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November 26, 2007
A Chance Encounter
I was waiting for my kids and my wife to come out of the locker room at the East Bank Club in Chicago when I saw Reverend Jesse Jackson coming up the staircase. I reintroduced myself and he engaged me in a discussion for the next half hour about the sub-prime mortgage crisis in the US.
Rev. Jackson has been changing his focus in the past several years, concentrating on the private sector as the primary means of advancement for African Americans. He told me that, “Blacks are policemen, firemen, postal workers and teachers. We are too heavily reliant on government jobs. Business is where the wealth is to be found.” His Wall Street project has been aimed at getting a larger share of investment banking and legal fees for minority owned firms. He noted that there has been real progress, with black financial executives such as John Rogers, Ron Blaylock, Chris Williams and Melody Hopson achieving real success.
He went on to say that America is presently in the fourth stage of the civil rights struggle. Step one was the end of slavery after the Civil War. Step two was the end of Jim Crow, the separate but equal status for American blacks. Step three was the achievement of voting rights in the 60s. The present phase is achieving access to capital, the economic stage.
The sub-prime crisis is a “tsunami that is threatening the stability of the African American community. Many of those threatened with foreclosure are first generation home owners. Many of our mega-churches also have sub-prime loans. All of the media coverage has been about the fall of the Wall Street titans, Chuck Prince and Stan O’Neal. But there is a depression on our side of town,” he added.
His concept for resolving this crisis is Restructure, Not Repossess, a US Government sponsored Marshall Plan that would facilitate a resetting of interest rates and extension of loan payment period. “What are the banks going to do with all of these homes? There are two million homes that are forecast to go into foreclosure. Sixty percent of them are owned by black people. There is one block on West Madison Street in Chicago where every one of the homeowners is in default on present terms.” He foresees a downward spiral of lower tax revenues for cities, less funding for police and education and flight of business.
To create attention for his proposal, Rev. Jackson is organizing a march on December 10 on Wall Street, to be followed early next year by meetings with CEOs of large financial institutions and a national broadcast from Trinity Church in New York City on January 5. This is a combination of “outside-in and inside-out” communications techniques.
It is fascinating to observe the evolution of the thinking of a religious leader who sees that the private sector is indeed the motive force for change but who recognizes the need for multiple stakeholders (unions, churches, academics) to coalesce around a plan that can be sold to government. We seem to be moving from a period of caveat emptor (buyer beware) with government as referee toward a new period where a common agreement on principles among key interest groups is required, with government as a key actor. There will be a key role for PR in this jostling of interest groups as they grope toward agreeable solutions. I would appreciate your views as always.
Posted by Edelman at 9:48 AM
Comments
On the topic of the importance of land ownership, see Henry Louis Gates, Jr.'s 11/18/07 NYTimes Op-Ed piece, "Forty Acres and a Gap in Wealth." And for even greater depth, Peru's Institute for Liberty and Democracy President Hernando de Soto's work including "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else."
Posted by: Howard Lalli at November 27, 2007 10:21 AM
Are you sure you want to depict Jesse Jackson as a "religious leader"? As someone who has fleeced and intimidated American companies in the past (forcing them to hire his employees in lieu of taking them to court), I doubt he is someone who I would be talking to for a half hour, except to ask him some very tough questions about the finances of his organization. Fancy titles do not make a leader, nor do fancy phraseology make for practical solutions...I can't help but wonder what is his next gambit?
Posted by: Art at December 4, 2007 12:30 AM
I don't agree with a lot of his politics. He has made a real contribution in civil rights. Thanks for reading my blog.
Posted by: Richard Edelman at December 4, 2007 5:54 PM
Thank you for highlighting the human impact of the sub prime crisis. It has made me stop and think about the human cost of business decisions.
