Much has been written about the $100 million bonus Citigroup energy trader Andrew J. Hall insists he is owed.

 

But ponder this question: 

 

Would such widespread outrage have been expressed by media, politicos and the public-at-large if the princely sums promised to Mr. Hall and other high income producers had been positioned as  commissions (instead of bonuses) for negotiating the hugely profitable transactions that, in Mr. Hall’s case, netted his employer some $600 million?

 

Admittedly, there are two extraordinary aspects of Mr. Hill’s situation.  One is the magnitude of his reward, i.e. a hundred million dollars, a respectable, but not overly inflated fraction of the income his transaction generated.   The other is that his employer, Citigroup, borrowed taxpayer-derived TARP funds, a loan which rescued Citigroup from insolvency, which Citigroup expects to repay and on which Citigroup is paying the government market rate interest. 

 

If Mr. Hill had been selling 45-inch TV sets he likely would have netted a few hundred dollars,  say five or seven per cent of the of purchase price.   Most likely, he would have received it in his next paycheck, certainly a lot sooner than bonus-giving time.

 

But Wall Street seems to feel differently about the timing of employee compensation – very likely a factor of its early partnership structure.   The usual compensation model, which persists to this day, delivers  a modest salary (even for the most senior executives) and bonuses based on the firm’s total profits.  Trader and broker bonuses usually reflected transactional income they produced (totally free of future liabilities)  – in effect, commissions deferred and paid at bonus time.   Bonuses for other executives were usually based more on qualitative metrics than quantitative and truly fit the “bonus” descriptor.

 

It therefore seems grossly unfair that traders like Mr. Hill should be penalized when they have generated measurable income after a promise (in most cases contractually) of an agreed-on reward based on measurable performance.   It’s even more horrific that they are being reviled in the media and in Washington circles as both greedy and unpatriotic when they choose not to forfeit money (commissions) they have rightfully earned.  The reality that some of them earn more than their CEOs is beside the question; they’re the ones who bring in the moolah and the formula determining their share is always very precise.

 

Those who earn their money by the rules ought not to be singled out as money-grubbers feeding at the public trough.   Perhaps a starting point toward more equitable treatment is for Wall Street to differentiate between bonuses and commissions.

 

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Harold Burson

August 12, 2009  

 

 

 

 

 

 

The General Motors bankruptcy has a special poignancy for me.  By my reckoning, our landing General Motors as a client in 1970 was one of the two most defining moments in Burson-Marsteller’s  56-year history.*   It was the catalyst for our extraordinary growth during the decade of the 70s --  from $5.2 million to $35.1 million – and even beyond.   Its impact on making us a major “player” in the world of public relations consulting firms was enormous.

 

It’s hard for those of you who did not actually experience the General Motors presence during the half century starting in the 1930s to appreciate its enormity as a societal force.   The world’s largest and most profitable corporation, it was the world’s largest private sector employer – at its peak 600 thousand.   Counting dealers and major supplier employees engaged on GM business, the number approached two million.    One of every 100 Americans depended on General Motors for a living. 

 

General Motors chose Burson-Marsteller as public relations advisers after a Congressional hearing that excoriated management for hiring a private investigator to shadow consumer activist Ralph Nader.  Nader’s hyper-critical book, “Unsafe at Any Speed,” hammered the Chevrolet Corsair, a new model heavily promoted by GM, as well as the industry’s attention to driver and passenger safety.   Public outcry condemning the invasion of Nader’s privacy led to the formation of a  board committee on public policy and social responsibility.  One of its first acts was to order the CEO to engage independent public relations counsel.

 

As the leading firm specializing in business-to-business clients, we had GM’s Electro-Motive Division, the world’s largest manufacturer of locomotives, as a client   We were GM’s only public relations firm, and I had worked with Tony DeLorenzo, their long-time corporate chief public relations officer.  In late June (1970) Tony informed me of GM’s intention to hire a firm to advise senior management on corporate policy matters and that Burson-Marsteller would be one of three firms they would consider.

 

Our competition was Hill & Knowlton and Carl Byoir Associates, then the two largest and most highly regarded firms, each serving numerous major corporate clients.  My principal associate, Buck Buchwald, and I assumed our being on the short list was more a factor of friendship than as a serious contender.  The selection would be based on discussions with GM management about their perception by important stakeholders, i.e. no formal presentations.

