As a practical matter, this means that labor unions as well as major environmental organizations and other political activists will soon be organizing to win seats. At stake will be whether boards reflect the interests of shareholders as a whole or those political interests. Many corporate managements will feel compelled to run the equivalent of internal political campaigns in order to protect the integrity of their boards.

Last November I co-authored an article on this topic in The Wall Street Journal. You can find it here.

]]> http://www.whwg.com/2010/08/access-to-proxy-and-the-integrity-of-corporate-boards/feed/ 0 http://www.whwg.com/2010/08/gulf-oil-speech-administration-dead-in-the-water/ http://www.whwg.com/2010/08/gulf-oil-speech-administration-dead-in-the-water/#comments Wed, 18 Aug 2010 21:03:41 +0000 Clark S. Judge http://www.whwg.com/?p=1372 It is no news now, but on Tuesday last week, President Obama delivered the least effective Oval Office address since Jimmy Carter’s “malaise” speech. Why?

It wasn’t just the awkward use of his hands, the hackneyed and inappropriate wartime metaphors, the equally banal “if we could land a man on the moon” drivel. All that was bad enough, but more devastating was the gulf between obvious fact and the speech’s fiction. These — shall we call them misspeakings — were coupled with more of the administration’s increasingly off-putting crisis default setting: That everything bad was Bush’s fault. Our son was two when we stopped accepting that kind of excuse in our house. This administration is almost two, but it’s been talking for longer than our son when we told him to stop the excuses.

Here is a list of questions that occurred to me during the speech and that even the most junior White House speechwriters should have seen as implicit in the text and hit the delete button:

* The speech suggested that the Administration was on top of the oil-spill situation from day one, with the Energy Secretary (co-winner of the 1997 Nobel Prize in Physics, awarded “for development of methods to cool and trap atoms with laser light”) heading the effort to trap oil gushing from the Gulf floor and floating toward our southern shores. Doesn’t that mean that hundreds of elected officials in the states involved, thousands of journalists, and millions of Americans failed to notice this all out effort until last night?

* The speech started by saluting our “brave men and women in uniform” who are “taking the fight to al Qaeda”. But part of that fight is diverting American oil dollars from the Middle East so they can’t fuel terrorism. In shutting down deepwater drilling in the Gulf of Mexico, hasn’t the White House gone AWOL in that part of the battle?

* The speech outlined a course of action that sets aside current laws for dealing with oil spills. Some may say that this emergency is too big to worry about the law, but out of curiosity, what is the White House’s legal authority for demanding that BP put money into an independent escrow account controlled by the government, and insisting that BP pay the wages of those affected by the White House ordered shutdown of deepwater drilling? Other than making the administration look in charge, why was the carefully crafted oil spill law (developed after the wreck of the Exxon Valdez) simply ignored in the week prior to the address in favor of huffing and puffing and threats of boots on the neck and kicked rear ends?

* The speech said that “we are running out of places to drill on land and in shallow water… [a]nd that’s part of the reason oil companies are drilling a mile beneath the surface of the ocean.” Aren’t there hundreds, even thousands, of such sites, but few, if any, for which the U.S. government is willing to issue permits? Wasn’t the speech’s message that the government is going to stick to, not change, that status quo?

* The speech talked about “costs associated with the transition” away from dependence on foreign oil and decried those who say we can’t afford those costs. By halting deep water drilling and pushing all liability onto the oil company involved wasn’t the speech saying that the government would pay no price and bear no burden — even those costs and burdens that its regulations and ineptness impose — to achieve energy independence?

* And to repeat, the speech employed the metaphor of war throughout. In what way is cleaning up a lot of oil like a war, unless the speechwriter intended to suggest KP duty? Is not our real war against global forces that are funded in large part via Middle Eastern money, money that comes from the oil trade? Isn’t using the accident as an excuse for policies that will push drilling out of the United States a form of surrender in that war, the real war?

Here is a lesson I learned writing speeches in the Reagan White House: Public communications is a highly sensitive, delicate thing. If the logic of your text is not tight, if you deviate even slightly from what your audience knows to be true, if in making your case you seem to look down on your audience and try to play slight of hand with their concerns, you are dead in the water.

Last Tuesday night, President Obama was dead in the water.

The SEC’s civil suit against Goldman charges that, through a partner company, the investment bankers packaged particularly troubled mortgages into collateralized debt obligations, the now notorious CDOs.  After Goldman sold the allegedly designed-to-fail instruments, the partner shorted them.  Goldman collected fees for assembling and marketing the package (later offset, the firm contends, by larger losses).  The partner reportedly netted a billion dollars on its short positions.

The Wall Street Journal front page story characterized the SEC’s charges as the biggest Wall Street-Washington confrontation since the Michael Milken-Drexel case at the end of the 1980s.  The Journal might have added that Milken’s was the most prominent of a larger package of investigations targeting the investment community.  Despite a parade of so-called perp-walks, when financiers were led into custody as cameras clicked, almost none of those actions produced convictions.  The Milken case led to a fine and prison time but remains controversial to this day.  Many, myself included, believe justice was miscarried.