Posted by: Sindhu Patil at December 9, 2007 2:24 PM
Could it be the mortgage contracts were/are faulty if not fraudulent? Why would the fault only be on the side of the "buyer"? To me this crisis is similar to the predatory interest rates of credit card company\ies. Some mortgage companies have implicitly recognized this by "restructuring" the "debt" ie implicitly admitting the hike in rates was irresponsible (and abusive -from the start-) and the situation would/was backfiring by threatening themselves: what's the use of repossessing millions of houses nobody wants? what is is worth? They have much more to lose in the foreclosures than in the "restructuring". What I find irritating is the way the media try to "explain" the whole thing by mostly blaming the clients. I was surfing today and stopped by the Grameen foundation that promotes low interest loans for poor people. That's the root of the mortgage "crisis": too high interest rates for people to own a home (I am not talking about the people who speculated).
Posted by: philippe at December 11, 2007 4:45 PM
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In Good Hands
I attended the opening of the New York Times Building on Monday night. The old building reeked of tradition, but was a turn of the century fortress. The publisher’s conference room had photos of American presidents and global dignitaries dating to the 1920s. The new building, a glass and steel tower designed by Renzo Piano, in the words of NY Times Company chairman Arthur Sulzberger Jr., demonstrates the company's commitment to transparency and open door to the local community. Then on Tuesday night, I went to an American Jewish Committee dinner honoring Donald Graham, publisher of the Washington Post and CEO of the parent company. I come away from these events reassured that we are in good hands, because both of these family businesses are committed, above all, to excellence and integrity in journalism.
The Times Building opening was a real New York City scene, with important figures from business, politics and journalism mixing freely in the building’s lobby. As the Times journalists looked into the atrium from their perch on the floors above, dignitaries such as Senator Charles Schumer, Governor Eliot Spitzer and Mayor Michael Bloomberg praised the Times as the arbiter of taste and guarantor of democracy. When Governor Spitzer jokingly noted that the State of New York should have negotiated a special deal for positive coverage in one section in return for land use rights, Sulzberger Jr. retorted, “Governor, we could have done some business if we had a comics section.”
The most touching moment for me was Sulzberger Junior’s tribute to his father, Arthur Sulzberger, confined to a wheelchair by advanced Parkinson’s Disease but gamely smiling and showing signs of recognition as friends greeted him. He said of his dad, “We would not be moving into this new building but for you; you have shown courage and determination. We have both carried on the tradition of my grandfather, Adolph Ochs.” All I could think of at that point was Sulzberger Senior’s decision to allow his paper to print the Pentagon Papers in the 70s in defiance of President Nixon, enabling the public to better understand the true situation in Viet Nam.
Yesterday night, Don Graham was toasted by Michael Gould, CEO of Bloomingdale’s. In preparing his remarks, Gould spoke with two Washington Post reporters to get a better sense of his subject. They told him that Graham is totally approachable, without airs, and concerned most about the quality of the product. Gould related a Warren Buffet comment on his two reasons for investing in the Washington Post company in the mid 70s; most important was “that young man Don Graham, who always has good ideas.” Graham’s own remarks reflected a strong sense of mission and quiet self confidence; he was most generous in his praise of his senior colleagues, especially his sister, Lally Weymouth, international correspondent for Newsweek and Jonathan Grayer, who runs the highly profitable Stanley Kaplan unit.
Jon Meacham, editor of Newsweek, ended the evening with an eloquent speech. His final quote, from E.B. White’s New Yorker article in 1941, was often used by President Franklin Roosevelt. “Democracies have that recurrent suspicion that more than half of the people are right half of the time.” By providing us with a critical review of the world, these two newspapers and others like them around the world make possible the exercise of that right.
I have an obvious bias but I believe in family businesses where the owners are also operators. Children of owners should not presume a God-given right to management; this needs to be earned by performance (Graham had a funny line last night about growing up as the average kid of a Fortune 500 company CEO). The family business edge is dulled once owners move away toward a passive investor status, such as the Bancroft family at Dow Jones. To be the CEO of a family company is a privilege, where responsibility to your colleagues, clients/customers, and family is a constant refrain and must be balanced with your responsibility to shareholders.
