A Word to the Wise

“Mind the gap,” warns a recent article in the Financial Times earlier this month. FT columnist John Plender offers substantial evidence that “income inequality in the U.S. is at its highest since that most doom-laden of years: 1929.” And, I would add, it doesn’t bode well for the image and reputation of retail and investment banks and hedge fund and private equity firms.

Here are just two of the gasp-inducing indicators Plender cites, which were the result of an analysis of Congressional Budget Office figures by Jared Bernstein of the Economic Policy Institute:

• Between 1979 and 2005, the pre-tax income for the poorest households grew by 1.3% annually and middle incomes grew by less than 1%, while the income of households in the top one percent grew by 200% pre-tax and — even more shockingly — by 228% post-tax.

• The result of this lopsided distribution of income growth was that, by 2005, the average after-tax income for the bottom fifth of households was $15,300; for the middle fifth $50,200; and for the top 1%, just over $1 million.

The subprime mortgage crisis and the collapse of the American housing market has left negative equity in its wake … also anger about a system that gives banking executives huge bonuses when the economy is booming, while taxpayers pick up the bill when banks fail.

This is certainly a public relations challenge, but it’s not just a PR challenge. It’s a fundamental operational issue that also needs to be addressed by the entire financial services industry — including banks, investment banking, hedge fund management and private equity firms and their professional associations — to avoid regulatory backlash … or worse.

Top Ten Most Useful Health Websites for Consumers

I’ve just run across a news bite that I want to share with everyone interested in obtaining accurate and reliable healthcare information for themselves and their families. It’s also a great resource for those of us who work in healthcare and pharmaceutical marketing.

The Consumer and Patient Health Information Section of the Medical Library Association has published its list of the most useful websites for healthcare consumers. Listed in alphabetical (not ranked) order, the “top ten” are:

• Centers for Disease Control and Prevention (CDC)
• FamilyDoctor.org
• HealthFinder.gov
• HIV InSite
• KidsHealth
• MayoClinic.com
• Medem Medical Library
• Medline Plus
• National Cancer Institute
• New York Online Access to Health (NOAH)
All of the healthcare websites were evaluated on the following criteria: credibility, sponsorship/authorship, content, audience, currency, disclosure, purpose, links, design, interactivity and disclaimers.

The Demise of Truth?

A couple of years ago, in his My Three Cents blog, PR guru Ken Makovsky wrote about the concept of “truthiness,” a word coined by the Stephen Colbert, host of the Comedy Channel’s Colbert Report. Truthiness is believing what you feel or wish were true, without reference to logic, evidence or facts.

There’s new book out called True Enough: Learning to Live in a Post-Fact Society, by Salon.com staff writer Farhad Manjoo. In it, he explores the idea — well supported by cognitive scientists— that when the facts don't fit a person’s frame of reference, the frame stays and the facts are ignored.

Manjoo cites a study by Stanford professor Shanto Iyengar and Washington Post columnist Richard Morin who tested Republicans and Democrats’ reactions to a list of headlines covering topics ranging from politics and race to travel and sports. The headlines were randomly paired with one of four logos: BBC, CNN, Fox and NPR. Not only did the Fox logo triple Republicans’ interest in stories about politics and Iraq, it even increased Republicans' interest (and decreased Democrats' interest!) in headlines about travel and sports.

The rise of the internet and the disintermediation of the mainstream media were supposed to help us get to the truth faster than ever before. But when people choose to read only the news that supports their ingrained prejudices, those of us who are responsible for public relations and brand management must recognize that we are facing a bigger challenge than ever before.

Environmental Claims Meet with Consumer Doubts

It seems that everybody these days is leaping on the “green” (or clean technology) bandwagon. I’ve seen press releases and ads taking the moral — i.e., green — high ground from companies in virtually every industry, from financial services and professional services to pharmaceutical and technology.

It’s no surprise to find that the blogosphere is exploding with talk about environmental issues. According to Nielsen Online, sustainability buzz more than doubled between September 2006, when blogger messages on the topic totaled 83,000, and December 2007, when they had skyrocketed to 172,000.

Unfortunately, one of the most popular blog topics is corporate hypocrisy — also known as “greenwashing” — where companies misrepresent their commitment to sustainability with aggressive PR campaigns. Greenwashing was the topic in 25% of all sustainability discussions on the web in 2007, according to Nielsen.

Confirming consumer skepticism, a recent web survey by Burst Media, an online media and technology company, found that while 70% of respondents recalled seeing green ads at least occasionally, more than 20% said they never believe the claims. Two-thirds say they only believe the claims sometimes.

