Senior VP, ICR Asia
My favorite comedian, Steve Martin, had a routine on his 1981 album, “The Steve Martin Brothers,” that included this gag: “Recently I did an interview with People magazine and, when the interview came out, I was deeply shocked because it was filled with lies, and made up facts. They should have told me ahead of time they did not want me to lie or make up facts.”
The joke riffs on the idea that a person would actually feel they needed to be told NOT to lie. We are supposed to inherently know this. At the same time, this bit of humor plays on our own shame about the extent to which we can all be guilty of lies, and made up facts.
While it should be obvious, we sometimes need a reminder not to lie, or make up facts.
I got to thinking about this after reading a thread on Twitter by Lulu Chen, a former colleague of mine at Bloomberg, and a journalist that I respect. Lulu had a few posts about a recent case of what she considered to be dishonest PR in China, which did not involve ICR or any of its clients.
“For Chinese companies that lie out of habit and the PRs that help them, here’s a tale of caution…” Lulu wrote in her post. “Companies and PRs need to be held more accountable for lying, which has been a serious problem in this part of the world,” she wrote in a follow-up post.
She has a point. Dishonest PR is a problem that can risk tainting the whole industry.
I can still remember a situation back in 2015, when we were chasing a prospective client in China’s technology sector. While we were still in pursuit of this prospect, rumors began to emerge about the company, and then some news reports indicating that the company’s CEO had been arrested for insider trading in other companies.
While ICR hadn’t won this company as a client, we offered some free advice, which basically boiled down to the Steve Martin punchline. We told them: don’t lie, or make up facts. The advice was a bit more detailed than that, but you get the point. We said communicate what you can about what is going on with your CEO; communicate the contingency plan; what is known about the CEO’s status; who is running the company in the CEO’s absence. If the legal case prevents you from making a statement about the CEO’s situation, then say nothing. But whatever you do, DO NOT LIE OR MAKE UP FACTS.
So what did the company do?
They lied, and made up facts.
The company issued a statement saying that the CEO was in the U.S. “seeking a health treatment,” which was an outright fabrication, as the CEO was then in police custody. The truth eventually emerged and the company’s lie was obvious for all to see.
It doesn’t have to be this way, and it shouldn’t be this way. While a crisis situation or heavy dose of bad news may tempt one to reach for “alternative facts,” the reality is that the exact opposite is almost always the best practice. An effective public relations campaign can only be built on the basis of unquestionable integrity. You’ve got to be believed to be heard.
What does this mean in practice? Does this mean complete disclosure, of everything, all the time? No it doesn’t, and it can’t. Public companies listed in the U.S. are governed in what they can communicate by Regulation Fair Disclosure, or Reg FD, which prohibits selective disclosure of material non-public information.
Reg FD is in place to ensure a level playing field for all investors. Material information is anything that may affect the price of a company’s securities or influence buy or sell decisions, including: earnings or changes to earnings, selling securities, dividend and credit position, capital investment plan, mergers, acquisitions and joint ventures, obtaining or losing a significant business contract or supplier, new products and services, major management changes or pending litigation.
That’s a pretty long list. Does that mean reporters won’t ask about any of these things?
Of course not. Reporters will seek information and ask questions about all of these things, but a public company has obligations to investors and must follow the proper procedures for the way these things are communicated. A public company can’t issue a new earnings forecast every time a reporter asks for one, and declining to do so isn’t dishonest.
Likewise with non-public companies, one of the sure questions reporters are likely to ask is, do you have any plans for an initial public offering? Here too, there are rules about what companies can and can’t communicate prior to and during an IPO. If a company has engaged bankers and is considering a share sale, then the company has already entered a regulatory quiet period in which company executives can NOT discuss any potential transaction.
Again, the goal of regulators is to protect investors. Regulators want to prevent “hyping”, “gun-jumping” or “conditioning the market” for the sale of securities.
Companies must respect regulators’ concerns, and follow the rules of the quiet period. When a company is ready to announce a formal plan to pursue an IPO, it will do so in the form of a filing with regulators. Once the filing is made, that becomes the plan of record. If there is no filing, there is no plan.
Still, reporters will ask.
We have seen reporters ask the CEO of a private company seven to eight follow up questions about potential IPO plans, prior to any filing, well after the CEO has indicated the he has nothing to announce on the subject. This is not a dishonest CEO. This is respecting the process put in place by regulators who are looking out for the welfare of potential investors.
As PR professionals, our job is to help clients communicate with integrity, while remaining mindful of the obligation to publish material information in a way that protects investors, in accordance with the guidelines established by regulators.
As we do so, we must always remember: don’t lie, or make up facts. You have been told.