It is more than a job, it is a way of life. Happy Thanksgiving to all of you.
Posted by Edelman at 12:02 PM
Comments
Gosh....It is hard to image the New York Times in a new space.....Sounds like a fun party.....
Posted by: Andy Levine at December 13, 2007 5:59 PM
Jackson's modern day version of Robin Hood, has only led those who believe in him down a road not less traveled, but worn to uselessness and disrepair. I believe Bill Cosby, who criticizes folks for not taking advantage of the Learning opportunities available them is on the right road. Education, and the desire and passion for it will better serve those in need help. While I had hoped your 1/2hour with Mr. Jackson would reveal some greater insight to how he thinks, it only supported what I had already surmised.
Posted by: Tom, Spotsylvania VA at December 15, 2007 11:54 AM
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Next Generation CEOs
In the past two months, I have met several CEOs whose companies are based in the new powerhouses of the global economy, including China, Dubai, India, Israel, and Russia. Here are my observations on these executives, many of whom are founder CEOs, not classically trained professional managers.
1) They are comfortable across cultures. To sit with Lev Leviev of the Leviev Group, while he juggles conversations easily in English, Hebrew and Russian, is a most amazing sight.
2) They are instinctive and entrepreneurial. Sunil Mittal, who runs Bharti Enterprises, has moved from a strong base in wireless communications in India to a joint venture in retailing with Wal-Mart. He gives passionate speeches about the potential for changing the Indian rural way of life, to have refrigerated trucks able to take fresh produce to rural markets, to provide the Indian farmer access to world markets, to reduce the spoilage and thereby increase the income, to slow the migration from countryside.
3) They are very philanthropic. Mr. Leviev gives substantial funds to charities in Israel, Russia, US and in diamond producing nations of Africa. He said that he wants to grow his business so that he can give even more money away to worthy causes.
4) They are patriotic and demonstrate this allegiance by giving of their time to help the economic development of their home nations. Mr. Mittal recently headed a contingent of Indian businesspeople who came to the US to celebrate the 60th anniversary of India’s independence, funded in part by the private sector’s leaders. Mohamed Bin Ali Alabbar, chairman of Emaar, is a relentless promoter of Dubai as a global business hub and tourist destination.
5) They recognize that business may be the most effective and fastest way to make change in a country. They follow the same theory of GE’s Eco-Imagination, where “Green is Green,” with business needing to make money while incorporating societal benefits. When Mr. Leviev brought diamond cutting and polishing jobs to Angola or Botswana, he was lowering his cost of goods to end users while enabling local workers to move into higher skilled and better paid jobs.
6) They are believers in leadership from the front line, not back at headquarters. They work tirelessly, defying time zones and jet lag, in order to put their personal stamp on far-flung operations.
Perhaps the best news is that they are believers in public relations. They recognize the need to earn a license to operate—to earn the trust of all stakeholders--particularly in the US and Europe. They’re not obsessed with media exposure (Donald Trump), nor are they averse to telling their stories. They want advice on everything from Non-Governmental Organizations to employee engagement to public policy, in addition to our classic media relations skills. This is not a universal truth; one Chinese client told me that he wanted to continue his present low profile “because tall flowers get cut down in China.” As always, I would appreciate your views.
Disclosure: Leviev, Bharti, GE and Emaar are Edelman clients.
Posted by Edelman at 2:49 PM
Comments
As a public relations student graduating next month from BYU, I have learned quite a bit about the importance of building trust, both from scholars and in my various internships. Establishing a trust bank is vital for any organization to succeed, regardless of an organizations geographic location. It is great to see these CEO's building trust with their key stakeholders and seeing beyond the bottom line, particularly with employees.
