Eric Starkman is President and founder of New York-based Starkman & Associates.
He worked more than 15 years as a reporter and editor at major newspapers in the U.S. and Canada, including the Wall Street Journal, The Toronto Star, The Montreal Gazette, The Detroit News, as well as American Banker. Prior to launching S&A, he oversaw the corporate communications practices at established agencies in the New York area, including Morgen-Walke Associates. He had worked earlier as a copywriter at W.B. Doner & Co., a Michigan-based advertising agency.
The maturation of the Internet should have been the golden era of the public relations industry. Prior to the widespread use of the Internet, PR firms had to inordinately rely on the mainstream media to communicate client messages to broad-based audiences. Relying on reporters was a dangerous and often difficult process; journalists controlled the bat and ball and they all too often were reckless and arrogant in how they wielded their power.
The Internet provided an opportunity to level the playing field. The rise of the blogosphere quickly cut the media down to size and exposed their rampant irresponsibility. Mainstream publications and broadcast outlets were held to an unprecedented accountability standard and many reporters crumbled under the scrutiny. An untold number of prominent media stories have been retracted because of eagle-eyed bloggers.
Harnessed correctly, the Internet can be a powerful marketing tool, but it’s also an effective vehicle for fraudsters, flim-flam artists, and for companies with no qualms about using deception and unscrupulous tactics to win over customers. It’s in the best interest of the PR industry to promote and adhere the highest standards of ethics in Internet marketing. The more credible the medium, the more potent its efficacy.
Sadly, the PR industry has contributed mightily to the corruption of the Internet. One of the biggest global agencies was caught years ago for running the “Wal-Marting Across America” blog, supposedly penned by a couple of customer enthusiasts who turned out to have been shills paid by the PR firm. The person responsible for overseeing the Wal-Mart account was recently deemed one of the most influential professionals in the industry, underscoring that there are no material career consequences for dishonest or questionable practices.
Some PR firms also were caught secretly paying off or bribing bloggers with products to post positive reviews, but fortunately a PR blog named “Strumpette” was quite aggressive about exposing the practice and some industry leaders became quite vocal about condeming the practice. While blogger payola has not yet been eradicated, fortunately most recent exposed incidents didn’t involve PR firms.
Nevertheless, some PR firms still can’t resist employing deception as part of their “strategic” arsenal. Last week, the Federal Trade Commission settled charges with a California PR firm for having its employees “pose as ordinary consumers posting game reviews at the online iTunes store, and not disclosing that the reviews came from paid employees working on behalf of the developers.”
Rather than taking the high road and saying the firm settled the matter in support of the FTC’s desire to ensure greater transparency on the Internet, the company’s owner haughtily dismissed the agency’s concerns as a “frivolous matter”, saying they only agreed to settle to save on the cost of litigation. Perhaps most disappointing of all was the disclosure in the New York Times that the deceptive reviews in question were written and posted by interns. Thus, a new generation of PR professionals was taught that deception is an acceptable communications tool. That’s a toxic message to teach impressionable college students interested in pursuing a PR career.
Sadly, there is no shortage of PR firms who will welcome the skill-set these interns acquired. It’s an open secret that other PR firms regularly engage in having employees post reviews on behalf of clients. Let’s hope that the head of the FTC’s advertising practices division successfully eradicates the practice. Now there would be someone I could get behind as deserving of the “most influential leaders in the PR industry” title.
Taking on a professional internship is daunting enough for a college junior, but the pressure is no doubt magnified knowing that your intern predecessors left mighty large shoes to fill. Now imagine that one of those previous interns came back after graduation and was working at your sponsor company full time…and oversaw the internship program. Well, that was the scenario that Erin Carpenter (Holy Cross, class of 2011) took on this summer. Let’s just say, Erin isn’t easily intimidated.
Today is Erin’s last day as our summer intern. We are truly sorry to see her go.
For several years now, all our interns have come to us through an innovative program sponsored by the College of the Holy Cross. The school’s alumni association provides each intern with a stipend to enable students to pursue internship opportunities that intrigue them intellectually rather than just tempt them financially. Participating companies must have a Holy Cross alumnae on board and pledge to provide a truly meaningful learning experience that goes beyond the usual filing, photocopying and fetching. The program has introduced us to an amazingly talented group of Holy Cross students including Lauren Olney, who interned with us last year and joined us full-time after graduating in June. Others we’ve worked with have been equally talented and impressive (see here, and here.)
We knew that Erin was cast from the same mold when she showed up for work on her first day having already read the Wall Street Journal on her Kindle. Actually, no – it was earlier than that. To apply for the internship, candidates must submit a cover letter and three writing samples with their resume. My colleague Jackie — who has the keenest eye for even the teensiest of errors — deemed Erin’s written correspondence flawless.
