Few things thwart the practice of good PR more than the short-termism that infects so many publicly traded companies. The focus on quarterly earnings militates against PR because the payoff from forming solid public relationships (a result of PR) is often slower to materialize than the monetary windfall that comes from other investments.
So it is encouraging to see some commentators warning that excessive focus on providing instant gratification to Wall Street can be hazardous to corporate health. In recent weeks, at least two major business titles have taken up this theme.
First came Fortune, in a cover story examining Why Companies Fail. The publication identified 10 factors, ranging from "overdosing on risk to "acquisition lust that can lead to disaster, but the one that showed up in the majority of recent business failures - from Enron to Global Crossing to Lucent to Tyco to Xerox - was being "a slave to Wall Street."
The article quotes Lucent's new CEO Henry Schacht, who seems to have learned his lesson: "Stock price is a by-product; stock price isn't a driver. And every time I've seen any of us lose sight of that, it has always been a painful experience."
Further support for this view came from an article by Harvard Business School professor Robert Simons and others in Fast Company, a memo to CEOs listing "five half-truths of business, one of which is that corporations exist to maximize shareholder value. The authors bemoaned the fact that today's CEOs no longer saw the organizations they lead as social as well as financial institutions.
"For years, the CEOs of the 200 largest companies in the US promoted this view most vocally, wrote Simons. "Your predecessors of the Business Roundtable regularly asserted a balanced philosophy of corporate responsibility ...
Then, in 1997, the Business Roundtable announced that it was making a remarkable U-turn. Its report on corporate governance assigned a new priority to CEOs: maximize shareholder value."
The interests of shareholders are significant, but maximizing shareholder value at the expense of other customers and employees, is "bad for business and bad for capitalism. It drives a wedge between those who create the economic value - employees - and those who harvest its benefits."
Of course, observations of idealistic journalists and academics are easy for hard-nosed CEOs to dismiss, even as corporate America's credibility keeps declining. But there are now signs that smart investors are growing increasingly concerned.
John Bogle, Vanguard founder, has proposed the creation of what he calls the Federation of Long-Term Investors. He suggests fund managers could meet to make their views felt on topics like full disclosure, managed earnings, and executive compensation. Eventually, he says, the group could address the social impact of short-term thinking.
Paul Holmes has spent the past 15 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of www.holmesreport.com.