 

Although GM was respected as the corporate world’s biggest and best, it was also generally regarded as arrogant, infallible, inflexible and a driver of hard bargains with dealers and suppliers.  It was seen to be high-handed with media (after the Wall Street Journal published a drawing of a new model before its formal release, GM cancelled its advertising).   Since we both felt we had little to lose, Buck and I decided to be totally straightforward in disclosing what we learned from talking with a small sampling of dealers, suppliers and automotive reporters.

 

In a casual setting in the then-new General Motors Building overlooking the Plaza Hotel and Central Park, we met with Oscar Lundeen, number two in the GM management hierarchy and Tony DeLorenzo.   For the better part of two hours, we shared our hand-written verbatims expressing the antagonistic and deep-seated feelings of dealers, suppliers and reporters.  Our audience of two were rapt listeners (actually DeLorenzo had a strong inkling of what we would say and he didn’t dissuade us from pursuing what we assumed would be a suicidal course of action).   Mr. Lundeen’s first comment was along the lines of “you’re telling us that our PR is not working,” a statement that shook up my friend and fellow-public relations professional Tony DeLorenzo (I could tell by the look in his eyes that I had better have a good answer; he was the person who signed off on our invoices!).

 

My response was along the lines that, in a sense, it was a breakdown in the public relations process, but “not at the level of your public relations staff.”   Rather, I explained that any public relations outcome is based on two components.   First – where General Motors is failing – is behavior and behavior is a factor of policy – policy set by senior management often without professional public relations input.   The second is communications – at which I thought General Motors is superb.   After being graciously thanked for our input, Buck and I, on the return walk to our office, commiserated with one another by agreeing we weren’t going to get the business regardless of what we said.

 

An hour or so later, the telephone rang; it was Tony DeLorenzo.  His first words were “Oscar thinks Jim Roche should hear what you and Buck told us.”  Roche was GM’s chief executive officer.    Even though we would meet with GM’s CEO,  we still were dubious that we were a serious contender.  Mr. Roche was a good listener, but palpably more aggressive defending GM actions as voiced by those we interviewed.   At the least, he agreed that the behavior of General Motors was a misunderstood – meaning that his public relations department was not communicating the essence of the company and what it stood for.

 

Because General Motors became the “target” for labor negotiations with the United Auto Workers, the decision on hiring a public relations firm went on the back burner.   Though DeLorenzo and I talked regularly by telephone, it was late November when he called to inquire if I would be in my office the following Tuesday.   After my affirmative reply, he said “Oscar would like to see where you live when he’s in New York for our next board meeting.”   Though I didn’t ask him directly, I knew the game was over and we had won; it was simply inconceivable to me that the second ranking officer at General Motors would take time to visit the offices of three public relations firms.

 

Buck and I worked the account in tandem.   Our frequent presence on the 14^th floor of the General Motors Building on Detroit’s Grand Avenue was a heady experience.  GM’s internal public relations staff was superbly qualified, though not always heeded by corporate management. The fact is that for many years GM management was more adept at making money than at making automobiles the American public wanted.  Smart and hard-working, they failed to recognize the competitive potential of Japanese car makers, especially on how quickly they could establish a dealer organization capable of delivering coast-to-coast service.   Also, few of their new models were really new; mainly they were enhancements of existing models.  Having operated in a protected market for so many years, General Motors, like its other U.S. counterparts, lost sight of what its customers wanted in an automobile.  GM’s share of market peaked in 1974 at 54 per cent.  In each succeeding decade it dropped approximately ten percentage points and is now in the low 20s.

 

But the impact on us – with our existing clients and in new business -- was palpable.  Even though neither we nor our new client issued a news release on our appointment, for the better part of the year our winning the GM account was the talk of the public relations community. Our corporate practice expanded at least three-fold as new clients joined our roster.  The topic at most first meetings with companies interested in our services was how life was lived at General Motors.**

 

Our relationship with General Motors ended in 1981 at our initiative.  We had joined forces with Young & Rubicam two years earlier.   Ford’s Lincoln-Mercury Division was a major Y&R client.   On the GM side of the equation, our third CEO, the affable and effective Tom Murphy, had retired.   Even more significantly, so had our friend and mentor, the unforgettable Tony DeLorenzo.   Though our GM association had been “grand-fathered” after our merger with Y&R, our B-M management team thought it made good long-term business sense to seek Ford as a client in tandem with our parent company.  

 

Though somewhat diminished in comparison to its glory years, General Motors was still a company to be reckoned with.   It would have been considered insane to consider it a candidate for bankruptcy a quarter century later.   But, as in all of life, “stuff” happens to corporations, for the better and for the worse.***  Only one of the original 30 companies on the Dow Jones Industrial Index remains about a century later.

