Strategy #1: Understand Business Financials

For my business journalism class with Professor Leckey, I have to read “24 Days,” which is a book that chronicles The Wall Street Journal’s experience in covering Enron’s collapse. (To this day, the ex-American energy company is credited as the largest bankruptcy and auditing failure in corporate history.)

While the book focuses on reporters, analysts and CEOs, one thing I noticed throughout the reporters’ tale is their reliance on Enron’s PR representative, Mark Palmer, for information and his subsequent lack of it.

Now, the Enron case is extremely complicated, and it would take WAY too long to explain it. However, what I can tell you is that whenever the WSJ reporters (Rebecca Smith and John Emshwiller) would ask Palmer a question about the LJM partnerships and income statements, it was never surprising to… A.) Hear Palmer respond that he didn’t know B.) Get an answer only to have Palmer call back to correct it, because he did not have the right information at first C.) Say he was told not to say anything by Enron executives.

Bottom line— Enron was entangled in a huge financial scandal, and funnily enough, Palmer had no idea. The reporters knew Palmer was feeding them incorrect information throughout the entire investigation. However, they also knew (and even stated in the book) that Palmer would never give them false information knowingly. Smith and Emshwiller knew Palmer was being told lies the entire time.

The Enron case was so shocking, because all of their shady business deals had been disclosed in SEC filings; they were hidden in the footnotes. So, anyone who had bothered to look closely or read the 10-K’s or 10-Q’s would have questioned Enron way before Smith and Emshwiller did. This includes Palmer for whom such a task would have been incredibly easy since he had access to all the documents that recorded Enron’s scandals. He could have discovered what was going on and either pointed it out to the company or walked away from the job.

Enron executives’ relationship with their PR professional was in sync with the ways of thinking that Harvard Business School characterized corporate professionals as having in their blog post, “Avoiding PR disasters.” They kept Palmer in the dark about the company’s inner workings and made communication decisions thinking that they knew what was best to do when dealing with the public. What would you have done if placed in the same situation? I don’t even want to imagine it.

For this reason, I think PR professionals should have a basic understanding of business financials. Dave Fleet, the account director and head of social media at Thornley Fallis Communications, also agrees; he listed it as one of the “14 Skills & Attributes for New Public Relations Professionals.”

Not only can a PR person know when they are working for a company that is crooked, but as pointed out by Kasey Kala’s blog, The Electric Waffle, they can also benefit themselves in multiple ways by having knowledge of business financials. For example…

  • Upper management is concerned with numbers and will be impressed if you understand those numbers.
  • The media and stakeholders of your company need someone to translate the words into a readable language to avoid uneasiness and to ease concerns that have the potential to turn into crises.
  • You can understand why your company does some of the things it does. For example, if the CEO tells you that lay-offs need to be made, there is a good chance the earnings statement could tell you why.
  • If you can read your employer’s income statement or balance sheet, you will have a much better idea of your own job security.

With all of the benefits that PR professionals stand to gain in learning the basics of financials, it is a wonder why the Cronkite School makes the business journalism class an elective and not a requirement. I think the knowledge is not only advantageous, but it is becoming more and more necessary in today’s corporate world. Would you agree? Or do you think it depends on the type of company you want to work for? Is it more important for PR professionals at agencies or for those representing one company? Do you think explaining business financials is a responsibility of a PR person at all?

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3 Responses to Strategy #1: Understand Business Financials

  1. dolson says:

    I agree, being business savvy can be a positive attribute. Not only does it allow one to better help one’s client or company, but it gives a good impression to the business reporters that you know what you are talking about. Mark Palmer did well in not knowingly giving false information, but his lack of general business sense doesn’t help with his credibility.

    I think that having even a basic understanding of business arcana helps if you work for one company, but an agency should leave that to it’s client’s accountants. Unless the mission is to improve your client’s financial reputation; that definitely calls for understanding what one is talking about.

    The biggest hassle I see is if a PR practitioner is trying to produce accurate numbers, but the higher-ups in the company, as in Enron, actively try to thwart his efforts. What could Palmer have done in this case?

  2. kmcnally says:

    I think that every PR professional should have a basic understanding of the business side of journalism so they can better serve their client. I think that by having some kind of a background/ or knowledge in the business side of things, it can help your credibility when it comes down to it, as well as it can help you when dealing with certain clients. If you have a client that is heavy on the business side of things, you don’t want to be scrambling around to try and gain all the information, you want to be able to know at least a little off the top of your head.
    So yes, i think that it can be very beneficial to have a business of journalism background, do i think it will be used often? NO, but i think that its better to have some knowledge about it than none.

  3. tburns says:

    To dolson, yes Palmer was being lied to, and he could not help that aspect of the situation. However, had he known a little bit about partnerships, he wouldn’t have needed to known much else to see that something fishy was going on at Enron. Two business journalists were able to draw out what was happening with Enron off of their own basic knowledge of business financials. Enron was Palmer’s employer; he should have had a better idea of what was going on at his own company, especially when speaking for the company to investors and the public.

    To kmcnally, I actually think that business knowledge in general will be used often. Business journalism is not anything extra; it is knowing the basics, and with the way the economy is going at the moment and the public’s mistrust of corporations and banks, people are going to be wanting the numbers and financial data more often than in the past. For that reason, PR people should be more versed in business financials, and not to mention, it upholds the value of transparency even more. By having just basic knowledge, PR reps look to gain quite a bit.

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