CorpComms Magazine

As PR faux pas go, it was a corker. The three bosses of America's beleaguered carmakers each flew in their individual private jets from Detroit to Washington to seek financial assistance worth in excess of £16 billion to save their companies.

It took the New York Democrat Gary Ackerman to voice the obvious question: ‘Could you not have downgraded to first class or something?'

Others were less polite. American tabloids seethed with incandescent opinion pieces about the incongruity of such a move. ‘At what point did the brains of their communications executives kick in?' observes one PR man.

It seems it did not take long. Within days General Motors vowed to stop leasing two of its five corporate jets, and promised that chief executive Rick Wagoner would slash his salary to a nominal $1 a year if America's Congress agreed to extend Federal funds.

The move was mitigated somewhat by the later revelation that General Motors had approached the US Federal Aviation Administration (FAA) to request that it did not track Wagoner's use of the aircraft, thus concealing his flights from prying journalists.

Ford's chief executive Alan Mulally also promised to accept a salary of $1 if Congress agreed to a bailout, and pledged to drive to the next hearing in a Ford Escape hybrid. ‘The gestures on $1 salaries make headlines, but these guys are not really suffering,' observes one PR man. Mulally took home $21.7m in 2007.

On this side of the Atlantic, Stephen Hester, the newly appointed chief executive of Royal Bank of Scotland, announced plans to get rid of the £17m Falcon 900EX private jet that his predecessor Sir Fred Goodwin leased to fly around the world.

And days before the UK government confirmed it was the majority shareholder in Royal Bank of Scotland, after investors shunned its emergency rights issue, the bank axed 42 designated ‘fast track' spaces in the priority short stay car park at Edinburgh Airport.

Life has changed for big business. As governments around the world bail out financial institutions and other key industries, the price tag will prove to be even greater than the funding costs. Behaviour and attitude must change. For some it will mark a return to the austere, no-nonsense world of the seventies.

Bank officials now have to act as if they are government officials, which in effect they are. Just as a politician would be attacked for leading an extravagant lifestyle, Britain's bankers will get slammed for spending even £1 of taxpayers' money on what the public perceive as unnecessary.

BOOZE AND EXCESS

Indeed, such is public anger and distaste at perceived excesses that one leading Sunday tabloid is believed to have contacted the country's hotels and offered financial rewards to staff members that supply details of a party or other celebration held by any British bank that has received government funding.

Indeed, the News of the World has run a series of articles slamming ‘greedy bankers'. Under the headline Bank's sick joke it attacked 302 ‘heartless men and women' from the mortgage division of HBOS who attended the bank's Annual Star Gala in Edinburgh, where they were entertained by comedian Patrick Kielty.

The Irish comic rubbed salt into the proverbial wound by joking: ‘Don't worry folks, I won't tell anybody about tonight. What goes on the p**s stays on the p**s. So eat, drink, sh**  your colleagues in your five star hotel then go back to your customers and say that you spent Friday night watching Coronation Street with one bottle of Bacardi Breezer. Your secret is safe with me.'

‘It doesn't matter about the realities, and what the true cost of an event may be, the newspapers are ready to attack any perceived excess by a high street bank,' says one PR executive.  ‘Fat cat boozed up bankers are seen as fair game. It is almost impossible to reason with journalists on the matter.'

For the communications departments of Britain's leading banks, the media priorities have changed. The days when the Financial Times was the number one target for their chief executives have gone. Today's priority is the BBC, which has established itself under business editor Robert Peston as the nation's mouthpiece when it comes to financial matters. ‘The relationship with the City Editor of the Sunday Times is now no more important than that of the reporter at the Sun,' says one PR man.

‘Everything needs to change when it comes to communications,' says one City PR. ‘The needs of institutional investors are no longer the top priority. Everything now needs to be written and communicated in the language of stakeholders, who now include taxpayers and customers at the top of the list. The language, tone and pitch all need to change.'

