Communicating (or not) big profits in recession
“The Joy of Sachs” article from Paul Krugman in yesterday’s New York Times drives home the unpleasant truth: “Goldman is very good at what it does. Unfortunately, what it does is bad for America.” Goldman Sachs has been in the crosshairs of many journalists and commentators since announcing its unbelievable second-quarter earnings of $2.7 billion, up 36 percent from the first quarter.
It may not be easy to work for Corporate Communications at Goldman Sachs these days, having to position such profit and “the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year…” (Guardian) With more than 33 million Americans on food stamps, up 1.2 million in just two months, no spin is going to ameliorate the impact of staggering profit and enormous bonuses.
Back in December 2006, Goldman Sachs’ CEO, Lloyd Blankfein, sent the following message to everyone in the bank when the bonuses were coming through, according to the London Times: “Don’t be ‘irrational or arrogant’, he warned.” We don’t know if Mr. Blankfein left a voice mail for his employees last week. According to Bloomberg, the only indication about how the company intends to conduct itself came from its CFO. “Our model really never changed,” Goldman Sachs Chief Financial Officer David Viniar said in an interview. “We’ve said very consistently that our business model remained the same.” And here’s the rub: if the business model has remained the same, and your profits are up, you’d better pay attention with what you do with money.
There were serious warning signs about the public’s perceptions about corporations months ago. When Richard Edelman presented his Edelman Trust Barometer 2009 – Paradise Lost at the Davos Forum back in late January, he said this: “Trust in business has collapsed in the United States, with American attitudes toward the private sector now comparable to France and Germany, which are historically the lowest among all nations surveyed.”
The Edelman report suggests how corporations should conduct themselves in these demanding times: “We have moved from a shareholder to a stakeholder world and to meet its challenges, business must change its approach to policy and communications. You have heard my appeal to the corporate sector for Public Engagement. At Edelman we’ve witnessed its effectiveness through private sector diplomacy, in which business works in cooperation with NGOs and government to address major global issues; through mutual responsibility, a combination of cause-related marketing and corporate social responsibility; through shared sacrifice in the face of the global recession, not just in equitable compensation, but also in supply chain management; and continuous conversation with stakeholders, one characterized by agility, timeliness, and contribution—not control.” Back in January, Mr. Edelman was “optimistic that business has the ability to adapt to this new environment.” I don’t know how Mr. Edelman feels today, but sadly, the situation got worse.
You know it’s getting unpleasant when the Wall Street Journal writes an editorial that openly chastises Goldman Sachs: “We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business. Ideally we would shed those implicit guarantees altogether, along with the very notion of too big to fail.” Diane Frances, a journalist at the Financial Post, a conservative Canadian daily, takes it even further in her blog: “This week the headline should have read: ‘Goldman Sacks America’s Taxpayers’ instead of Goldman Sachs posts a US$3.88-billion quarterly profit.”
So how do you successfully communicate big profits during a deep recession? Forget it. There is no way to spin this one.
