June 2007

Corporate Image Advertising and the Future of Free Enterprise

Crisis management has become the latest fashion in building a corporate reputation. Companies that come under siege from interest groups, trial lawyers, and the press wage image campaigns to make themselves "better liked"--and often do so by playing down their capitalist purpose. Do these campaigns mislead the public? Do they validate the belief that for-profit entities are inherently corrupt and, therefore, injuring them is a virtuous act--not to mention a victimless crime? Does corporate social responsibility represent a good business strategy in the long run, or has reputation management become, in effect, an apology for making money? If so, does this trend ultimately pose a threat to free enterprise?

Public relations expert Eric Dezenhall tackles these issues in his new coauthored book, Damage Control: Why Everything You Know about Crisis Management Is Wrong (Portfolio, 2007). Dezenhall presented his book's argument at a June 4 AEI book forum, and afterward discussed it with a distinguished panel.

Eric Dezenhall
Dezenhall Resources

The conventional wisdom of public relations is that each situation is a puzzle that can be successfully solved by overcoming communication problems. This is occasionally true, but much more often crises are conflicts between two sides inexorably at cross-purposes. A whole host of anti-corporate interests--including the trial bar, organized labor, and activist NGOs--are unlikely to be placated by anything a corporation might do in its own defense, and so seeing reconciliation with these interests as a the means of averting PR crises is counterproductive. These groups exist and earn their funding by conducting campaigns against corporations--a fundamental fact too often overlooked. When corporations are attacked for real problems, the solution is to fix these problems, apologize, and publicize the improvement. When corporations are unjustly attacked for fake problems, however, their apologia should consist of vigorous self-defense, not abject surrender. Corporations need to learn to fight back in these situations, which often means painting the attacking group as the villain and showing how they are the ones being victimized.

Jon Entine
AEI

The corporate social responsibility (CSR) movement has a long history in America. Although it is rooted in a primarily religious and pacifist movement, it merged with the sensibilities of the 1960s to become largely environmentalist and leftist. In today's business climate, actively embracing CSR has become a necessity. For the most part, there is nothing wrong with this trend. Gaining a reputational advantage over competitors through good corporate citizenship is just good business, and it is perfectly healthy for society. But in seeking positive publicity, many corporations take CSR and "dialoguing with stakeholders" to absurd lengths and often willingly put themselves in the hands of interest groups whose purposes are fundamentally antithetical to their own. Cooperating with activist NGOs such as Greenpeace in search of good publicity is a dangerous game, however, as such groups will turn on their erstwhile corporate allies with little hesitation whenever doing so will serve their interests.

Nancy Murphy
Case Foundation

The distinction between CSR and CSR messaging is a crucial one--behavior is distinct from efforts to publicize it. Corporations most often get in trouble with the public when their public relations rhetoric gets ahead of the reality of the activities being publicized. The public can see through such deceptions and does not like feeling misled. In dealing with various NGOs, it is important to keep in mind that not all such organizations are activist organizations. Not every group is an extortionist in disguise. Many organizations share substantive visions with corporations and can offer genuine opportunities for partnership with companies looking to be good corporate citizens. It is also important to keep in mind that all of these organizations--corporations, NGOs, the media--are just made up of people. Trying to deal civilly with the individuals who seem to be part of the opposition is thus crucial, and vilification on all sides is counterproductive. With this in mind, it is important that NGOs be held to the same standards of conduct as corporations, and they should willingly submit to the same kind of public scrutiny that they so often demand.

Steven Hantler
DaimlerChrysler

One of the most important groups of people attacking corporations is the trial bar. Many trial lawyers are among the smartest, most talented attorneys out there, and they are extremely adept in crafting strategies to win cases against big corporations. They employ legions of people poring over public documents and filings in hopes of finding the "billion dollar mistake." Once they find a seed, they methodically grow it--through focus groups, collaboration with government regulators and state attorneys general (which yields free discovery), and careful media exposure. When trial lawyers call press conferences, it is not primarily to influence the jury pool, but rather to create intense pressure for settlement from shareholders and Wall Street analysts. Succumbing to this pressure, or simply taking it lying down, is a huge mistake. DaimlerChrysler has vigorously fought back against the trial bar, and, far from making us a target, this tells savvy trial lawyers that going after our company is a bad investment. More companies should show courage and tenacity in fighting back against the trial bar and those promoting shoddy science, as doing so is ultimately in their long term interests.

AEI research assistant Philip Wallach prepared this summary.