 

*    The most defining event in the history of Burson-Marsteller was establishing an overseas office (Geneva, Switzerland) in  1961.

 

**   At that time, CEOs played a significant role in the selection of public relations firms.                                                                   

 

*** Only one of the original 30 companies comprising the Dow Jones Industrial Index remains today, 113 years later.   It is General Electric.

For a good part of my business life I have made two or three visits a year both in this country and when traveling abroad to speak to students and faculty at colleges of communications and graduate schools of business.  My two most recent talks were at Boston University and City University of New York (CUNY).  At both, the Q&A portion of my presentation was palpably more serious, the questions more purposeful, than usual.  The top-of-mind topic for most students was how to find a job.

 

As I parried their questions, the thought crossed my mind that members of the class of 2009, mostly age 22, were never aware of a serious downturn in the economy.  Barely 13 years old when the Silicon Valley bubble burst, they were toddlers when the economy bottomed out in the early 90s. Throughout their pre-adult life they knew and experienced only the showy extravagance and excessive consumption as real estate prices and credit card debt soared and jobs were there for the asking.  

 

Expecting magic answers on how to get a job in public relations, I could assure them only that I was confident in believing that the value of public relations/communications as a business discipline was greater today than ever and its future even more so.   When pressed with questions demanding a more specific response, I told them that those best at networking were the ones most likely to find a job.   I pointed out that more than half the staff at Burson-Marsteller were first introduced to the firm by friends and families and neighbors and acquaintances of employees, clients, media representatives and others who had a “connection.”  This is not an unusual occurrence at professional service businesses.

 

This piece of advice was in line with my answer to my most-often-asked question by students: “what should I be doing now to improve my chances of getting a job in public relations?”   My response, developed after years of pondering the question, was “start now building a network of friends and colleagues whom you expect to be in positions of influence or awareness.”   Nowadays, a typical college graduating class includes a likely governor or senator, several future entrepreneurs, numerous lawyers and physicians and college professors with broad acquaintanceships, dozens of business leaders who influence the hiring process.

 

But I admonish them that networking is more complicated than simply knowing people.   Networking takes both time and effort.   Like getting together for a beer, e-mailing or otherwise communicating, exploring mutual interests like hiking or watching football.   I also shared an observation learned through experience that friendships established early in life, say during high school of college, are the most lasting, the most likely to deliver when times are toughest.  

 

Another bit of advice I have given students through the years has to do with writing.   There’s not much argument that writing quality has been diminishing for at least half a century (some say since the advent of television, which absorbed much of the time once devoted to reading).  The present array of more sophisticated devices that claim the time and attention of the young – cell phones, i-Pods, text messaging and other computer-driven recreations – can only be expected to further reduce time available for serious reading and writing.   Accordingly, the young job seeker who demonstrates writing skills is immediately differentiated from others competing for jobs.

 

But despite the miseries that await the class of 2009 in their quest for employment, I take a small measure of comfort in observing that the current recession – the most severe since the Great Depression of the 1930s – has had a less adverse effect on public relations employment than the ten or twelve previous recessions that coincide with my business career.   Many public relations firms have trimmed their staffs, but usually not to the degree of past recessions.  Save such industries as financial services, real estate and automobiles, corporations have not cut and slashed staff and budgets to the same extent as in past recessions.

 

There are, I believe, two reasons. 

 

The first is the maturation and, with it, the appreciation of public relations by clients and employers as a valued business discipline.   At this time of major turbulence in how messages are communicated to target audiences, public relations has proven itself to be agile, flexible, creative and comprehensive in the sense that it is without boundaries in its scope and reach. 

 

The second is the impact of digital communications.    Institutionalizing digital as a communications medium is still a work in progress.  Corporations, indeed all societal entities, are at different levels of experimentation and sophistication in both the content and the context of messages to employees, customers and other significant audiences.    Despite the recession, the use of digital is growing, albeit in some areas at slower rates than in previous years.

 

But little of this serves the purpose of those young women and men seeking entry level jobs in public relations.  Sadly, we will lose many of them to other disciplines.  But I suspect those most committed to public relations will achieve their job-hunting objective as the economic environment returns to normality.

Not too many years ago, a negative article in a small newspaper or on one of the cable news programs at a non-peak news hour usually elicited a “who cares” shrug of the shoulders and life moved on.