As might be expected of a woman who voluntarily took a class at Oxford in Italian Renaissance Art despite having absolutely no background in that area of study, Erin relishes a good challenge. She didn’t flinch when assigned to research the fundamentals of an esoteric Wall Street trading strategy and soon after she was up to her elbows in research for a healthcare initiative. Erin also provided invaluable assistance putting together a timeline for a litigation support project. No filing, photocopying or fetching for her!
Underscoring Erin’s work ethic and commitment, she asked to attend some meetings with various charities she had identified as worthy of support by one of S&A’s clients, even though they started well beyond her scheduled hours and were held on one of those brutally hot days we had this season. Charitable and non-profit work are truly one of Erin’s passions; she spent three summers working as a counselor at a camp for children with Autism, Turrets, ADHD, and other anxiety orders. She also has considerable experience tending to exotic animals (a skill-set that will no doubt come in handy dealing with some members of the media). At Oxford, Erin participated in a program to assist international students with personal and emotional issues.
Erin is the consummate team player. She delights in working as part of a group and never once sought special acknowledgment for her formidable contributions. Erin also doesn’t have much of an ego; one day on her own initiative she opted to clean out the company fridge. Trust me, no alumni association in the world offers a stipend large enough to tackle that nasty task!
Erin continued to impress us even when we took her out for drinks to thank her for her hard work. We learned she has an appreciation for Oban single malt scotch, although a purist would question the appropriateness of her adding ice cubes. Nevertheless, Don Draper would be proud.
Some people see the proverbial glass as being half full, while others see it as half empty. Erin approaches life with an energy and zeal the likes of which we’ve rarely seen. She is a credit to Holy Cross and another example of the impressive discipline and humility the college instills in its students. Though she worked with us for only 10 weeks, she will be long remembered and greatly missed.
Having a clear code of ethics is important, but having a demonstrated propensity to actually enforce it is far more so. Corporate ethics cannot be mandated by words alone. The thought may seem obvious, but it seems nonetheless lost on many companies.
Enron, for example, had a strongly worded code of ethics that proclaimed it was “dedicated to conducting business… with the highest professional and ethical standards.”But, employees no doubt knew that the creed was a sham, nothing more than pretty words on a piece of paper to be tacked up on the local office bulletin boards by someone in HR or internal communications.
More recently, there is technology giant Hewlett-Packard and its broken moral compass. H-P’s business conduct standards reportedly require employees to consider how any business decision “would look in a news story.”Hmmm….so “how it might look” should take priority over the rightness or wrongness of the action itself? That certainly seems to be the message, intended or otherwise. And, if that’s the case, then the decision whether to do something unethical will simply come down to how likely it is that they’ll get caught. Who knows how much that played into former H-P CEO’s decision to allegedly fudge his expense account – something rarely scrutinized at his level on a day-to-day basis – but I’m guessing it played a part.
Given H-P’s concern for how actions might be viewed if reported in a news story, it’s a wonder that contractor Jodie Fisher was ever hired to interact with the company’s major clients at corporate events. Her background does not scream “seasoned Corporate America professional.” That Ms. Fisher reportedly commanded as much as $5,000 a dayto appear at corporate events is a pretty sad commentary on how H-P peddles its IT products to its biggest customers.
Equally eyebrow-raising, given their “think of how it will look” standard, is H-P’s choice of outside PR counsel when the bad news started to snowball. Let’s just say that firm has garnered more than a fair amount of negative coverage for itself over the years (see here, here, here, and here).
As for Mr. Hurd, his response to his transgression has not exactly been inspiring. Rather than take responsibility and unequivocally admit he made a major mistake in judgment and by doing so betrayed H-P, its employees, and its shareholders (and likely garner a considerable measure of sympathy), he hired a PR firm known for its aggressive “scorched earth” tactics. According to the Wall Street Journal, one of the firm’s message points is that Mr. Hurd’s expense account transgressions were quite small and that he offered to repay the amount, seemingly hinting that the punishment didn’t fit the crime.
When it comes to corporate ethics and reputation risk, potential bad press should have no bearing. None. Zero. Zilch. Adherence to a company’s guiding principles of integrity, trust, and responsibility should not depend upon what the press may report. A code of conduct is a company’s line in the sand about what is right and what is wrong, about what it stands for, and about how it defines itself as a member in some greater community. Sometimes that means companies and their leaders must do the proverbial right thing even when it invites media fallout. Just ask Royal Caribbean.
