have a choice; and these brief "stolen moments" can be productive.

What kinds of things do I think about? Mostly, business, client, employee or family matters. It could be mulling over a creative solution to a client problem, the organization or direction of the firm, an employee's aspirations, rewarding someone who has done a great job, a financial challenge, a strategy for a meeting I will lead, marketing ideas for a client or the firm, themes for a speech I will be giving or an article I'm writing, developing new services or strengthening current ones.

Do you recall Coca Cola being called "the pause that refreshes"? Thinking time is kind of like that for me. It clears my mind, invigorates me and enables me to move forward.

Technorati Tags: time, thinking time, Coca Cola, business, communications, public relations

Are They Killing the US Capital Markets?

2008-02-12T11:13:00.002-05:00

I have been very concerned about the state of the US capital markets of late. The market’s gyrations aside, we have seen a marked decline in initial public offerings over the recent years. I discussed this matter with Mitch Gross, the founder and former CEO of Mobius Management Systems, Inc., a publicly-traded company which was acquired last year and was formerly a Makovsky Investor Relations client.

Q: Why the lack of IPOs?

A: There are three things that are killing the public markets: 1) government regulation; 2) Reg. FD; and 3) overly aggressive shareholder activism.

Q: What about shareholder activism?

A: Today, corporate boards and managers live in fear of activists. Boards and corporate managers are afraid to invest to build their businesses or make acquisitions for fear of things not working out leading to loss of market value making it easier for activists to launch an attack to oust management. As a result, market and growth opportunities are missed as well as efficiencies given the curtailed investment in capital improvements. This is particularly problematic for small cap growth companies that lack easy access to the capital markets.

Q: What happens to these companies? They can’t continue to operate this way, can they?

A: Ultimately, these companies wind up selling out in an attempt to realize some measure of value. Studies have shown that most boards and managers act both in the companies’ and perhaps more important, their own interests. When attacked by outside forces they react accordingly. Typically, the price is not optimal as managers grow weary of the glare of public scrutiny. Oftentimes, the acquiring company “guts” the business hoping to realize some economies of scale, resulting in a loss of jobs and perhaps market position for the products acquired.

Q: What about the regulatory environment particularly Reg. FD and Sarbanes-Oxley?

A: I believe that Reg. FD - which curbs the practice of selective disclosure of material nonpublic information - has had a very profound impact both on companies and investors. Reg. FD has instilled a disclosure muzzle on management because of the simultaneous release requirement and has severely inhibited the flow of information and the ability of corporate management and boards to communicate with shareholders. To greater or lesser extent (probably greater), this has exacerbated the problem of shareholder activism. You can’t make investment decisions without information. Other regulations pertaining to the disclosure of executive compensation and corporate governance (particularly in the area of proxy voting) will place additional stress on corporate managers and make being public less appealing.

When it comes to Sarbanes-Oxley - which came into force in July 2002 and introduced major changes to the regulation of corporate governance and financial practice - I look at it simply as a “poor man’s tax.” You have to comply and you have to spend the money to comply. So, like a tax on bread, Sarbanes-Oxley effects smaller, less well financed companies dramatically more than the larger entities. These rules and their associated costs are pushing companies to either stay private or sell out. As a result less companies go public and the investing public has less good opportunities in which to invest. The end result? The current growth in “private equity” funds that enable the wealthy investor to take private stakes in growing, innovative companies.

Q:What can be done to change things?

A: That’s a tough one. It would help if shareholders were better educated so as to understand the difference between corruption and bad business decisions. Years ago, people understood the risks. You invested based upon a wealth of information and if you were smart you stood to make a reasonable return. Now only the rich benefit from the future of America through their participation in private equity vehicles.

Q: Is there a chance for legal changes?

A: Perhaps, we might move toward a more prudent system. I think boards and legislators should resist the recent trend toward changing proxy voting rules such as requiring minimum votes to elect board members. These regulations tend to take the control of companies away from boards and management and turn it over to the “voting public.” Companies just cannot be expected to take advantage of opportunities and perhaps risks if they are continually worrying about the next proxy and the next vote.

In their zeal, regulators have opted for more laws in stead of efficiency. It would be better if Corporate America asked itself: “Is this right” as opposed to “Is it legal.” Ours is now a class action culture with the lawyers being the chief beneficiaries. There might be some changes to Sarbanes-Oxley based on a company’s size which could lessen the burden on smaller companies. However, I don’t believe there will be changes in the near future.

Technorati Tags: US Capital Markets, Mitch Gross, Mobius Management Systems, Inc., shareholder activism, Reg. FD, Sarbanes-Oxley, business, communications, public relations