Holmes Report Blog

The Holmes Report blog focuses on news and issues of interest to public relations professionals. Our main site can be found at www.holmesreport.com.

Saturday, January 06, 2007

Disney Disgrace: It’s always unedifying to see giant corporations use legal bullying against their critics in the media, but there’s an extra irony when the giant corporation involved is in the media business itself.

Disney has filed a copyright infringement suit against blogger Spocko, who has been waging a campaign against radio station KSFO and right-wing talk show host ?????. Over the past few years, it has become commonplace for leading supporters of the Bush administration to call for the imprisonment or even the execution of the administration’s critics, and Disney’s Melanie Morgan joined the parade earlier this year, calling for the death of New York Times editor Bill Keller.

Spocko posted audio clips from KSFO programming, triggering a letter-writing campaign that prompted advertisers including Visa and MasterCard to reconsider their support for the station. Disney responded by sending a cease-and-desist letter to Spocko’s ISP, claiming the use of the audio clips was an infringement of copyright and Spocko’s site was shut down.

The truth is that the use of audio clips was almost certainly within the “fair use” provision, which allows news sites to use selected material to illustrate stories. If Spocko was a vast news organization with large resources, Disney would never have considered using such a spurious lawsuit. But Spocko is a lone blogger, and his ISP apparently has no interest in defending the right of free speech on the Internet, so Disney has been able to shut down the site, for now.

Friday, January 05, 2007

Paying a Premium: The Wall Street Journal seeks to defend Robert Nardelli’s $210 million severance from Home Depot by pointing out that most of the money he received in exchange for his departure wasn’t severance money at all, since it was guaranteed in the contract he signed when he joined the company—a distinction without any appreciable difference.

The Journal’s broader objective is to defend the extraordinary amounts paid to CEOs, which it does by claiming: “Top executive talent is hard to find, and boards are willing to pay a premium to get it. Their hiring decisions don't always work out—whose do?—but they'll pay a lot to reduce that risk.”

Spend a moment thinking about that and the argument boils down to this: CEOs are paid so much because they’re expensive.

What the Journal doesn’t claim is that CEOs who cost a lot are better than CEOs that cost only a fraction as much. It doesn’t claim that because it can’t. It can’t, because there’s absolutely no evidence to suggest it’s true.

The reality is that no one knows how much a good CEO is worth: it’s impossible to isolate the impact of the CEO from other factors—the quality of the management team, changes in the competitive landscape, global economic conditions—that affect corporate performance. It’s also pretty much impossible to predict whether a CEO who appeared to perform well in one job (perhaps because of some innate skill, perhaps because he was in the right place at the right time) will perform well in another.

Boards of directors are spending massive amounts of money based on nothing more than guesswork. It’s not even particularly educated guesswork. Top executive talent, as the Journal says, is hard to find. It’s even harder to identify with any certainty. So perhaps companies should avoid spending hundreds of millions of dollars until they know exactly what they’ve bought—any CEO confident of his own ability ought to be happy to accept a genuine pay-for-performance arrangement.

Thursday, January 04, 2007

Ticket Masters: Washington Sports & Entertainment, which owns the Washington Wizards basketball franchise and Verizon Center, has taken a bold stand against Democratic plans for ethics reform in Washington, D.C.

The company claims that any benefit to the public interest likely to result from curtailing the use of bribes by lobbyists eager to curry favor with lawmakers is far outweighed by its own need to profit from those bribes. Thus it will oppose efforts to close a loophole that allows lobbyists to furnish lawmakers with the best tickets. (The current law says lawmakers must pay face value for sports tickets, but stadium owners have circumvented the law by declining to put a value on individual luxury box tickets.)

“We support the concept of full and open disclosure on the part of lobbyists and lawmakers to comply with ethics standards,” says Matt Williams, senior vice president at WS&E. “However… this ban of tickets to sporting events as gifts will cause a negative impact on our business. Probably more than any other franchises in professional sports, Washington, D.C.-area teams count business from lobbyists as a contributing factor to our bottom line.”
Sound-Bite Science: There’s a lot of nonsense in the world, and a good amount is spouted by celebrities (not as much as by politicians, activists, corporations or journalists, but still…) so a new initiative by the U.K.-based Sense About Science is to be applauded.

The group has listed statements made by stars on topics such as organic food, pesticides and ways to avoid cancer, and supplemented the celebrity advice with actual scientific information. It says it will offer a helpline for celebrities so they can check their facts before going public—something that should prevent both embarrassment and misinformation.

“There is a real problem when people present things as though they are scientifically grounded,” says the group’s director. “There is always going to be a fair bit of nonsense around, and particularly with the big interest in lifestyle. We are saying, ‘Before you go public, check your facts.’ All it takes is a phone call to us.”