Early this year, Royal Caribbean faced a very difficult decision in the wake of the catastrophic earthquake in Haiti, the cruise company’s tourism partner for nearly the 30 years. The cruise company’s private resort called Labadee, located 85 miles or so from Port-au-Prince, suffered very little damage, with all facilities in prime condition to continue hosting ship passengers scheduled for a day of fun there. But as Chairman and CEO Richard D. Fain wrote at the time:
Should we bring guests to our private destination in Haiti or should we simply bypass the island and bring them to another destination further away from all the suffering? Bringing our guests to Haiti could be characterized by some as insensitive to the suffering of the Haiti people in the rest of the country, and we wrestled with this sentiment ourselves. After the government of Haiti asked us to continue to call on Labadee, there really was no choice; bypassing Haiti would do more harm to an already ravaged people by taking away essential income from our employees and their families. The Haitians told us they were desperate for our return and we couldn’t refuse… I remain convinced that we took the only honorable path and I remain convinced that we and Haiti will be better off in the long run because of it.”
As soon as the first ship dropped anchor and started tendering passengers ashore, the “how dare they?!” newspaper articles started, as Royal Caribbean’s management and savvy PR team undoubtedly knew that they would. The initial press was unfavorable, but Royal Caribbean stayed the course, working to explain their rationale for returning to Labadee and their broader contributions to Haiti’s recovery, both financial and in terms of getting much-needed food, materials, humanitarian aid, and other much-needed items to the country. In other words, they did what they thought was the right thing, backlash be damned.
Given the competitive nature of business today, adhering to ethical and moral business practices is more difficult than ever. Staying on the honorable path requires a strict moral code and a team with shared values. Given H-P’s code of conduct and the company its board and Mr. Hurd chose to keep, it’s little wonder they find themselves in such a messy and distasteful situation.
One of the biggest challenges facing a company under fire is to resist the temptation to downplay the severity of the crisis. And while there is no shortage of crisis communications advisors who may advocate telling white lies or less inflammatory half truths — a practice euphemistically known as “spin” – that approach almost invariably makes the situation worse. Goldman Sachs’ misguided PR effort to combat its mounting reputational crisis is a textbook example.
When the SEC first unveiled charges alleging that Goldman misled investors when it sold a package of risky subprime mortgage-related securities known as Abacus, the mighty investment bank wasted no time to thunder that the civil allegations were “completely unfounded” and vowing it would “vigorously” challenge them. A few hours later, Goldman issued a second statement, saying that it had lost more than $90 million on the transaction and proffered that it couldn’t have honestly believed the investments would fail given the firm’s own exposure.
Admittedly, quite a few reporters initially bought Goldman’s argument, repeating it without any objective analysis. However, all Goldman’s strategy bought them was time – not a free pass – as the media wasn’t duped for long. Within days, The New York Times reported that Goldman had insurance in place on the Abacus transaction to offset the $100 million loss and, separately, internal Goldman Sachs emails made public by a Congressional committee also suggest that Goldman handsomely profited as the housing crisis escalated. The Columbia Journalism Review has gone so far as to warn reporters to be wary of Goldman’s “forked tongue.” In addition to combating charges of fraud, Goldman must now deal with the fallout from being publicly accused of lying.
Regretfully, there are now other known incidents of spin that suggest that Goldman views the intellect of Congress and the public as cynically as the investors who were long on the Abacus deal. Goldman took out prominent ads in Politico, a newspaper closely read by Washington’s political elite, trumpeting that it was the biggest issuers of Build America Bonds; the ads neglected to mention that Goldman earns considerably higher commissions on the bonds. Goldman also seems to have leaked a story that it is mulling a requirement to compel its top executives to donate a certain portion of their earnings to charity. Giving to charity is an admirable initiative but it won’t alleviate the public’s anger about the firm’s perceived ill-gotten gains.
Goldman’s lament that the SEC’s charges are politically motivated is pretty tenuous. Decrying politics is a tad hypocritical given that many people believe that Goldman’s political connections were responsible for Washington making the firm whole on its AIG contracts. In any case, the interests of the SEC and The New York Times are closely aligned in making the fraud charges stick so the argument just won’t fly with the newspaper at the forefront of the media hunt for the rest of the story. Tongues are wagging that the SEC gave the Times a sneak preview of the fraud charges before they were even filed, perhaps as a reward for its dogged reporting. Even if the fraud charges are dismissed on summary judgment, the Times has pretty much secured itself a Pulitzer Prize.
Finally, there’s the issue of Robert Khuzami, the SEC’s enforcement chief and a prosecutor whose credentials include taking on organized crime. Although it’s been reported that Robert Khuzami previously oversaw a team of lawyers at Deutsche Bank who also were closely involved in structuring subprime mortgage-related investments similar to Abacus, Goldman would be wise to resist even veiled attacks on the enforcement chief. Given Khuzami’s impressive track record standing up to hardened criminals without the proverbial white collars, the public will likely relish the prospect of a proven legal tough roughing up Goldman’s top brass, regardless of the merits of his case.
