Thursday, March 26, 2009

Can AIG's Reputation Be Salvaged? Does It Matter?

This week"s question: Can AIG's Reputation Be Salvaged? But the better question may be: Does it matter?

As the pundits and politicians haggle over AIG's reputation, there are rumors that scores of high priced public relations professionals are working to turn the company's image around. Nicholas Ashooh, SVP Public Relations at AIG, has his own staff and likely has help from one or more communications agencies.

I am anxious to read your opinion about AIG's reputation and whether it can be salvaged. I think it can.

However, the first step in the process is the same first step any company or organization, of any size, must come to grips with after a crisis -- figure out what they did wrong, take responsibility for it, and then map out a strategy to fix what's broken, and then do it.

Only AFTER that is all done, can the organization begin the slow, methodical process of rebuilding its image and reputation.

President Obama said, "I screwed up" after one of his new administration appointees turned out to be a dud. And that "screw-up" quickly disappeared from the front pages.

Earlier, if then-President Bill Clinton had fessed-up that he had, in fact, "known that woman" Monica Lewinski, and said he would never do anything like that again, instead of stonewalling and denying it for months, the nation would have been spared a lengthy and embarassing saga. The American people would have chuckled and collectively laughed and said, "yeah sure," but that would have been the end of that.

But, the more intriguing question about AIG is: Does it matter?

Think about Exxon. In 1989, the Exxon Valdez dumped 10.8-million gallons of crude oil in Prince William Sound and the surrounding 11,000 square miles of sea and coastline. The media coverage and public outrage was comparable to the current AIG bonus flap.

Exxon spent an estimated $2-billion to clean it up, another $1-billion to settle civil and criminal charges, not to mention the hit on its share value. In 1994, the case and its publicity was still very much alive. In the case of Baker VS Exxon, an Anchorage jury awarded $287-million dollars in actual damages and $5-billion in punitive damages.

The company appealed and appealed and appealed and in June of last year (2008) the U.S. Supreme Court ruled the penalty was too high and sent the case back to the lower court.

Now, here's the potential answer to the question about AIG.

Even though Exxon is still the first thing that comes to mind when you say "oil-spill," and the next thing is the pictures of seals and water fowl covered in black crude oil, Exxon ended 2008 with a record profit of $45.2 billion.

So some executives argue that it really doesn't matter if you have a really horrendous crisis.

Exxon may be an exception to the rule, but most companies that experience that much damage, both to the bottom line and to their reputation, do not do so well. And I might argue, just how much more profitable Exxon might be if the public didn't detest it so much and trusted it more.

What do you think?



5 comments:

  1. Hi,

    I've just discovered your blog, after cruising through the ICM site. I've subscribed to yours and to Dan Hicks.

    I live in Victoria British Columbia, and there were a number of stories in the news (print and TV) this week about the Exxon oil spill. March 24 marked the 20 year anniversary that the tanker ran aground in Prince William Sound. Several stakeholder groups used the anniversary as an opportunity to call for a restrictions on oil tanker traffic and pipelines off the BC coast.

    I'd be interested in whether you feel this could this have been an opportunity for Exxon as well, and if so, what would you have advised them?

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  2. This comment has been removed by the author.

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  3. Cindy,

    Thank you for finding us!

    The anniversary of the Valdez oil spill could have been an opportunity for Exxon, but it would have been out of character for the company, considering its past 20-year history. Exxon leadership, if nothing else, has been consistent.

    The founder of ICM, Bob Irvine, spent time at Prince William Sound, working for another company that was concerned about getting swept up in the negative media attention. One day he was standing on the short of the Sound watching Exxon crews and contractors working to save wildlife and clean up the massive spill.

    He was standing next to a senior Exxon official. He commented about how impressed he was with the effots Exxon was expending to fix the mess. And, then he suggested, "If you would tell the folks back home what you are doing here, I think it would help."

    The Exxon executive replied, somewhat arrogantly, "We don't have to tell anyone anything. All we have to do is a good job."

    Obviously, that wasn't enough. But, they are still in business, still fighting one of the lawsuits resulting from the spill, and still making obscene profits.

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  4. My take on "does it matter" is a tad different from the Exxon case. out of sight, out of mind...

    I doubt that most Americans or American companies would knowingly buy insurance services from AIG now for several reasons... revenge, voting with their pocket book, and skepticism about whether the company will be around in X years, aside from the fact that the government bailout.

    Which begs the question, is this bailout spending good money after bad? Is it not a NO
    win situation? Except to prevent further collapse of other back end insurance and securitized loans, etc. that exist to shore up our entire financial and real estate infrastructure. Or whatever else it was / is that AIG was into.

    I fear that AIG will falter in its own right, and take others down with it if there is not an infusion of outside dollars. So the bailout is just a delay of the inevitable for its shaky business practices. And Americans will be lucky to recover the bailout money.

    For AIG and others, it is unlikely that they will 'recover' from their bad reputation. However, that didn't seem to hurt ENRON, TYCO and others whose misguided fiduciary responsibility and accounting principles were able to squeak by. I think that there is finally a new age of accountability. As well there should be.



    P.S. I just stumbled upon your org and your blog.
    My impression went from WOW KEWL to skepticism when I saw that you removed 2 posts... Can't imagine what they were... and wonder why you can't weather a 'crisis' or squash them in kind... But here is my for real comment about AIG.

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  5. Thank you for your observations and thanks for letting me know about your reaction to the deleted comments. You can go back to WOW and KEWL because the deleted items were MY comments with really bad typos in them that I did not catch until after they were posted. And I could not figure out a way to correct them, so I thought it was better to delete them than for me to post items that looked sloppy.

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