Fellow blogger David Murray saw my Tuesday blog post and posted his own interesting take on the whole concept of using "employee ambassadors" to get company messages to external audiences -- the most recent example being Citigroup's 'leaked' internal memo that sparked a bull run on the market.
There's an important angle on the story that I didn't mention in my initial post. One of the many things that struck me about that BNN panel discussion is that no one seemed to be too concerned about the "material disclosure" issue. For those who might not know, companies with publicly traded shares are required to fully and broadly disclose any information that could have a material effect on the company's share price, which means issuing a public news release. If you don't do this you can get in deep trouble for withholding or selectively disclosing the information. Citi's CEO talking about unexpectedly strong results for the first two months of the year in the middle of a huge financial downturn would certainly qualify as a "material" event, and, indeed, the company's share price skyrocketed when the news came out.
As soon as I finished watching the TV clips I went to Citibank's website and, sure enough, the most recent news release, issued the day the internal memo went out, was "Citi Files 8-K Regarding Update to Employees." So the company avoided the wrath of the SEC by quickly disseminating the information through normal public channels.
But there's a big unanswered question here. Was this a clinically planned thing, where the company chose to deliver the material information in the CEO memo and purposely disclose it to the market at the moment it was communicated internally?
Or was it a hair-pulling nightmare in which, half an hour after the employee memo went out, the Wall Street Journal got a copy of it from an insider, called the media relations or IR contact to verify the information, and suddenly there was a scramble at Citi to file with the regulator and get a news release out?
If it's the former, I think it's a pretty cynical move that, if replicated often, would just further erode trust and blacken the already charred reputation of CEOs, companies and their PR advisors.
If it's the latter, it's a terrible gaff that exposes serious internal barriers to effective communication at the bank.
I'm inclined to believe the latter. Too often a public company's internal communicators are not closely tied in with the IR folks and stuff like this happens, or comes dangerously close to happening.
Does anyone know someone at Citi who would be able to shed light on this, or saw something reported on it?
What do you think happened?
Ron: I saw this first on David's blog, and the instant thought was what you and a commenter there said: "Oh my God! Did they disclose that externally?!"
As far as your question about how it happened, I'm sure you have more experience with this than I, but in the two public companies I've worked in, there has been extremely clear and frequent communication organization-wide about what you can and cannot do as an employee, as a manager, etc. in a public company.
As a result, I would find it extemely surprising if the CEO authorized that internal memo without ENSURING that the info was disclosed simultaneously to the public. Because, let's face it - in many large corporate environments, the internal comms people just don't have the authority (or often the access to information) to do a memo on behalf of the CEO without about 27 approvals and sign-offs. I just can't see this happening on the fly without somebody along the line saying "what about the disclosure aspect?".
If, as you believe, this went down internally without doing the proper disclosure in advance, I for one would be pretty skeptical about the capabilities of the company. I mean - a bank who doesn't understand their financial disclosure requirements?! Yikes!!
I wish I knew someone at the company who could confirm how this went down. If you do hear from someone at Citi I'll be very interested in more info about this situation.
Posted by: Kristen | March 13, 2009 at 11:11 AM
Well, maybe you're right, Kristen. You would think that an organization that big would know what it's doing. But there's also that whole "silo" thing where the bigger the company, the higher and thicker the walls between different functions, even within the same department. I can imagine a scenario in which someone (maybe even the CEO) identified a communication need: "Employees are demoralized. We should get a message out to them that shows how things aren't nearly as bad as they might seem." And so a memo was crafted, approved by the CEO and VP of internal comms, and the send button was pushed, but no one thought of the external implications. Don't you think that's plausible?
Posted by: Ron Shewchuk | March 13, 2009 at 11:21 AM
Sadly, yes, I do think it's entirely plausible. I wish it wasn't but it is.
It would sure make an interesting communications case-study though if they were willing to talk about it to someone.
Posted by: Kristen | March 13, 2009 at 11:29 AM
Is it really something sinister? It has always been a best practice to communicate with employees before the outside world or, if regulations don't allow that, concurrently. (SEC rules don't call for disclosure to the financial markets first, but at the same time as other disclosures, in order to avoid unfair market manipulation.) So the company disclosed externally at the same time they notified employees. That's concurrent, what we've always been told and, in my case, tried to practice. The only difference now is the speed with which information communicated inside can be communicated to the outside. So again, I'm not sure why you'd consider this a gaffe rather than just the new reality of instant communications.
Posted by: Shel Holtz | March 15, 2009 at 09:08 AM
I take your point, Shel. There is a third scenario, which is not a cynical PR move, in which it was all planned, and the company made a point of making the primary communication to employees at the same time as it ensured that the market was informed at the same time.
And I agree that this approach would be a best practice - an integrated approach to communication that clearly values employees at the same time as it honors the company's responsibility for timely full, clear and true disclosure to the market.
But, why, then, did we see an SEC filing rather than an external news release?
In any case, perhaps gaffe is too harsh a way of describing what I think happened. More like a quick, definitive response to a fast-moving situation. A scramble to do things right in what you aptly call the "new reality of instant communications."
Any one else have any thoughts?
Posted by: Ron Shewchuk | March 15, 2009 at 06:28 PM