 

But not now.   A posting of that once obscure clipping or that 50 seconds of damaging reportage on YouTube or Twitter multiplies its audience by a magnitude of ten or more.  A thousand readers or viewers can easily become more than a million.

 

That’s not all.  When posted on a mega-viewed website the negative message gains credibility.  Being there implies a trusted third party endorsement; a respected outlet, in effect, vouched for the content and has tacitly agreed it deserves a wider audience than the local hometown newspaper or cable news outlet.

 

The “who cares” attitude can no longer pertain.  Depending on the content, a full-blown crisis may be in the making – just as likely to happen at midnight as at mid-day and any place on earth.  YouTube and Twitter are as easily accessed from Malaysia or Moscow as from Memphis or Manhattan.

 

Media relations has become a 24/7 job.   Relaxing after the 11 o’clock edition has gone to press and the airing of the 10 o’clock late news is now out the window.  But short of the Pentagon and State Department, few institutions in our society are prepared to respond to this new breaking news paradigm.

 

Nor is technology the only villain in today’s news breaking scenario.  One must also acknowledge the growing number of insider leaks --  news emanating from “an unidentified news source whose career would be jeopardized” if named.   Insiders leaking news has become part of today’s business ethos and mass media make it easy for leakers to reach them and their ever-growing audiences.   Remember always that they thrive on ears, eyeballs and clicks.

 

There’s no “one fits all” solution to this cancerous phenomenon of leaked information and media’s craving to being first with the news.  We now live in a “gotcha” age fueled by technology and people who get their kicks demonstrating they’re in the know.  It’s unrealistic to think leaking by employees and informed outside parties is a here-today gone-tomorrow fad.  

 

Realistically, companies vary in their vulnerability – largely a factor of the degree of public interest in a company or industry and the content of the leak (sex and misdeeds like theft and fraud always rank high with listeners and readers).   The remedy is, first, to make media relations operative 24/7, i.e. literally around-the-clock staffing.  It also takes a constantly updated data bank with responses to any and all issues, real and imagined.   Most of all, it takes a management commitment to transparency and the will to “tell all” before it’s discovered by an investigative reporter who flushes it out dribble by dribble.  

 

More CEOs should think of media relations as risk management.

         

Few people can relate to a million of anything, especially dollars.

 

Even fewer to a billion.

 

A trillion? Here's a clue:

 

One million seconds equals 11 1/2 days.

 

One billion seconds equals 31.7 years.

 

One trillion seconds equals 31,700 years.

Now it’s Citigroup that’s responding to public – to be more accurate, media and political – wrath focused on the bank’s commitment to spend $20 million a year for the next 20 years to name the new New York Mets stadium. Having taken taxpayer money to preserve its solvency, Citigroup is said to be renegotiating its Citi Stadium deal barely two months before the opening of the 2009 Major League Baseball season.

 

This follows on the heels of public criticism of Bank of America’s sponsoring a well-attended extravaganza for customers, present and prospective, at the Super Bowl in Tampa.  Like Citigroup, BofA has also partaken of taxpayer money.  And AIG, another recipient, continues to be the poster corporation for misuse of, you guessed it, taxpayer money, for spending several hundred thousand dollars on “lavish” hospitality, including spa appointments, benefiting members of its marketing organization.

 

True enough, were taxpayer money not involved, there would be no outcry. But even with taxpayer money, which each of the recipients expects to repay, should there have been so strident a backlash and how, really, did the outcry arise? 

 

There’s little evidence that its genesis was Joe Public.   Rather, Joe Public was incited by “gotcha” mentality stories emanating from the media, both traditional and the now well-established web news hawkers who play the “gotcha” game even more ardently than their print and electronic counterparts. Legislators and other government officials were quick with condemning sound bite epithets.

 

That said, those of us engaged in marketing communications should be asking ourselves the reason for so strident a backlash. After all, the incidents cited were tested, legitimate and productive marketing practices known to produce a return on money invested in them. If such marketing tactics are throttled, how will taxpayer-funded institutions earn the revenues needed to repay the government?  And will these troubled financial institutions feel restrained advertising in either traditional or new media or both?

 

The problem is that many of the world’s movers and shakers, well-educated and in positions of influence, have somehow developed the notion that corporate sponsored meetings in nice surroundings are, per se, wasteful extravagance. They don’t recognize the value in terms of motivating a sales force or recognizing customer loyalty or even informing the media about new products, new services or upcoming television programming and movies.