Wanting to also have a firmer grasp on public relations and believing in PR is essential in building trust I believe. Where I currently intern at, we follow one of your Chinese client's low profile stance. We will donate over $100,000 this year to various children's charities but it is something our CEO does not want publicity or recognition for. While publicizing this could add to our trust bank, it also has the potential to jeopardize the organization.
I think your trust barometer is right on, especially with organizations being trusted more by people in other countries than by companies here in the US. The CEO's you mentioned are a prime example as to why this is.
I enjoyed today's post and I look forward to more.
Posted by: Justin Jochim at November 15, 2007 4:20 PM
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CSR in Asia: An Update
I had a fascinating dinner with Richard Welford, director of CSR Asia, and Alan Vandermolen, Edelman’s president of Asia-Pacific region, on Sunday night in Hong Kong. We spent two hours on corporate social responsibility, one of my favorite topics. I have also just come from Beijing, where I met with several global companies grappling with the same set of issues. Here are some observations from these experts:
1) The top of mind CSR issue in Asia remains labor, though the environment is important and becoming ever more so.
2) The environment continues to deteriorate. There is concern that the air in Hong Kong carries significantly more pollutants than other major cities such as New York and London, and may led to an increasing number of respiratory diseases (http://en.wikipedia.org/wiki/Air_pollution_in_Hong_Kong). Parents now check the smog forecast and keep children from playing sports on weekends.
3) Government is beginning to move on environmental issues. Smoking in public areas and idling of taxis is now banned in Hong Kong. The central government in China and the provincial government in some provinces like Shenzen are lowering emissions by forcing a switch from coal to natural gas (national target on utilities is decline in use of coal from 70% of total to 40% by 2020). China is developing its own version of Europe’s ISO 26000, which may include reporting standards on environment and labor. Indonesia’s Parliament has just passed a law making CSR mandatory for companies.
4) Chinese companies are beginning to consider CSR, especially those with serious global competitors (such as Haier, China Southern Airlines). Chinese companies are moving faster than most Hong Kong companies in this area
5) Global NGOs are now more open to relationships with business in Asia, willing to cooperate on specific projects or industry standards. Local NGOs are often partnering with Global NGOs on these projects.
6) China has passed an employee protection law (the ECL) which goes into effect on January 1, 2008. It guarantees a minimum wage and prompt payment of salary. This will be a challenge for retail, especially fast food.
7) Some part of positive public response to NGOs bashing of multinational companies (especially American) is based on protectionism and nationalism. When a six year old cut her nose on a straw dispenser at McDonalds, the local media complained about the inadequate compensation offered the family. There is notable anti-US feeling in India and Korea. In India, Welford said that NGOs are using the same logos and materials today as used in the effort to oust British companies in the 1940s.
8) Blogs and bulletin boards tend to focus on labor issues. One such case that made huge news in the Chinese blogosphere is the Korean factory manager who found an employee smoking in a textile factory, banished him outdoors to stand in the sun, then forgot about the employee until he was found passed out from sun stroke.
9) Global NGOs will likely not make the Beijing Olympics a huge stage for protest. There is a higher likelihood of European NGOs, such as the Dutch NGO Fairwear Foundation which monitors the textile makers, engaging China’s media. One issue that might be raised is China’s non-intervention on Myanmar.
10) The local media is somewhat interested in CSR, but there are profound differences by market (high interest in China, especially the government run China Daily, low in Singapore, medium in Hong Kong though highest in English media such as South China Morning Post)
11) China is not willing to cut CO2 emissions until the country’s median income reaches the average for the world (that is $5,000, or twice the present level in China of $2,500)
12) There is nascent dissatisfaction in local communities in China on environment. New chemical plants have been thwarted by community protest.
That is all for now. It is time for the jet lagged blogger to hit the sack. I would appreciate your views.
Posted by Edelman at 10:41 AM
Comments
Britain was once known as 'the workshop of the world'. That was in the middle of the nineteenth century and there were problems with growing cities, air quality and sanitation, long hours and child labour. (Victorian novelists like Elizabeth Gaskell depict the age well).