For Goldman Sachs to survive this reputational crisis, the firm will have to devise a credible strategy that addresses both the legal and moral issues relating to its profiteering from the housing collapse. Its practice of deception and playing with the facts could potentially doom the firm. Because here is a secret that a spinmeister will never tell you: When you utilize spin as a strategy to minimize a crisis, the crisis will almost invariably spin right out of control.
Newspaper journalists suffer from a misguided belief that reporting great stories is all you need for success. Yes, a good editorial product is critical for a newspaper to survive, but an equally important – and decidedly less glamorous – component is getting their take on the news out there before their audience has seen or heard it already elsewhere. When it comes to print newspapers, that means getting those trucks rolling out to the newsstands pretty early in the morning.
The Journal will soon be launching a special section devoted to New York City. Robert Thomson, the WSJ’s editor, must believe that his newspaper can dethrone The New York Times as the city’s most influential newspaper. ”My advice to New York Times readers is cancel your subscription, read it on the Web for free and buy The Journal,” Mr. Thomson recently told The New York Observer.
I won’t debate Mr. Thomson as to whether he can best the Times‘ local coverage – or even that of the Daily News or NY Post for that matter – but I will challenge him on his advice to buy the Journal. After being a loyal Journal subscriber for more than two decades, I recently threw in the towel – and not because of the extreme makeover the Journal has undergone since Mr. Thomson took over the paper. I simply couldn’t buy the newspaper when I needed it.
Although much has been written about News Corp’s transformation of the Journal into a mainstream newspaper over the last two years, significant changes to its distribution, at least in New York City, have largely gone unnoticed. During the 20 or so years I’ve lived in Manhattan, I always knew that when I opened my apartment door at 6:00 am, the Journal would there waiting for me. Further, I knew that calling the customer support center in Chickobee, MA to suspend delivery when going out of town would be a painless process.
Not anymore.
In the past few months, there have been big hiccups in distribution to my neighborhood. The newspaper hadn’t arrived by the time I left in the morning and were not yet available at the local newsstands. ”Not in yet,” is how the guy at the counter greets me most mornings when I stop by to try to grab the Journal. It seems I’m not the only one hearing it as he told me that he loses at least a half-dozen Journal sales a day because of the paper’s late delivery. I’d be much more understanding if I was out at 4:30 am looking for the paper or if the newsstand in question was out in the suburbs somewhere, but we’re talking 6:00 am in the middle of Manhattan.
Adding insult to injury, News Corp. has transferred the once-reliable customer care center to some incompetent outsourcing firm overseas. After 30 minutes on the phone with them trying to resolve my missed deliveries, I recently became so exacerbated I simply cancelled both my Wall Street Journal and Barron’s subscriptions (News Corp. owns both). Sadly, in the process I may have cancelled another subscriber’s subscription, as the woman on the phone called me by the wrong name. (Apologies to Mr. Levy, whoever you are!)
To be fair, I’ve had troubles in the past with my New York Times delivery, but the newspaper always managed to resolve the issue fairly quickly. It’s a good thing – since the paper is now my first-read of the day. As for the Journal, I read it online when I get to work.
Mr. Thomson, the WSJ editor I mentioned earlier, bragged to the Observer that the Journal is already “developing a closer relationship with an ever-larger number of women” and that the New York edition will help snag a broader array of readers. Maybe so – but he better hope they aren’t early-risers living in midtown Manhattan.
New York may be renowned for having some of the finest restaurants in the world, but few have called our neighborhood in midtown Manhattan home.Around the corner from Grand Central Terminal, the area around Madison and 42nd Street had always been more of a “passing through” area rather than a destination spot for people in search of a good meal.Thanks to Benjamin Prelvukaj and Jason Avery, however, that’s all changed. Prelvukaj is co-owner of Benjamin Steak House and Avery is chef and co-owner of Pera, which bills itself as Mediterranean cuisine.Benjamin and Pera are the restaurants of choice for Starkman & Associates and the clients we’ve taken there are always grateful for the introduction.
Opening a 150-seat restaurant on a non-descript block on 41st between Madison and Park took guts. Previous restaurants in this space inside the Dylan Hotel didn’t last long, including Britney Spear’s ill-fated NYLA. When Benjamin Steak House first opened, business was indeed quite slow.
Never one to follow the in-crowd, I gave the restaurant a try and immediately appreciated its outstanding food, responsive service, and friendly staff. I admit to becoming something of a regular.I knew others would eventually catch on despite its off-the-beaten path location and told Prelvukaj he better remember me when they get discovered.“Mr. Starkman, you will always be guaranteed a great place in this restaurant,” Prelvukaj promised with his inimitable smile. Viktor, the restaurant’s amiable manager assured the same.
