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ROUNDTABLE: HOW PR EXECS CAN KEEP BOARD OF DIRECTORS ABOVE BOARD
from PR News, May 5, 2003
Helping their companies respond to a slew of new corporate governance rules is one of the biggest challenges facing PR pros these days. "Listing Standards" recently mandated by the New York Stock Exchange and the Sarbanes- Oxley Act — not to mention the media maw waiting for another juicy corporate scandal to gnaw on (read: Tyco International) — are dramatically changing the ways companies need to communicate. "It’s a new world, with new rules," says Kurt Stocker, past president of the Arthur Page Society, who is also a member of the Corporate Accountability and Listing Standards Committee of the New York Stock Exchange. "Transparency is communicating not just financial information but information about boards of directors and how they’re evaluated."
The PR executive’s challenge is to increase their own credibility by finding new ways to deliver information to shareholders," adds Stocker. To be sure, it’s a fine line that PR pros must walk between pleasing the C-suite and pleasing the Board. But it’s a line that PR execs will have to learn how to navigate in what is still uncharted territory. For a road map, PR NEWS asked several PR executives for their advice on some of the best practices for dealing with board members – and how not to get caught in the crosshairs.
Reed Bolton Byrum
President-CEO, PRSA
A Board scenario like that of American Airlines finding out too little, too
late has been repeated too often. Silent collusion by a CEO with a company’s
CFO will continue to bring down huge corporations, and the Boards will still
be feeling like plucked porcupines — unless the traditional Board structure
undergoes change.
No PR officers have been indicted in the corporate scandals, and I believe they could fill several governance gaps. Public relations officers can prove they are more than just sounding boards – rather, they can be proactive counselors who keep alive the flame of a company’s most valuable asset: its reputation.
A Board-designated communications counsel could help the directors navigate difficult waters by interpreting needs of the many internal and external audiences. The results could be a Board that not only is aware of activities beyond the boardroom, but also can place its actions in the proper ethical context.
Dan Collins
Division VP, Corporate
Communications, Corning Inc.
At Corning, we experienced no angst in implementing the new corporate governance
regulations because we were already doing much of that voluntarily. However,
we did realize there was an opportunity to enhance our communications efforts,
in light of the uncertainty that stakeholders were experiencing in the wake
of crises at Enron, Worldcom and elsewhere.
We added a corporate governance presentation to our annual investor meeting well before Sarbanes-Oxley was implemented so that investors would have the information they needed up front. We boosted our internal communications with Q&As and online glossaries, knowing that employees might be having trouble making sense of the evolving regulations and associated vocabulary. We meet regularly with the Corporate Relations Committee of the Board of Directors to update and inform. We had members of the Board address our leadership team on issues of social responsibility and financial integrity.
Michael Claes
Managing Director, Corporate
Practice, Burson-Marsteller
With respect to the day-in, day-out relationship with the Board, the professionalism
used in advising any corporate executive applies. But when it comes to difficult
situations — change of control, accounting issues, etc. — the
nuance of "who is the client", especially for internal staff, adds
a complexity because in many respects management is the client and the Board
can be an adversary. So someone (internal or outside PR counsel) going to
the Board on a difficult issue has to weigh whether they are — or are
perceived as — speaking for (i.e., defending) management, or are they
giving the Board impartial advice even if it runs counter to management’s
interests. This is not conveniently resolved by the idea that ultimately all
are employed by the corporation and accountable to shareholders, and a skeptical
independent committee of Directors is going to view the inhouse staff, and
even outside counsel, as advocates for management.
A seasoned in-house professional who has the esteem of the Board may get past this, but with the pressure for independent thinking many Boards are retaining their own advisors, including legal, accounting and public relations, for the impartial advice they think they need.
Julie Freeman, ABC, APR
President, IABC
In an ideal world, public relations professionals should impact a Board’s
decision-making at two points in their process: before a decision has been
made and afterwards. As Board members decide on a course of action, PR practitioners
should help them see the impact that choice would have on all of the organization’s
publics.
If they anticipate an unfavorable reaction, they can suggest strategies to help those publics understand and accept the Board’s decision. Once the Board has made a decision, the public relations practitioner can develop a communication plan that is timely, honest and clear. If Boards and organizations wish to rebuild employee, customer and public trust, their decisions must be transparent, and they must be communicated openly. Public relations professionals have an important role to play in that process.
Margery Kraus
President and CEO, APCO Worldwide
Relationships between boards of directors and their companies are changing.
As they seek to regain trust and credibility with key constituencies, they may
well begin to communicate on their own behalf rather than leaving it to the
CEO. At times, they will have to represent their own and key shareholder interests
publicly and separately from management.
This will likely cause terror in the hearts of CEOs and some PR directors. They will fear confusion and contradiction. But the situation is not very different from that of any stakeholder – labor, shareholder group, activist. The process will be the same. Maintain open, two-way communications with them. Understand their needs, expectations, pressures – especially within key committees, such as audit and compensation. As with others, this will take close coordination with CEOs, but the advantage is that there are few groups more important to them than the board. You should have their full attention.
Katie
Paine
President - KDPaine & Partners
I sit on a board of directors for a health concern. The talented and charming
PR person made a presentation to the Board about a major new initiative. It
has all the "right" ingredients, good strategy, catchy logo, good
implementation, but it lacked the single most important component: clear measures
of success.
I pushed her to find out how she would be telling the board if the program was working. Her response was "the number of people who participate." My response was "fine, and how does that help the bottom line of the organization?" She did not know the answer. To me it was simple: the program was designed to improve community relationships and make employees feel more engaged. That can be measured in lower employee turnover (four employees retained @ $50,000 to replace a single employee would have paid for the program) and increased membership from the communities affected. But the PR person didn’t know how to speak "boardroom" – i.e. numbers, charts and graphs. As a result her program was perceived to be somewhat frivolous.
In contrast, the government affairs person followed her, making a thorough presentation of pending legislation and for each piece of legislation outlined the possible costs and benefits to the organization.
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Helene Solomon One way to connect with board members early on in a relationship is to seek their input during a communications audit. This provides an opportunity to establish a rapport and gain a sense of a board’s point of view. Sometimes a crisis is what engenders respect for the PR firm. A board member seeking crisis counsel who sees that a firm is seasoned, able to absorb information and react quickly, and is in sync with the organizational mission, can become a cheerleader for PR in the future. |
Louis M. Thompson, Jr.
President & CEO, National Investor Relations Institute
While there is plenty of room for finger pointing when it comes to who failed
in their respective roles resulting in the tremendous loss of investor confidence
in the equities markets, the failure of boards of directors to provide adequate
oversight is a major one.
The New York Stock Exchange and Nasdaq corporate governance listing requirements
are an effort to address some of the problems growing out of the Enron debacle.
While new rules may raise the bar in making boards more independent, financially
literate and so on, the one factor that will distinguish good boards from
bad or mediocre ones is behavior and the culture in which the boards operate.
The culture and the behavioral aspects are most often established by the CEO.
The PR officer must emphasize this when counseling the CEO. Board members
must operate in a culture built on trust – trust that they can challenge
each other and the CEO. And, a key piece of advice is that we live in a world
of few secrets. Just ask the board of American Airlines.
