AIG came under scrutiny after news spread that it was hosting a $440,000 retreat in Monarch Beach, CA, just days after asking the government for $85 billion. Similarly, struggling Wachovia, which was in the middle of being bought by Wells Fargo, was also planning an event: A Greek Isles cruise for employees of its brokerage firm A.G. Edwards.
While much of the country was focused on the spreading financial crisis, a backlash to the companies' seeming profligacy ensued. Presidential nominee Sen. Barack Obama called for the AIG executives involved to be fired, and Rep. Elijah E. Cummings' (D-MD) sound bite – “They were getting their manicures, their pedicures, massages, their facials, while the American people were paying their bills” – was widely quoted.
Both companies have since canceled future events, and AIG released a statement saying the event was “mischaracterized” as an “executive retreat” when in fact it was for independent life insurance agents and not AIG employees.
When reached for a comment on how the company is working to help rebuild its reputation, Joe Norton, the director of PR for AIG, tells PRWeek, “We're focused right now on repaying the Fed loan as quickly as possible, protecting the taxpayers' funds and the interests of our shareholders.”
Wachovia canceled the cruise, but a spokesperson says it was not responding to negative press. Instead, it acted in the best interest of its clients and employees, who might need to be closer to home during the ongoing economic turmoil. The company has no plans for further outreach on the situation, the spokesperson adds, who spoke only on background.
Yet, the perception remained for many that the companies receiving any help from the government or its $700 billion-taxpayer-funded assist should not be even dipping a toe in the luxury market – preplanned or not.
These companies should have anticipated the sudden interest in all their expenses, “from light bulbs to retreats,” says Stan Collender, MD and head of financial services for Qorvis. “They are in a fishbowl. That is the price of borrowing from the government.”
Any damage control will be a slow, steady process, Collender says, and the companies need to “demonstrate [they are trustworthy] through solid business results, rather than advertising, marketing, and spinning.”
Collender also notes the importance of getting someone out there to emphasize the changes a company is going through. He points to AIG, which recently elected Edward Liddy as chairman and CEO. A new face can help give customers a reason to reinstate trust, he says.
After the retreat incident, Liddy wrote a letter to US Treasury Secretary Henry Paulson, saying, “We owe our employees and the American public new standards and approaches.” However, he said it had been “standard practice” in the industry for many years, which was picked up in the press.
Torod Neptune, SVP and global practice leader at Waggener Edstrom, says AIG and Wachovia should turn to third-party voices to help build up their corporate reputation.
Overall, banks must realize they are under more scrutiny than ever, and should get ready to communicate openly with consumers about their business and how it is run, he adds.
“This is a time to look beyond its walls for its communications,” says Neptune, who offers social media a way to directly communicate.
John Dillard, SVP at Edelman in financial communications, agrees. Banks need to make sure that information about the company's strategy is widely distributed, and that meetings with investors and employees follow any major company announcements.
“They should stress that there is a plan in place and that they are executing this plan,” he says. “They need to communicate transparently... for one reason: to maintain trust.”
“But there are far more profound situations at stake,” adds Karen Shaw Petrou, managing partner at Federal Financial Analytics, pointing to the reform that's happening on Wall Street. “The industry in general will need to be rather sensitive to its reputation.”