Before you risk overstating your company’s use of clean technology, check out the Federal Trade Commission’s Guides for the Use of Environmental Marketing Claims. Issued by the FTC in cooperation with the U.S. Environmental Protection Agency (EPA), they can help ensure that your company’s green claims don't run afoul of the law.

Good News Ahead for PR Firms

A couple of weeks ago, the Council of Public Relations Firms announced its members’ fourth consecutive year of double-digit revenue growth.

“It demonstrates that public relations as a discipline is no longer a ‘nice-to-have’ but rather a ‘must-have’ for clients of all kinds,” according to Kathy Cripps, president of the Council. “This is particularly evident in consumer products/services, healthcare and technology [PR].”

Looking ahead to 2008, 84% of public relations firms are projecting top line growth, at an average overall rate of 10%. These numbers track closely with projections of 10.3% compound growth through 2011, made last fall by Veronis Suhler Stevenson. What’s more, according to the U.S. Department of Labor’s Bureau of Labor Statistics, employment of public relations specialists is expected to grow by 18% from 2006 to 2016 … faster than average for all occupations.

However you cut the numbers, our future is a promising one.

The Power of a Well-Managed Brand

My politics are my own business, but I have to give “props” to the team behind the Barack Obama branding initiative.

Not only is the campaign’s red, white and blue logo — an “O” which evokes a rising sun — simple, effective and easily identifiable, but it sometimes seems as if the campaign’s volunteers have been issued copies of a style manual … and they’re actually paying careful attention to it! Campaign communiqués are all set in Gotham, an elegantly simple font that gives a very American look to all the campaign’s communications, including its website.

In the interest of bipartisanship — and because this blog entry should in no way be construed as an endorsement of any political candidate — you should also check out the websites of candidates John McCain and Hillary Clinton for comparison.

Do Ethics Matter? Yes!

Our job as PR practitioners is to build connections and trust, so ethics ought to be top-of-mind for us at all times, whether we work for corporations or public relations/investor relations firms.

We’ve already experienced the consequences of ethical lapses on the corporate side. And once the U.S. Presidential Election really gets underway, I have every confidence that we will be subjected to the inevitable array of charges and countercharges that range from dubious to patently untrue.

Even small sins can lead to big evils, according to Stanford Professor of Psychology Philip Zimbardo, the author of The Lucifer Effect: Understanding How Good People Turn Evil. (Zimbardo is famous for creating the Stanford Prison Experiment, in which normal college students randomly selected to serve as “guards” in a simulated prison, became so brutal so quickly that the experiment had to be shut down after only six days.)

A speaker at this year’s TED conference in Monterey, CA, Zimbardo presented the “Seven Social Processes that Grease the Slippery Slope of Evil”. They include “blind obedience to authority,” “uncritical conformity to group norms” and “passive tolerance of evil through inaction or indifference.” Zimbardo concludes that we need to foster a culture of heroism as the antidote to evil.

In its list of professional values for our profession, PRSA lists “honesty” as the #2 value, after “advocacy.” I think “honesty” warrants a promotion to the #1 spot.

Branding the Professional Services Firm

Uh-oh. Real GDP is not expected to “grow much, if at all, over the first half of 2008 and could even contract slightly,” Fed Chairman Ben S. Bernanke recently told Congress's Joint Economic Committee.

You can’t afford to let short-term economic conditions compromise long-term goals … especially if you operate in the professional services space — e.g., as an accountancy, law, wealth management and personal finance advisory firm. Look at tough economic pressures as a growth opportunity and consider the following seven brand-building strategies for your organization.

1. Concentrate on core values. Understand who you are and what you offer and communicate simply and directly.
2. Make a commitment to investment. Establish an adequate budget. Consider retaining an outside specialist firm to execute.
3. Prioritize your constituencies. You can’t reach everybody. Hone in on your most important constituencies.
4. Focus on your clients’ needs. Forget features; promote benefits.
5. Take a holistic approach. Integrate your marketing, advertising, customer service and product development teams.
6. Think inside out. Your employees are the vanguard of your branding efforts. Enlist their support.
7. Follow through. Don’t falter. You can’t afford to lose ground!

The bottom line? Using PR to preserve and protect your brand can mean growth for your bottom line … even in the most challenging of economic times.

A Reputational Roller Coaster Ride for Accountants

The accounting industry has successfully redeemed its reputation from its rock-bottom low in 2002, according to Gallup’s most recent Business & Industry Sector Ratings. But even now, complacency represents a serious threat … witness the effect of the subprime mortgage scandal on Bear Stearns. While the reputation of its management may have been besmirched, the credibility of its independent auditor, Deloitte & Touche, was not … largely because its statements, in an audit released last year, warned investors of the potential problem, according to WebCPA, citing a BusinessWeek story on the topic.

