Public Fury

March 21, 2009

Public Fury

    As I hear and read more about AIG and the public’s outrage about executive bonuses, I thought back to an incident occurring over a decade ago and which I discussed in my recent book on reputation recovery. Although no crisis is ever the same, AT&T was the recipient of public fury in 1996. The telecom giant announced the loss of 40,000 jobs as part of its restructuring under CEO Robert Allen.  Like most job-elimination announcements back then and even not so long ago, Wall Street welcomed the news and the company’s market capitalization rose six billion dollars in two days. What AT&T did not realize was that this news would also be taken as an assault on the working class. As AT&T’s former Public Relations Officer Dick Martin explained in his terrific book Tough Calls, the layoff announcement came during Pat Buchanan’s U.S. presidential primary campaign.  Presidential hopeful Buchanan used the layoffs as a symbol of corporate greed and further fueled the public’s prevailing sense of economic uncertainty.  The media soon jumped on the bandwagon denouncing the profiteering of CEOs and decline of the middle class.  The New York Times began a multiple series on downsizing and BusinessWeek issued an entire special issue on economic anxiety.  The most memorable coverage sparked by the A&T announcement was Newsweek’s “Corporate Killers” cover with CEO photos looking like America’s Most Wanted Criminals.

 

Despite even larger company layoffs than AT&T’s, the entire country took the AT&T news personally and as though it was happening to them.  Even U.S. Secretary of Labor Robert Reich joined the fray: “Does a company have obligations and responsibilities beyond the bottom line?  Does a company owe anything to its workers, its workers’ families, the communities in which it does business?  Managers who balk at executing the judgments of the market may fear with some reason that they will quickly face their own day of reckoning.  And yet, I want to suggest to you that this restricted vision of stewardship may be ultimately disastrous for this country. And it may ultimately harm American business.”

 

Although AT&T leadership intended to generate positive news that it was taking care of business after its disastrous acquisition of NCR and well-documented runaway expenditures, the public was uneasy about the past recession and weakening employer-employee contract.  Further enflaming the situation, CEO Allen’s job layoff announcement was followed closely by news that he was granted $10 million in stock options.  The public’s rage was inflamed.  As Martin wrote about the convergence of circumstances: “Incredibly, none of us at AT&T had connected the two events, largely because they had actually occurred months apart.  The option grant had been made at the time of the company’s restructuring announcement, months before the size of any downsizing was known.  But their public release within days of each other was starkly insensitive.” Such notorious coverage and bad press may have been prevented if AT&T had better sense of public sentiment at the time of these dual announcements. 

 

However, as history has repeatedly shown, hindsight is always easier than foresight.

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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