Prelvukaj and his partner, Arturo McLeod, both hail from Peter Luger’s, a Brooklyn-based restaurant that has long been famed as being one of the top steak houses in New York.Prelvukaj was its former maitre d’ and McLeod was one of its chefs.Benjamin steaks are from the same quality cuts of meat and are prepared in the same family style manner; but whereas Peter Luger’s is infamous for its surly service, Benjamin prides itself on treating customers with old fashioned respect. And if you eat there often enough, the place becomes like ”Cheers” – everyone knows your name.
In addition to serving some of the best steaks in New York City, it offers a wonderful salmon entree and the side dishes are highly recommended, including its non-greasy onion rings and homemade potato chips.Hungry yet?
Benjamin also has the best Happy Hour deal in New York City.Even premium drinks are half price at the bar from 4 p.m. to 7 p.m. and the bartenders at Benjamin are quite generous with their pours.Kenny, one of the restaurant’s longstanding bartenders, is unquestionably one of the best mixologists around.If you can drink more than one of Kenny’s to-the-brim martinis, you’ll need to take a cab home.
Benjamin has long since been discovered, but Prelvukaj is a man of his word.Jackie and I ate there last night and, just as Prelvukaj promised me three years ago, we’re still getting one of the best tables in the house.
I still remember with great delight the email Jackie sent me about a new restaurant called Pera that had just opened in a space across the street. One of the local tabloids had run a piece that morning on its opening and its chef and co-owner, Jason Avery.We knew Jason and were excited he’d come to midtown.
Prior to October 2001, S&A was based on Wall Street directly across the street from a five-star hotel called the Regent Wall Street.At the time Avery was the executive sous chef and the chef de cuisine at its restaurant called 55 Wall Street. Jackie and I frequented that restaurant – it had a Happy Hour in the spirit of Benjamin’s – and Avery always took especially good care of us.
Avery is well on his way to getting the recognition he deserves as one of New York’s most talented chefs. I can confidently recommend everything on Pera’s menu, ranging from its inventive salads to its daily specials. Lamb is among the restaurant’s specialties, and it took Avery months to wean me off his lamb burger before I would sample his other dishes. Avery is always concocting new and interesting appetizers and entrees, and he recites them with a certain relish and zeal that underscores the pride he takes in his craft.I once mentioned an appetizer of peas and feta cheese that I had sampled and loved at my favorite restaurant in San Francisco; Avery made the dish even better.
Pera has an interesting and fairly priced wine list and the service is always quite attentive. The restaurant has an open kitchen, and Avery is always quite visible supervising the line or interacting with customers.Avery treats all his guests like royalty, which is why I frequent the place at least three times a week.
So a tip of the hat — or should I say toque? — to Benjamin Prelvukaj and Jason Avery.Your restaurants are probably the greatest things that have happened to the neighborhood since Grand Central Terminal was first built in 1871.
Much has been written about the changing role and significance of mainstream media and the myriad factors that continue to erode its once-vaunted credibility.Chief among them is, of course, that the field is rife with unethical individuals who fabricate and plagiarize, a trend I wrote about last May when New York Times columnist Maureen Dowd was caught using prose previously published by a blogger (my take here).Since then, at least two other high-profile cases of journalism plagiarism have emerged, as outlined in this column by New York Times columnist Clark Hoyt.
Another major factor for mainstream journalism’s decline is the profession is plagued with failed leaders who, despite their less-than-stellar track records, continue to hold their senior positions.Mainstream journalism is in desperate need of radical visionaries, yet the industry continues to be led by people who are part of the problem rather than a source for the solution.Is there any other business where failure and myopia is so frequently and handsomely rewarded?If ever there was a single industry that illustrates the concept behind The Peter Principle, today’s mainstream media is it.
Marcus Brauchli, the former managing editor of the Wall Street Journal, is a prime example.Under the leadership of Brauchli and other senior editorial leaders, the Journal went into a near-irreversible economic spiral.A very senior Dow Jones executive confessed to me that the company quite possibly would have gone bankrupt had Rupert Murdoch’s News Corp. not come to the rescue. As part of the deal, Brauchli retained a degree of “veto” power over anything Murdoch might want to do with the paper, ostensibly to protect the Journal’s editorial integrity and standards.Once the deal closed, however, Brauchli reportedly received a whopping $6.4 million to go away instead. In this market, Brauchli’s payout is sufficient to finance the hiring of at least 10 reasonably experienced reporters.
Brauchli has since been named Executive Editor of The Washington Post, another newspaper that has suffered a significant erosion of prestige, talent, and national influence.The paper is badly in need of an innovative editorial leader to regain the previous glory it once had under the editorial leadership of Benjamin Bradlee in the late sixties through early nineties. Brauchli is no Bradlee; if he is doing anything of note to save that newspaper, it isn’t readily apparent.Indeed, the newspaper’s one known attempt at, ahem, “innovation” — soliciting lobbyists to pay a hefty fee for exclusive meetings with editors and reporters — was the biggest journalism ethics debacle in recent memory. Brauchli claims he wasn’t told of the pay-for-access program, a possible indication of how he’s regarded by the business side of the newspaper.