It’s my view that every accounting firm PR program should have a strong component dedicated to highlighting ethical standards. After all, do any of us truly believe — to the extent that we did seven years ago — that accountants provide a rock-solid guarantee of the honesty and accuracy of the financial statements that they audit? Enron was a watershed in this respect, and public relations must take this into account.

How Deep Is Your Law Firm’s Commitment to Growth?

Market budgets continued to climb at law firms of all sizes for the second successive year, according to BTI’s Benchmarking Law Firm Marketing and Business Development Strategies 2008, a recent report produced by the BTI Consulting Group, a research/consulting group. Among the study’s findings:

• Overall marketing budgets are up $1 million
• Marketing spending per attorney has skyrocketed more than 20 percent
• Marketing staffs have grown by more than 30 percent

Clearly, law firm marketing is moving from a back-office function to its rightful role at the management table. In fact, according to the San Diego Business Journal, many national firms spend millions and employ teams of 50 or more for marketing and public relations.

Public relations may be commonplace at most law firms today, but the real questions to ask are: how well do they do it and how deep is the commitment? I think that when it comes to law firm PR, it’s often a matter of the head being committed, but the heart unwilling. Attorneys may recognize the need for public relations, but the function is often hampered by the caution and risk-aversion that is endemic to how lawyers operate. So PR winds up being a shadow of what it can and should be.

Using PR to Differentiate in a Commoditized Investment Market

According to senior reporter Kevin Black, in “Fads Dominate as Creativity Falls,” an article last month on FT.com, “The US mutual fund industry’s best attempts at innovation have fallen flat in recent years due to a hairy mix of factors ranging from changes in how funds are distributed to the simple fact that many new products have failed to deliver their promised returns.”

Black goes on to say that innovation is discouraged. “It’s expensive to roll out new products and it takes three to five years to incubate a fund and develop a track record. Being a first mover also carries a lot of risk, something most firms are unwilling to roll the dice on.” He adds that one way to differentiate in this mature and crowded market is to offer access to a particular niche, but warns that there’s still a downside: “limited appeal.”

Public relations would seem to be an essential tool that is being too often overlooked by the hyper-competitive mutual fund industry, with over $12 trillion invested in over 8000 separate funds, according to the Investment Company Institute (ICI). As wealth managers move downmarket and as the client mix for many funds grows more and more institutional, PR strategies have to change accordingly. A lot of what were once strictly institutional products are now being reconstituted into tremendously complex products for individuals, such as hedged mutual funds. In this kind of environment, two basic PR skills are key: financial experience and the ability to clarify complexity.

Hedge Funds: The Root of All Evil?

According to Paul Krugman, op-ed columnist for The New York Times, in his blog last month, Iceland believes it may be the victim of a conspiracy of “unscrupulous dealers” trying to break the country’s financial system. “They will not get away with it,” says Central Bank Governor David Oddsson.

According to Krugman, “Such things really do happen … According to the Hong Kong Monetary Authority [HKMA] , several major hedge funds engaged in a ‘double play,’ shorting both the city-state’s stock market and its currency.” The nefarious plot in the late 1990s was thwarted when the HKMA bought up a large fraction of the Hong Kong stock market.

Last year, New York magazine asked the question: “Are hedge funds the virus that’s going to make the markets keel over? Are they an evil cabal?”

Clearly, hedge fund PR is a concept that a lot of people managing these funds today dismiss or overlook entirely. It baffles me. The elements of the perfect storm public relations crisis are all about the hedge fund industry: the “elitist” investment profile, the shadowy but enormous impact on the financial markets and the volatility that is the nature of hedge fund investing. We’ve already seen glimmerings that all these elements can come together and create some serious problems for the industry.

An Unintended Side Effect of the Subprime Fiasco

Since our public relations firm is based in New York — a world center for banking and financial services — we’re following the ins and outs of the subprime mortgage crisis with more than average interest interest. In fact, our president, Ken Makovsky, has written about it on his My Three Cents blog.

One of the more interesting side effects of the scandal was reported by Bloomberg News: “Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages.”

The article goes on to report that a man named Joe Lents in Boca Raton, FL, hasn’t made a single payment on his $1.5 million mortgage since 2002, when his mortgage bank, Washington Mutual, first tried to foreclose on his home. The efforts ceased when WaMu couldn’t find the paperwork!

“If you're going to take my house away from me, you better own the note,” said Lents.

