Whither banks’ PR?

By Felix Salmon
August 5, 2009
Steven Pearlstein makes a good point today about corporate PR shenanigans:

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Steven Pearlstein makes a good point today about corporate PR shenanigans:

In their version of corporate reality, lawsuits are always without merit, executives leave only for “personal reasons” and regulatory actions are settled not because anyone did anything wrong but simply to avoid the cost of litigation.

Over time, this cynical game has become so ingrained that investors, analysts and business reporters now simply take it for granted that they are being spun or misled. Whenever bad news comes out, investors assume they are being told only half the story and overreact, leading companies to be even less candid next time. The result is a vicious cycle of deceit and distrust.

I’m not entirely sure why this should be a vicious cycle, though. If corporate spin causes investors to overreact, then isn’t the obvious response to spin less, rather than more?

But there’s a bigger issue here, which is that over the course of the financial crisis, as a general rule, the spin from banks, in particular, got much worse. This is a relatively common theme when I talk to financial journalists: before the crisis, we often believed what bank PRs told us. Now, we don’t. How and whether banks are ever going to be able to regain that trust is far from clear — they might need to wait for a whole new generation of financial journalists to come along, who weren’t involved first-hand in reporting this crisis. And in the mean time, one can reasonably expect the media in general to continue to be quite harsh when it comes to banks and banking.

6 comments

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“I’m not entirely sure why this should be a vicious cycle, though. If corporate spin causes investors to overreact, then isn’t the obvious response to spin less, rather than more?”

Only (1) over the long term, (2) assuming investors will realize you’re being honest, which I’m not sure is a given.

For #1 – if you’re a PR person and you don’t spin, and the market assumes you’re spinning, the market overreaction will be greater than normal. To pull this off, you’d need to come in with a sterling reputation to weather the overreactions and be young enough to see it through to the time when your company has a reputation as a straight shooter.

You also risk that greater than normal overreaction making people think things must be worse than you’ve admitted!

For #2 – that period is unlikely to be short. The behavioral economist in me points out that lies will stick in someone’s memory much more prominently than truths, and lies are more likely to recapture your attention later and thus remind you. If I say things are bad, but will get better, and they do, you don’t remember that, and nothing calls you back to it. If I say that and we nearly collapse, you remember that, and the later near-collapse keeps it fresh.

Posted by Joe | Report as abusive

So you’re saying that journalists are simply changing how they make mistakes – from totally swallowing the line before the crisis to totally ignoring it now?

Doesn’t put us journos in a very good light, does it? We’re either prone to be too lazy or too cynical. I for one try to be both at the same time no matter what part of the economic cycle we’re in!

Posted by Murray | Report as abusive

When I see financial journalists pointing to Goldman’s health and profits as a sign that the sector is revitalized, I see journalists who are swallowing Goldman’s PR hook line and sinker.

Not seeing the 4th estate ignoring the PR of banks at all these days.

Underscores the fact that this is remains a crisis of credibility for all who are in leadership positions in business, politics, and economic studies…

Posted by Eric Dewey | Report as abusive

Isn’t the bigger issue how pervasive doublespeak is in our culture?!?

Posted by Argel | Report as abusive

“This is a relatively common theme when I talk to financial journalists: before the crisis, we often believed what bank PRs told us. Now, we don’t.”

The bigger problem is that now you should have realized what you were told before was ALSO a lie, and in fact almost everything you were told for the last 39 years was in fact a lie.

That might take a while to get over.

Posted by Rockfish | Report as abusive