Clean air in Britain cane with the decline in industrial production in the later twentieth century and the move away from coal for domestic heating (and power stations).
China is now the workshop of the world and repeating much of this pattern. Their industrial boom and growing economic power comes at a price that appears inevitable unless the lessons of history can be learnt and their economic strength can be used to skip a generation of dirty industrial technology. Unlikely while labour is cheap.
Posted by: Richard Bailey at November 5, 2007 12:12 PM
I think it's wonderful that companies and the government, especially in large countries like China, are beginning to realize the importance of social responsibility. Social responsibility is going to become evermore important in the years to come, especially considering the current state of the environment. Organizations are going to have to "go green" in a sense or lose the respect of its publics. PR practitioners need to urge their clients to be more socially responsible in order to build better relationships with their communities.
Posted by: Abbey Swank at November 5, 2007 1:50 PM
Great post. Did you see any evidence of Chinese companies developing CSR programs to address a growing US backlash against Chinese made products? I think this may be a huge issue as we head into the holiday season.
Posted by: Josh Morgan at November 5, 2007 7:00 PM
That reminds me of the year I was in school in the US at the University of Redlands in Orange County, CA. The LA smog would come up the valley and sometime after lunch it would be really unpleasant to play football or do any exercise. I also lived in Singapore as you know for a few years and that isalnd was (and still is ocassinally, I think) affected by the wood fires in the forests of Indonesia. For weeks on end the smoke would settle over the island and exercise was impossible and the health of many was affected. So it's not just Hong Kong, but it is a big issue.
Posted by: David Brain at November 6, 2007 5:17 AM
Hi Richard,
Jumped onto your site to better understand how progressive you are in China and was pleasantly surprised to read your blog regarding CSR on this side of the water (I am based in HK running a real estate private equity business). Actually, Rhea McGraw is a good friend of mine and she had also shared with me her views on the same not that long ago.
We're facing a CSR issue on an environmental front in Northern China. We're looking at developing an industrial / business park there and have retained EDAW (a world class urban planner) to help us come up with a progressive master plan. The challenge we face is attempting to be environmentally sensitive in our design is the risk of sticking your head up above the bunker. For many environmentalists a small step is not better than no step at all - it is an unacceptable compromise.
I find myself instructing the planners to come up with "green" alternatives such as designing for energy efficiency, but (after advice from another friend who volunteers for an environmental group)have decided against making any sort of representations as to being a "green"(er?) business park. For those businesses that think it is important, we can show them the efforts we have made, but also wouldn't want them to tout having chosen a greener alternative.
If everyone made one small step forward it is still a step in the right direction, and empirically raises the overall standard. Moreover, one might argue the greater accomplishment is the awareness that one helps improve by talking about their efforts - however small.
Thanks for sharing your thoughts in your blog and for contributing to the awareness of this important issue.
Best Regards, Tyler
Posted by: Tyler Goodwin at November 6, 2007 7:25 AM
Dear Mr Edelman,
I am from Hong Kong. Great to learn that China is taking initiatives to address the environmental issues. Whatever happens in China will have an impact on Hong Kong. If China can take bold steps in the right direction, Hong Kong as a special administrative region (HKSAR) of PRC can do the same. It appears that what both Government and some corporations are doing now are for cosmetic PR purposes. However, as far as I know, some companies in the construction sector are doing concrete things in terms of green building and energy efficiency silently. I think they need communications agencies like Edelman or any other PR firms to help them communicate and broadcast their efforts in order to persuade the government and the public that CSR is doable ! CSR is very much a political issue. By the way, HKSAR Government is just taking steps to consult the public on banning idling cars.
Best wishes .. so next time you come to HK, hope you can take Batman together to take a plunge into Victoria Harbour.