The public perception point here is that major financial players face a formidable communications obstacle when they become the targets of such sweeping legal actions. Most attorneys — both prosecutors and their own defense attorneys — and journalists don’t actually understand what investment bankers and securities traders do.  The complexity of modern finance bewilders them.  And they are predisposed to assume that complexity equals opacity and opacity equals fraud of one stripe or another.

As I write, the weekend after the SEC’s charges hit the papers, I am not offering a judgment on the  case against Goldman, though the purchasers of the CDO were among the most experienced and sophisticated players in the financial world.  If any buyers were capable of being intelligently beware, it was they.  But I am saying that Goldman must learn to explain its business with unprecedented clarity, otherwise, the legal, political, and journalistic worlds will judge the company guilty and exact huge penalties long before any trial.

Morgan’s term “glass pockets” suggested passive transparency.  Pull back the fabric; let in the light.  Goldman will need actively to project the light outward, making the complex both simple and comprehensible.  For an institution unaccustomed to talking to non-experts, the task is sure to prove formidable.

Posted weekly, the program usually features Roberts interviewing a distinguished economic thinker.  On February 8th, Roberts broke from this format to discuss his own thinking about why trade is good.  Drawing on Adam Smith and David Ricardo, 18th and 19th century respectively giants of economic thought, he explored how trade increases personal productivity by a factor of a hundred and more.  As he summed up, “Self-sufficiency [in a person, a tribe, or a country] equals poverty.”

While listening, I found myself thinking of the campaign against Wal-Mart, which is essentially a campaign against productivity and global trade.  Wal-Mart’s enormous price advantages are based on harnessing the interplay of enormous global sourcing of product and advanced information technology to lower costs and, with costs, prices.  This is the dynamic the Roberts explains in his podcast.

Why am I talking about economics and a retailer on a communications website?  Because Wal-Mart is running an ad campaign that conveys precisely the same ideas as does Professor Roberts, but in the compact, anecdotal, and personal language of advertising.  Its slogan — “Save Money. Live Better” — condenses Smith, Ricardo, and Roberts into four words.

When writing for Ronald Reagan, I noticed that the President did something very similar.  He would sketch out the thinking of Adam Smith or Alexis d’ Toqueville or some other major thinker.  But he would rarely refer to the thinker by name.  Like Wal-Mart, he framed his discussion in compact, anecdotal, and personal terms.  Listening to him, you felt you had heard something very simple, when in fact you had heard an argument of high sophistication.

Companies facing the kind of agenda-driven challenge that Wal-Mart faces would do well to look at both the retailer and the former president as examples of how to communicate.

It looks simple.  It isn’t.

Typically companies in Toyota’s position clam up.  Statements are defensive and evasive.  Maintaining such a posture during the long life of a litigation will leave a company’s reputation in badly compromise.

Yet public opinion studies have shown that companies that publicly speak to their problems — that defend themselves but also acknowledge faults and both pledge and work to fix them — build the trust of customers, suppliers, and potential jurors.

Toyota was slow to grasp its problem and engaged in denial for too long.  But now it has put corporate reputation first.  It is right to do so.  And it likely to do better in court as a result.

First a note about history.  This being the music industry, we are talking about ancient history — 2001.

Fans will recall in that year’s Grammys a moment similar to tonight’s, when Sir Elton paired up with the rising rapper, Eminem.  The ostensible reason for that year’s duet was to save Eminem’s career.  Eminem had taken heat for a recently released song that included lyrics some judged anti-gay.  John is gay.  That he was willing to appear with the young star quelled the criticism.  But it did more.

Before that night, Eminem — though highly popular — was in many respects a niche player in a niche space.  Many saw him as something of a thug, which limited his potential popularity.  ”Stan” — the song that he and John performed and that Eminem had co-written — was a tremendously sensitive, evocative piece that transcended the style of its music and lyrics.  Eminem’s appearance with an artist as widely respected as Elton John led audiences that would never have looked twice at him to tune in and listen with an open musical mind, and they came away seeing Eminem as himself an artist who deserved attention and admiration.

Lady Gaga occupies in a similar place tonight, though without the homophobic baggage.  She, too, is a highly popular performer in a niche space.  Like Eminem, she, too, has the potential to reach a much larger audience.  Appearing with Elton John in such a high profile event will win her open-minded attention from a wide range of people that would otherwise dismiss her as a passing musical fad.

The public affairs lesson here?  You don’t always need people — third parties — to speak for you.  Sometimes it is enough that they simply stand with you.  That very fact opens otherwise closed ears to what you have to say.  Eminem used his opportunity brilliantly.  We will see tonight if Lady Gaga does as well.