It would be nice to see something similar in the States.
Unjust Rewards: Last year, Home Depot gave Robert Nardelli $30 million in pay and stock option for serving as its chairman and chief executive. This year, the company will pay him $210 million for doing nothing… unless you count his decision to step down as a major contribution to the company’s fortunes, which shareholders apparently do: Home Depot stock was up 2.3 percent yesterday following news of his departure.

It is obvious that executive pay in America is distorted, grotesque and out of control. This is only the latest, and probably not the most extreme, example. Nardelli will receive almost twice as much for leaving the company as he received over the course of his six year tenure ($125 million) during which Home Depot’s share price went from $40.75 to $40.16. And that’s to say nothing about the company’s reputation: once a leader in employee engagement, social and environmental responsibility, the company is now just another big box retailer.

The outrage over Nardelli’s rewards is likely to add fuel to incoming House Financial Service Committee chair Barney Frank’s interest in investigating executive compensation, but it’s hard to envisage a cure that is not worse than the disease. The only solution likely to work involves boards acting responsibly of their own volition.

It would be nice to believe that those who have contributed to this sorry state of affairs would feel a little discomfort, but how do you embarrass people who have no shame?

Tuesday, January 02, 2007

Plague of Flogs: Here’s my hot tip for the big public relations buzzword of 2007: “flog.” A “flog,” for those who have not been paying attention, is “a fake blog typically used as a sales tool.”

Early examples include, most notoriously, the Wal-Marting Across America blog created by Edelman for the giant retailer, which featured a written by a Washington Post staff photographer and his partner, a freelance writer, as they traveled across the U.S. in an RV, parking for free at Wal-Mart stores all across the country and posting conversations with Wal-Mart employees full of praise for the notoriously generous and tolerant retail giant. Unfortunately, the authors forgot to mention that their entire jaunt was subsidized by the company.

The latest example is brought to you by Sony, which shortly before Christmas set up a blog called alliwantforxmasisapsp (it’s now been taken down, but it’s parodied here), written in an “urban patois” by a hip hop artist called Charlie, whose cousin Pete really, really wanted a Sony PSP for Christmas but who couldn’t afford one.

If you haven’t already guessed, neither Charlie nor Pete was a real person. They were fictional characters created by some Sony marketing whiz whose enthusiasm for the blogosphere was matched only by his (or her) contempt for Sony’s customers.

“It’s a stealth marketing practice that’s unethical,” Andy Sernovitz, chief executive of the Word of Mouth Marketing Association, tells the Sacramento Bee. “A business pretending to be a consumer is always wrong,” he adds—something that should be obvious but clearly is not. “I don’t think it’ll become a big trend, because they get busted almost as fast as they happen. The blogosphere does a great job of enforcing itself.”

So the technique is both deceptive and stupid. For that reason, I expect to see much, much more of it over the next 12 months.
Public Interest? Don't Hold Your Breath: In his recent book Profit with Honor (reviewed in our newsletter last year), Daniel Yankelovich expressed the touchingly naïve hope that companies practicing what he calls “stewardship ethics” (a fancy new term for enlightened self-interest) would take the public interest—and not just their own narrow self-interest—into account in their public affairs activities.

How likely is that? Exhibit one for the prosecution: the Motion Picture Association of America.

A California law that would have prevented companies and their private investigators from using “false, fictitious or fraudulent” representations in order to obtain private information such as telephone records, has been killed because of lobbying from the motion picture industry.

The law, proposed after the scandal over HP’s egregious invasion of reporters’ and board members’ privacy earlier this year, was apparently sailing through the Senate before the MPAA voiced its opposition.

The MPAA claims—essentially—that it needs to engage in fraudulent behavior in order to combat film “piracy.” If there’s a more egregious example of an industry putting its own narrow self-interest ahead of the broader public interest, I can’t imagine what it would be.
Welcome Additions: What better time than the New Year to update the blogroll with some interesting new additions to the ever-expanding public relations blogosphere.

First up, Leslie Gaines-Ross moved from Burson to Weber Shandwick in the middle of last year, but continues to blog prolifically and provocatively on corporate and CEO reputation issues here.

Ruder Finn has a weekly ethics blog, written by chief ethics officer Emmanuel Tchividjian. I’m a little dubious about the “weekly” thing, since it doesn’t appear to have been updated since early November, but it’s certainly a worthwhile topic.

In a similar vein, Arment Dietrich has launched a new blog dedicated to the “Fight Against Destructive Spin.”

And finally, Cohn & Wolfe’s corporate and technology practice has launched WolfTracking, which follows “the ever-evolving media landscape” and kicked off with a bunch of case studies and this post on the shifting media landscape.