He’s one of the lucky ones. Millions of other subprime homeowners are on the verge of bankruptcy and foreclosure. If the banking industry doesn’t address its own shortcomings, it better be ready for the inevitability of regulatory intervention if we want to protect consumers and the U.S. economy.

How Do You Count Your Cash?

Now, more than ever, we need to “think global and act local.” Despite the fact that the internet has made the world a smaller place, it hasn’t eradicated many of the more subtle cultural differences that separate us. For just one example, check out “How People Count Cash,” a nifty little video that shows how people all around the world have their own, unique ways of counting currency.

These subtle cultural differences can be critical if you’re doing business in an unfamiliar market. It’s one of the reasons why our firm has long cultivated a network of partner agencies, regionally, nationally and worldwide: IPREX , one of the world’s largest global public relations networks, and the Northeast Partnership, which consists of seven PR firms in New England (Connecticut, Massachusetts, Rhode Island, Vermont, Maine), New York and New Jersey.

It’s part of our commitment to “The Power of Specialized Thinking.” Not only have we organized our practice areas — health care + pharmaceutical, technology + business services, financial + professional services, investor relations, branding + visual communications and online fluency — to reflect our belief that depth of expertise always yields the best outcomes, but also because we’re convinced that geographic and cultural specialization are more productive and often more cost efficient for our clients.

Microsoft + Yahoo: Another Perspective

There’s been lots of coverage in the mainstream media about Microsoft’s proposed acquisition of Yahoo. Those in favor say that the merger could strengthen both companies and create more shareholder value than each company could create on its own. Those against it say that Microsoft’s offer substantially underestimates Yahoo’s worth.

If you believe that the success of any merger depends to a significant extent on the willingness of employees to embrace it, then Microsoft has some problems ahead of it.

On his “Tech Your Universe” blog, Yahoo employee Nick writes, “I estimate that 1 in 10 Yahoos will refuse to work for Microsoft.” After giving three reasons why the idea of working for Microsoft is “awful,” Nick goes on to say, “I’d be embarrassed to admit that I worked for Microsoft, and having it on my resume would be detrimental to my career.”

Apparently he’s not alone in his sentiments.

This is a public relations battle that is likely to be fought in the boardroom, the courtroom and the vastness of cyberspace.

The Court Rules in Favor of Wikileaks

Last week, Federal Judge Jeffrey S. White withdrew his earlier order disabling Wikileaks, a website that allows the anonymous posting of documents to discourage unethical behavior in governments and corporations. He’d originally shut down the site at the request of Bank Julius Baer & Company, a Swiss banking company that serves the ultra-rich. They charged that Wikileaks had posted confidential information about some of its customers.

Wikileaks is designed to enable whistleblowers to leak documents, without fear of censorship or the risk of the political repercussions. Its founders contend that Wikileaks will “civilize corporations by exposing uncivil plans and behavior. Just like a country, a corrupt or unethical corporation is a menace to all inside and outside it.”

It’s still in its infancy, but Wikileaks is worth a careful look if you’re at all concerned with the possibility of adverse publicity or if you are involved in issues or crisis management.

Only 6% of corporate frauds are revealed by the SEC and 14% by the auditors, according to the Center for Economic Policy Research. More important monitors are media (14%), industry regulators (16%), and employees (19%).

As it develops, it’s likely that Wikileaks will become a useful source for the mainstream media … so it’s worth keeping it on your radar.

Don’t Miss This Video

There’s so much great stuff on the internet, it’s hard to keep up. This week I finally caught up with an amazing and challenging video on YouTube. I think it should be mandatory viewing for generalists in public relations and financial, healthcare, pharmaceutical and high tech corporate communicators and the specialty PR firms that cater to them.

“Did You Know/Shift Happens” is a PowerPoint presentation about globalization and the information age created by Colorado educator/blogger Karl Fisch and posted on his blog, The Fischbowl. To whet your appetite, here is a sampling of the facts and figures that caught my eye:

• The 25% of the population in China with the highest IQs is greater than the total population of North America.
• China will soon become the number one English speaking country in the world.
• If you took every single job in the U.S. today and shipped it to China, China would still have a labor surplus.
• The U.S. is 20th in the world in broadband Internet penetration. (Luxembourg just passed us.)
• There are over 106 million registered users of MySpace [as of August 2006]. If MySpace were a country, it would be the 11th-largest in the world (between Japan and Mexico).
• It’s estimated that a week’s worth of The New York Times contains more information than a person was likely to come across in a lifetime in the 18th century.

For those who are interested, sources for the data featured in the video can be found by following this link.