CHANGING STRATEGIES

It seems statements about upper tier two capital ratios and capital adequacy are out to be replaced by comments about business strength and the money needed to survive.

Communications are not the only thing to change. Business strategies need to change in response to the new realities. This sea change has been most obvious when it comes to the issue of house repossessions. Royal Bank of Scotland has confirmed that it will give home owners defaulting on their mortgage payments six months' grace before commencing legal repossession proceedings, while Northern Rock was attacked by politicians and the media after it emerged that its repossession rate is three times the industry average.

Indeed, senior executives at Northern Rock recently told a Treasury Select Committee of MPs that it expected to be responsible for ten per cent of all repossessions this year, although the nationalised mortgage lender is working on an industry-wide solution for mortgage ‘forbearance' to help customers at risk of losing their homes.

‘The stories about Britain's high street banks have moved from the City pages to the front pages,' says Andrew Walton, managing director of FD. ‘It is no longer just the financial writers who are covering them. You only have to look at the bylines to see that political journalists are equally as likely to cover the stories.'

Rod Cartwright, managing director of public affairs at Ketchum, adds: ‘There has been a whole game shift. Banks have different ownership structures, which means they are subject to different types of scrutiny. Arguably, they face a different communications challenge.'

‘The key to success is how far you can get in front of the story,' says one City PR executive. ‘Banks need to adapt their behaviour so that they do not leave themselves open to be attacked.'

Royal Bank of Scotland's move to defer repossession proceedings has been viewed by some as ‘getting in front of the story', and indeed was welcomed by homeless charities Shelter and Crisis. However, City analysts also pointed out that its action would have a limited impact on the bank, which has just 5.7 per cent of the mortgage market. Alex Potter, banking analyst at Collins Stewart, adds: ‘Royal Bank of Scotland can do something like this and get great headlines, but it will not have much impact on its profit and loss account.'

Another cynical observer points out: ‘Obviously banks are going to repossess homes only as a last resort. Let's be honest. Who wants to be saddled with a portfolio of properties at a time when prices are dropping. This is just business sense.'

RETHINKING RELATIONSHIP

Other attempts to ‘get ahead of the news stories' include offering assistance to small businesses, passing on interest rates as soon as they are made by the Bank of England and supporting customers who are getting into trouble as a result of the credit crunch.

‘It is all about transparency,' says one PR man. ‘Transparency in behaviour and transparency in finances. The government and the man in the street will not accept banks making what they perceive to be excessive profits if customers are suffering along the way.'

Cartwright adds: ‘If you go from being a publicly listed company to a publicly owned company, then by definition you have to view policy makers and regulators in a different way.'

Many believe that John McFall, chairman of the Treasury Select Committee, is the person that banks need most to respect and impress.

Peter Bingle, chairman of Bell Pottinger Public Affairs, says that McFall has ‘done more to change banks than anybody else. He has been the one person who has been able to call the chairman or chief executive of a high street bank and humiliate them in public'. Observers point to McFall's success in changing the behaviour of the private equity industry, after the public backlash against its ‘excessive' profits and secretive behaviour.

Bingle believes that the banks' past attitude towards the government may have played a part in their downfall. ‘As a sector, the banking industry never understood the need to develop long-term relationship with government,' he says. ‘They always viewed the government as a problem rather than part of the solution. They though they were global institutions and that individual governments were unimportant.'

As a result, Bingle believes, the fall from grace for many banking organisations has probably been more dramatic than it needed to be. He also believes that banks have suffered because their trade body, the British Bankers' Association, is viewed as weak. ‘It's an irrelevance,' says Bingle. ‘It has never been taken seriously and has probably done more damage than good to the industry. A trade body is meant to do things. In a way, that's the banks' fault. Banks are highly political institutions, but they have never built on that. They never took government relations seriously.'

It seems that's a mistake that Britain's high street banks are unlikely to repeat.

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