Posted by: Scott Cheng at November 7, 2007 11:48 PM
Hi Richard. Hope all is well with you. Looks like you haven't slowed down a bit in nearly 30 years. Your blog reminds me of some of our early Asian clients, who shall go unnamed. Hope you folks and family are well. Drop me a line when you've recovered from jet lag; would love to catch up.
Steve
Posted by: Steve Cook at November 9, 2007 12:11 PM
Hi Richard,
The debate sounded really intereting and it was great to see you this side of the world again. Thought you might be like to see Edelman Korea's just-published white paper on CSR in Korea, which as you know has its own particular quirks.
Either through:
http://corporati.wordpress.com/2007/11/15/edelman-koreas-position-on-csr-in-korea/
or:
http://www.edelman.co.kr/web/insight/news/upload/CSR_in_Korea_English_Version.pdf
Posted by: Keith Morrison at November 15, 2007 2:01 AM
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Miss Gold
I had a fascinating day in Seoul, Korea. The country is entering the final phase of the presidential election, with the two candidates sprinting to the finish line, and the former Mayor of Seoul Myung Bak Lee about 15 points ahead. The country seems prosperous and self-confident, the economy is humming along led by the usual big names (Samsung, LG, Hyundai) and a set of aggressive mid-sized multinationals (Hankook Tire, Posco Steel) with big ambitions for expanding outside of their Asian stronghold.
The most profound insights came in a meeting with a senior executive at Standard & Poor’s, the rating agency Jung Tae Chae. He told me about the emergence of a group of young affluent working women in their late 20s and early 30s, still single and loving it. Known affectionately as, “Miss Gold”, this is the most important new segment for marketers of imported cars, overseas travel, upscale food and clothing. They delay marriage by choice. Many still live at home with their parents but increasingly can afford their own apartments. They have different attitudes about premarital sex from previous generations. They demand more equal relationships with men on the domestic front and in the workplace. One of the consequences is a precipitous drop in birth rate, with only 1.08 children per married couple, well below the level in other industrialized nations and a great concern for the economy as the population inevitably ages.
Even more interesting is how the rise and influence of Korean women can be reflected on the internet. According to LG Economic Research Institute, a new trend of influencers has emerged in Korea - the 'wifelogger' (wife + blogger). Out of 31.8 million internet users (59% of the population), 2.8 million (9%) are wifeloggers. Many housewives are utilizing the internet to share information about their hobbies/interests and these personal blogs allow Korean women to exchange information and tips on everything from cooking recipes, interior design, education and raising children. Some of the more popular wifeloggers are now considered power bloggers and are being sought after by companies hoping to ride on their influence.
I also learned that the educational system is causing parents to limit the number of children in a family. Here is the downward spiral. The education in public schools is not sufficient to earn entry into one of the best colleges (sounds familiar—this happens often in the US as well!). Korean parents, knowing that education is the key to a better life, engage private tutors. This can cost between $500-1000 per month, a major burden even for the two-income couple. On average, children are expected to go to school for 8 hours a day, do homework for four hours, then have tutoring for one or two hours. There is little time left for physical education or sports. In fact, obesity among Korean children is rising quickly. There is also real angst among the teens who feel the parental pressure to succeed.
Korean consumers are increasingly open to global brands, from Japanese cars to American videogame boxes. In fact, 70% of Koreans want the Free Trade Agreement with the USA to pass their legislature so that tariffs drop even more on imported items. As their market share erodes slowly at home, Korean companies have no choice but to expand aggressively overseas.
I always leave Korea with a smile. I identify with Koreans. They remind me of Chicagoans, committed to hard work, quality, family, and quiet achievement. I will write later in the week about Beijing.
Posted by Edelman at 9:06 AM
Comments
As I lived in Tokyo for a while and encountered the locals. Aren't these Korean 'Miss Golds' just copycats of their Japanese (f) counterparts who've been pioneering this 'sex in the city' lifestyle (culturally exported by the West) for some years now?
Posted by: Gerry McCusker at November 4, 2007 10:42 PM