Communication Tools

Just as the Sarbanes-Oxley era was about ensuring transparency, the TARP era has ushered in a new imperative of corporate accountability. The economic stimulus package that President Obama signed into law in February 2009 includes an amendment offered by Senate Banking Committee Chairman Christopher Dodd that drastically limits executive compensation. A year ago, such government intrusion into the private sector would never have been tolerated. Today, it is welcomed by many outside of Wall Street.
 
At a time when corporate leaders aren’t seen as sharing in the economic hardship they helped bring about, stakeholders have demanded more accountability – and legislators and regulators are responding.
 
The public has simply lost patience with business as usual. Everyone is looking for leadership that will point the way out of this crisis. Either corporate executives will offer it in the form of publicly articulated reforms, or newly empowered politicians, regulators, and bloggers will fill the vacuum – and those “solutions” will not be palatable for all.
 
Communicating steady, creative vision to key stakeholders isn’t easy in the TARP era, but there are strategies that can differentiate business leaders from their competitors:

 

Be for Something. With public trust in Corporate America and Wall Street at an all-time low, no amount of explanation or finger-pointing will salve the wound. Instead, the business community needs a leader, or leaders, to show everyone the way out. There is a hunger for this kind of forward-looking leadership – and the longer the marketplace goes without it, the harder it will be to convince stakeholders that it's even possible.

 

Limit the excesses. The first companies to effectively define themselves as “anti-perk” institutions are the ones that will assume the leadership position articulated above. Consider the example of John Reed, who took the helm of a struggling New York Stock Exchange for an annual salary of one dollar in 2003. That’s the kind of decisive action needed now because it communicates a commitment to the new way forward in deed, rather than word. With the Dodd Amendment already limiting compensation at banks that accept TARP funds, companies are wise to identify ways to adjust their compensation structure, award non-cash bonuses (e.g. restricted stock), and cut back on the frills that have already landed companies in hot water.

 

Deliver bad financial news early and all at once. Such an approach may seem counterintuitive – and frightening – but it is a critical strategic approach that subsequently defines how a negative story is felt and seen by your most important constituencies. Do not let the drip-drip-drip of rumor and/or real negative news play out publicly in the marketplace. Today, assumptions are almost always worse than the truth.

 

If under investigation, cooperate, cooperate, cooperate. New SEC Chairwoman Mary L. Schapiro has already moved to do away with an existing rule that requires enforcement division lawyers to seek the approval of Commissioners before negotiating penalties. To be sure, the SEC is on the lookout for villains to use to burnish its watchdog credentials. If your company lands in the spotlight, now is not the time to fight or hide. Today, companies can assume one of two roles – poster child of reform, or poster child for reform. Cooperation that goes above and beyond mere compliance is the best way to ensure that your company never gets cast in the wrong role.

 

The new Corporate America and Wall Street need leaders to brave uncharted frontiers. The fates of companies hardest hit by financial crisis are still within their own control, but only if they induce the kind of leadership