Stephen J. Adler, who also held senior editorial positions at the Journal before being named editor of BusinessWeek in 2005, is another example of how journalism rewards failure. BusinessWeek, a once grossly underrated magazine that long eschewed gourmet sizzle for solid meat-and-potatoes reporting and analysis, badly stumbled under Adler’s four-year leadership.Under his tenure, the weekly magazine essentially became the Reader’s Digest of American finance, replete with oversized typeface, condensed stories, and bulky photos and graphics that badly reduced the magazine’s news hole. The magazine was on the brink of failure when Bloomberg picked it up for next-to-nothing last fall.Adler resigned shortly after the deal was announced, subsequently moving on to Thomson Reuters where he was named senior vice president and editorial director of its Professional division. Since the sale, BusinessWeek is fast returning to its previously high editorial standards, which is to Bloomberg’s great credit.
The disturbing state of journalism leadership was, ironically, further demonstrated recently at a meeting held by a trade group called the Committee of Concerned Journalists who are “worried about the future of the profession” (I guess non-members belong to the Association of Reporters Who Don’t Give a Damn). As reported by Fox Business News Senior Correspondent Charles Gasparino (Full disclosure: Gasparino is a longtime friend of mine), the high-minded committee last week held a seminar to breast-beat themselves for their failure to warn the public that the U.S financial system was on the brink of collapse.
Hank Paulson, the former Treasury Secretary and CEO of Goldman Sachs in the period leading up to the economic collapse, gave the keynote address.If anyone there could have shed valuable light on the subject, clearly he was the one.However, according to Gasparino, the “concerned” journalistic luminaries on the panel, including Fortune editor Andrew Serwer and New Yorker media writer Ken Auletta, never availed themselves of the opportunity to ask Paulson the tough questions about his own failure to anticipate or prevent the economic collapse.
Hmmm…just a wild guess here, but reporters who don’t act like reporters could have something to do with the professional pickle they collectively find themselves in.
Personally, I don’t buy into this notion that reporters should have been able to predict the financial meltdown.It takes unabashed arrogance for journalists to believe that they are so well-steeped in economics and high finance that they can possibly forewarn the nation of a pending financial collapse. They are on the sidelines, not in the game itself.Most business journalists tend to mime conventional wisdom of the day, which explains why the leaders of Enron, Worldcom, and Tyco were heralded in newspaper and magazine cover stories before those companies blew up. Journalists would serve their audiences best if they reported as many informed perspectives as possible, rather than spew out their too often misinformed and biased opinions about the companies and subjects they supposedly objectively cover. As for the prescience of mainstream journalism about Goldman Sachs and Paulson, check out this fawning profile that Fortune published in 2004.
According to a study by the Pew Project for Excellence in Journalism, less than 30 percent of Americans believe what they read in the mainstream media.That’s a fairly sobering statistic, and one that the Committee of Concerned Journalists should be focused on rectifying above anything else.Sadly, absent a real change in the vision, mindset and competencies of the bold-faced names that occupy the upper echelons of the business, mainstream journalism will likely only continue to go downhill.
There is no retailer I admire or trust more than Nordstrom. My fervent loyalty stems from a favorable experience years ago when a menswear department manager voluntarily refunded the cost of a suit after I complained about premature wear. I had bought the suit a year earlier, didn’t have a receipt, and there was no record of my purchase in the computer. I was so impressed with the store’s sense of accountability, I felt compelled to buy two suits. I have pretty much shopped at Nordstrom exclusively ever since, and now carry the retailer’s loyalty program Visa card. Without question, the goodwill and repeat business generated by that refund far outweigh the latter’s actual dollar cost.
On the service and value front, Charles Schwab is quietly becoming the financial services industry’s closest equivalent to Nordstrom. But they’re not entirely there yet, and founder Charles Schwab would be wise to take a closer look at the customer service playbook of Blake Nordstrom, the CEO who runs the retailer that bears his surname. (While Schwab is no longer CEO, he remains chairman and apparently is active enough in the business to command more than $3 million in annual compensation).
Although I maintain some of my assets with Schwab, I readily admit that I am highly distrustful of the company. Allow me to explain the paradox.
My relationship with Schwab is currently limited to plain vanilla bank products where I’m certain I have virtually no risk (or at least the faith and backing of the U.S. government). I would never buy an investment product from the firm because, unlike what I’ve learned to expect from Nordstrom, I do not trust Charles Schwab to stand with integrity behind the products they push.
