Crisis Management: Goldman Sachs – Do this – not that: Crisis response
When the Securities and Exchange Commission sued investment firm Goldman Sachs for allegedly misleading investors about risky complex real estate securities that cost investors billions and earned others billions how did you react to Goldman’s response? Were you comforted when it insisted it is innocent and would fight the accusations? If you were a Goldman investor, did deny and defend console you? The share price plunge of 13% the day after the suit suggests few were reassured.
Now the soundbite battle ensues. Many experts say the SEC has a tough case to prove. Meantime, damaging information about Goldman keeps surfacing.
Such a case is always good grist for the “what would I do in their shoes” mill. Just as I was contemplating how Goldman ought to respond, Wall Street Journal and SmartMoney columnist James B. Stewart beat me to it. He said what I would have said, and, given Stewart”s superior financial background, his words have more credibility. Before we look at his recommendations, remember how often this column has encouraged companies to reassure victims, fix problems (when did you learn about it and what did you do about it?), strive to wage peace rather than war if you can, and keep all stakeholders in the loop. Think how many times we’ve urged organizations to get ahead of the story. Notice how these principles underpin Stewart’s suggestions. My comments follow his.
Stewart said, “To regain investor trust, Goldman must abandon conventional public relations and legal strategies that call for an all-out defense. It should stop saying it will fight the charges aggressively and the SEC’s suit is ‘completely unfounded’. No matter how wronged Goldman officials now feel, they must put those feelings aside and view this matter from the perspective of clients, investors, politicians and the public. Goldman’s mantra should be cooperation, not defiance.”
My crisis management mentor Jim Lukaszewski often warns people under attack to avoid what he calls testosterosis. Fighting may feel good but usually its best to put down your sword and address concerns of those most affected.
Stewart continued. “When an institution depends on trust and is accused of wrongdoing, it needs to get ahead of the investigators… learn the facts, share them with the public, impose accountability on its employees, and take any steps necessary to remedy the problem and restore trust.” He said the company should be releasing information before others do. Sound familiar? Remember that oft-told saying that the truth is determined by the first one to hold the press conference?
I once gave similar advice to a client. He and his lawyer said they couldn’t do it. A federal indictment followed six months later. Legitimately, public relations seemed the last thing on his mind. For Goldman’s sake, let’s hope that is not the case.
Columnist Stewart ominously warned that he had watched once-heralded firms like Kidder Peabody and Drexel Burnham Lambert ignore such advice and pass into oblivion.
If Goldman Sachs wants to protect its brand and not just its court case it should listen to James Stewart.