 

It’s not to be denied these now-debased practices played a role in the earlier success of many of the troubled businesses.  First-hand experience has shown me that corporations don’t embrace sponsorships or host gatherings at attractive venues without serious thought and deliberation.  The companies I have worked with have wanted to know the pay-off before they spend their money. It’s also been evident that few employees regard a weekend sales meeting at even the toniest of venues as a free vacation, a Jack Nicklaus golf course notwithstanding. In effect, they do it for the stockholders – even when much of the stock is held in the collective name of the taxpayers.

 

Obviously there’s been a breakdown in communications.   Obviously media and legislators/regulators don’t appreciative the value of  initiatives that recognize, reward and motivate corporate stakeholders.  It’s just as obvious that corporations, are pragmatic; few spend money on which there is no return. Well-managed and profitable corporations like Nike and Accenture don’t dish out big bucks to Tiger Woods because he’s a great golfer and a nice guy.  He earns his mega-bucks by motivating customers to buy products and services associated with his name.

 

It serves no useful purpose when Joe Public is agitated by “gotcha” stories thrashing productive marketing initiatives that differentiate one product from another and create customer awareness and preference. Therefore, it seems to me that “we in the business” must work harder and more effectively to establish the value of marketing initiatives we often propose to our clients. Our clients already “get it” – they know the value of such doings; otherwise they wouldn’t be shelling out the dough.  It’s the media and the Washington legislator/regulatory community we must reach with a positive and compelling story backed by empirical evidence. And we should get on with the job with all deliberate speed.

 

Harold Burson

February 2, 2009

Many of those who reached adulthood during the past two decades take for granted the national holiday honoring Martin Luther King Jr., whose “I Have a Dream” speech at the Lincoln Memorial on August 23, 1963 symbolizes the achievement by African-Americans of civil rights commitments set forth in both the Declaration of Independence and the Constitution.

 

Actually, it took time and a lot of hard work for Congress to pass legislation recognizing Dr. King’s leadership following his assassination on April 4, 1968, regrettably, in my home town, Memphis, which now memorializes him with a Civil Rights Museum. The first bill to do so was introduced soon after his death; it went nowhere despite much public sentiment favoring setting aside a day to honor not only Dr. King but the granting of rights promised almost two centuries earlier to a segment of our population that, through the years, varied from 12 to almost 20 percent.

 

Illinois – the state that has had, perhaps coincidentally, so great a role in the African-American civil rights saga – was the first to make Martin Luther King Day a state holiday.   Fifteen years later, Congress passed legislation creating Martin Luther King, Jr. Day, effective in 1986 and subject to acceptance by each of the states.  Originally designated for January 15, Dr. King’s birthday, Congress changed the actual day to the third Monday in January to conform to such other national holidays as President’s Day, Memorial Day, Labor Day and Veterans Day.

 

Gradually, the states followed the lead of Illinois and in 1993, for the first time, all 50 states observed MLK Day in some format, sometimes under a different name and not always as a paid state holiday.  Seven years later, in 2000, Utah became the last state to recognize Martin Luther King Day by renaming its Human Rights Day,  and South Carolina was the last state to make it a paid holiday.

 

During the slow and tedious process, there was only one major glitch.   After the Arizona legislature passed enabling legislation, it was rescinded by a newly-elected governor in 1987, setting off all manner of boycotts.   The most significant was by the National Football League which had scheduled the 1993 Super Bowl in Phoenix; in protest, the championship game was moved to the Rose Bowl in Pasadena.  In a referendum, Arizona citizens later voted in favor of the holiday and the NFL awarded the Super Bowl Game to Tempe in 1996.

 

As evidenced by our archives, we at Burson-Marsteller played a small part in gaining state and private industry acceptance of the Federal mandate.   The original Congressional legislation established a Martin Luther King, Jr. Federal Holiday Commission to implement the initiative, and the CEO of our client, DuPont, Edward G. Jefferson, was chosen to represent the corporate community.   Ed Jefferson asked for our support and our Washington office promptly arranged for Mrs. Coretta Scott King, the widow of Dr. King and head of the King Center and King Foundation to reach out to the Washington press corps with a speech at the National Press Club.   A letter from Mrs. King dating back to 1985 tells the story.   We were one of many in the business community to support the Commission.

 

Under any circumstances this is a story worth telling.   It is especially timely that it be told this week – the week in which our 44^th president will be inaugurated.    After all, way back in August 1963 at the Lincoln Monument on The Mall in Washington, for Dr. Martin Luther King Jr., prime mover of the 20^th century civil rights mover and Nobel laureate, his was not so wild a dream.

 

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Harold Burson

January 16, 2009