Liddy Testimony on AIG Bonuses Misses The Point About Corporate Reputation

"We understand that since our relationship with the Government and taxpayers had changed, our behavior as a company needed to change." -- Edward M. Liddy, Chairman and Chief Executive Officer, AIG, in testimony before House Financial Services Subcommitee on Capital Markets, Insurance and Government-Sponsored Enterprises, March 18, 2009

What's wrong with the above statement is that it shows that AIG's behavior only changed when it had its hand forced first by the government bailout and, more recently, the explosion of anger across the U.S. about the excessive bonuses paid for by taxpayer dollars.

Crisis communications and reputation management don't start when the crisis happens. It starts with who you are as a company, what your culture represents and how you are viewed by your critical audiences.

Companies that enjoy solid reputations get there because of their actions first, then words. They don't change for the good just because of external forces. They start out that way in their infancy, stay committed to ethical behavior, root out corruption, focus on community involvement and social responsibility and are good corporate citizens.

No one should for a minute cheer AIG for saying it changed its behavior. Actions speak louder than words when it comes to corporate reputation. Unless or until the bonuses are rescinded, AIG's corporate reputation will be and should be judged by that one action. 

It's possible that AIG didn't think about the public anger over the bonuses when it decided to grant them. But it has never apologized, which was the first major mistake it made in this crisis.

Making matters worse, AIG's put out a press statements that they were legally bound to the bonuses and that the bonuses were given to retain employees. A critical part of crisis communications planning is thinking about what you are going to say and trying to gauge public reaction BEFORE releasing any statements. In this case, AIG failed miserably. 

That's why Liddy's statement is so disturbing. Are we supposed to thank him that the company's greedy behavior changed? He can tell us his company has changed but I don't buy it. A company that hands out these kinds of bonuses with taxpayer dollars to a failed division hasn't changed at all. And a company that admits it only changed because it was forced to says much about the culture at AIG.

Comments

[Rory Davenport]

Sometimes a company has a communications problem and sometimes a company has a problem. In this case, AIG's culture created a problem that was bound to occur.

[Javeriya Dunn]

Thanks for the post. I can't seem to keep wondering is why wasn't this handled better. Also, why didn't they hire the best legal minds in the nation to get them out of the contract.

[BarbD]

Great post, Rich. You helped inspire me to get a few of my own simmering thoughts out this morning as well.