In the past few years, Schwab has unloaded some highly dubious products on its customers, including quasi money market funds called Schwab YieldPlus and long-term bonds known as auction rate securities. Schwab faces class actions suits relating to the sale of its money market funds and has been charged with Martin Act Fraud by New York Attorney General Andrew Cuomo for peddling the auction rate securities. (Important Disclosure: S&A represents an attorney who has a case against Schwab relating to Schwab YieldPlus. That said, the comments in this blog post represent my thoughts and observations and are mine alone).
My outrage and lack of confidence in Schwab is not simply that it sold the money market funds and auction rate securities, but rather its failure to do right by clients who allegedly were misled. While most of Schwab’s competitors have settled with regulators and reimbursed their clients for losses relating to auction rate securities, pass-the-buck Chuck is following the old-school Wall Street strategy of saying the clients were entirely to blame: “Roughly 90% of the clients who invested in (auction rate) securities came to Schwab asking us to locate and make available these investments for them,” Chares Schwab wrote in a Wall Street Journal op-ed last August, emphasizing his firm “never guaranteed individual success.”
While that may be true, customer service is not simply about written guarantees, Chuck. It’s also about ensuring your customers view you as trustworthy and reliable.
People shop at Nordstrom because they can do so with confidence. If something goes wrong with a purchased product, there’s little if any doubt that the store will do the right thing when you bring the defect to their attention.
In truth, when it comes down to the fundamental principles of effective brand management and customer service, it really doesn’t matter what you are selling. As Donald Porter of British Airways once aptly put it, “Customers don’t expect you to be perfect. They do expect you to fix things when they go wrong.”
So why didn’t Charles Schwab do the right thing with respect to making customers who essentially were sold defective products whole again? Perhaps the lawyers deemed doing so too great a legal risk.
While that stance may have a significant upside in the courtroom, it will not be without a significant downside cost elsewhere. By not stepping up as other firms have done (voluntarily or otherwise) to make allegedly misinformed product purchasers whole again, Charles Schwab will squander immeasurable current and potential client goodwill and badly undermine the impressive work of those responsible for creating Schwab’s Nordstrom-like experience.
In truly world-class organizations, the legal and marketing functions do not operate as separate silos, in good times or crisis, and a measured balance is routinely struck between their sometimes conflicting interests – and for good reason. After all, the only ones to ultimately benefit from letting Legal call all the shots are, well, the attorneys themselves.
Customers have talked, Chuck. Perhaps it is time you started listening.
Much has been written and speculated about the dire state of the mainstream media, both in terms of its financial condition and declining ethical standards. If you ask me, much of the current financial troubles can be attributed to industry leaders’ death grip on their widely held misperception that citizen bloggers can’t produce good content and that their own reporter’s work is vastly superior simply because they went to j-school.
An egregious example of this misplaced and often smug superiority was evident in this blanket statement made in a Wall Street Journal op-ed by Peter Kann, the former Dow Jones chairman who nearly drove that company to ruin:
“The Internet is not filling news vacuums either. There are hundreds upon hundreds of online sites and blogs that claim to provide news, but virtually none of them even pretend to pursue the traditional news role of newspapers, which is to invest in professional staffs dispersed around a community and across the country or the globe to cover, analyze, and only then comment on, events. Actually, all they do is comment.”
Yes, the Internet is indeed filled with wanna-be journalists and mischievous trolls who simply publish trite pablum or grossly reckless commentaries simply for the sake of getting noticed or causing a stir. But mainstream publications produce more than their share of irresponsible drivel as well, such as this “investigative” article published in the San Francisco Chronicle or this doozy published in the Orange County Register.
The American public clearly isn’t impressed with the content produced by mainstream media: According to a September Pew Research survey, just 29% of Americans say that news organizations generally get the facts straight, while 63% say that news stories are often inaccurate. But hey, even Pulitzer Prize-winning reporters like Kann apparently don’t have to let the facts get in the way of a good argument.
In truth, many of today’s bloggers are increasingly establishing themselves as authoritative sources of news and commentary in a variety of industries. Blogging is not a mere trend; its advent has proven to be a significant mile marker in the evolution of mass communication. Any organization that believes otherwise is deluding itself. Brett Snyder, who pens the “The Cranky Flier,” airline industry blog, best personifies the new breed of blogger who most threaten the survival of mainstream journalism.
I’ve closely followed Snyder’s work for the past two years. A former industry insider and self-professed “airline dork,” he is wise to the industry’s shenanigans and isn’t afraid to call them on it. Brett’s readers also are remarkably well-informed and civil in their comments on his observations. If you want to understand the airline business, “Cranky” is truly a must-read.
As for Kann’s dismissive claim that all bloggers do is comment, sometimes informed commentary is decidedly more valuable and insightful than the original “reporting” trumpeted by Kann. To wit, Snyder’s initial post regarding the crash of the Air France flight from Brazil stood in stark contrast to the speculative reporting of mainstream reporters. He derided the “million different theories” he had seen about what happened, cautioned readers that “none of the theories that keep being flung out there by the media seem to make sense on their own,” and forewarned that the true cause of the crash may never be known. By comparison, among the speculative stories published by the Wall Street Journal were this one, this one, and this one. More than six months later, we still do not know what really happened.
Unlike a lot of mainstream reporters, Snyder isn’t above admitting he might have been wrong, as he recently did in a post discussing Virgin America’s announcement that it posted an operating profit (as he put it himself, he’s “been a harsh skeptic of the viability of Virgin America since the beginning”). When is the last time you can recall a mainstream publication openly admitting without public pressure or the threat of a lawsuit that it may have gotten something wrong?
Snyder tells me that not one mainstream publication has ever approached him about a job. Given that he lives in suburban Los Angeles, which is heavily impacted by the airline industry, you might expect the Los Angeles Times or Orange County Register would be fighting to scoop him up, but therein lies the judgment of the leadership of mainstream publications. Hmm… is it any wonder the owner of the Orange County Register in September filed for Chapter 11 bankruptcy.
Blogging about airlines may be his passion but, like everyone else, Snyder needs to make ends meet. To that end, he recently launched Cranky Concierge, an airline planning and travel problem-solving service that I wholeheartedly endorse. Snyder recently figured out a way for me to fly business class from New York to San Francisco on my preferred flights for less than $250. Trust me: the guy knows his way around the system. And if anyone can solve your air travel dilemma, it’s him.
A tip of my hat to you, Cranky. Dork or not, it’s conscientious bloggers like you that should have the mainstream media now reaching for the overhead oxygen masks…
When I first joined The Detroit News after working for several years as a business reporter at major Canadian newspapers, I was completely taken aback by the comparably low level of editorial concern and legal oversight given to any of my highly critical stories about private individuals. As it was considerably easier to sue for libel in Canada, I had grown rather accustomed to my hard-hitting stories about business executives being subjected to Talmudic scrutiny by a bevy of seasoned editors and legal counselors. At The News, however, my investigative reports pretty much sailed through the copy desk as I had written them.
I suspect the unusually high number of ex-pat Canadians at major U.S. print and broadcast outlets probably has as much to do with the strong caliber of Canadian journalists’ rigorous training as it does with simple geography. Fear of being sued is a tremendous motivator to practice responsible and diligent journalism, and the extra miles Canadian reporters must often go to get their stories published undoubtedly helps ensure that media debacles such as the reckless maligning of innocent individuals like Richard Jewell and Dr. Steven Hatfill happen with a lot less frequency north of the border. Indeed, in Canada even former prime ministers can successfully sue for libel.
But that’s about to change – and not for the better. Sadly, the Supreme Court of Canada recently decided to dismantle some of the safeguards built into libel laws by allowing journalists to cite “responsible communication” as a defense in libel suits. The Court ruled that Canadian journalists can avoid liability if they were “diligent” when trying to verify the allegations. Under that standard, the reporters responsible for destroying the lives of Mr. Jewell and Dr. Hatfill couldn’t be held liable under Canadian law.
In theory, a vigorous and aggressive independent press is healthy for a functioning free society. I agree – in theory. Practice is another matter altogether. Truth be told, the mainstream American media has become a business controlled by profit-driven companies seeking to bolster their bottom lines and staffed by reporters focused more on promoting their brands than pursuing justice, revealing truth, and upholding the profession’s historic role as the Fourth Estate.
Oh, Canada….you’ve truly picked the wrong standard to benchmark.
New York Times reporter Alex Berenson is representative of the moral compass of journalists who remain in the profession: Having orchestrated a highly dubious scheme to gain access to court-sealed documents relating to the controversial antipsychotic drug Zyprexa, Mr. Berenson then balked about publishing a story when one of his cohorts insisted on making the documents widely available to serve the public good. Faced with a choice of serving the public interest or promoting their own, I sadly suspect most U.S. reporters would follow Berenson’s lead. (An outline of Berenson’s largely unknown antics can be found here and here.)
The Supreme Court of Canada should have taken a lesson from Parliament about knowing when to rebuff the prevailing wisdom of its neighbor. Years ago, Canada’s Parliament blocked four of the country’s five major Canadian banks from merging, showing remarkable responsibility and prescience by ignoring the dominant view in the U.S. at the time that “bigger is better” when it comes to financial institutions. Had those bank marriages been allowed, the merged institutions would likely have been badly crippled during the global economic collapse by their combined U.S. exposures. Instead, Canada’s banks remain among the healthiest and safest in the world.
Canada would be similarly wise to prevent the creation of a U.S. style press where the media can publish irresponsible and false stories with wanton abandon and without retribution. Regardless of your political leanings, it’s hard to argue that despite having the most liberal press freedoms in the world, the American public is any more enlightened than their brethren elsewhere in the Western world.
