This is a country that loves a good fall from grace. I am willing to bet that there is more schadenfreude in a Los Angeles or New York block than there is among all of our Teutonic brothers across the Atlantic; the only difference is that they acknowledge it with a term unique to the German language and we hid behind the lack of an English translation and pretend that schadenfreude doesn’t exist.
But more than we love to see someone famous or someone in power experience a public collapse (reaffirming our deeply held belief that everyone is just as screwed up as ourselves), we are enamored by contrition and absolve people completely once they publicly admit they are wrong in what can only be a type of hedge for when we inevitably make a mistake ourselves.
With all this in mind, it is inconceivable to me that people who operate in the realm of public relations have not grasped this obvious and intuitive concept. The normal public relations campaign after a mistake is made regardless of the industry or the position is as follows:
- assess the situation;
- figure out a way to delay the information from becoming public;
- while the delay is in place, formulate a blunder-ridden plan that divvies up blame among a wide-range of people that all, markedly, exploit some type of self-drilled loophole that requires an obligatory “But, it was not really my fault because...”
This strategy employs less organization and functionality than playground children returning to class with muddy shoes and trying to tell the teacher that they did not go outside during recess.
Jamie Dimon and JPMorgan Chase gave everyone a free public relations lesson this last week when it called a snap press conference to explain to analysts that the firm's London investment office racked up some $2 billion in losses. A full five days before JP Morgan’s annual shareholder meeting, Dimon pro-actively announced the losses and admitted that they were likely to grow. (Perhaps to as much as $3 billion.) Dimon took responsibility for the losses, which he characterized as “egregious.” This unforced and unleaked admission of guilt before he was publicly forced to acknowledge it was not just the right thing to do but it was also a savvy, calculated public relations move that played to the heart of Americans’ love for compunction. In turn, it also became a way to stop the firm's reputational hemorrhaging before it really got started. True, Dimon was living on borrowed time; he would have had to admit the losses sooner or later. But he chose to get out in front of the news and control it rather than wait until the news controlled him.
The $2 billion loss has become a tool for regulators to push for more stringently designed parameters in the so-called "Volcker Rule," the Dodd-Frank provision that restricts banks from proprietary trading (trading with the firm’s own money). News of the loss has made countless headlines despite the fact that JPMorgan still has $127 billion in equity and is still profitable and well-managed; how much worse would it have been if JPMorgan went to the same old public relations playbook?
It would have been a disaster, not just for JPMorgan but for the whole financial services industry. The American people, and their regulators, have short memories filled with images of robber-barons and white-collar gamblers. After all, who can forget the months of populist anger last year against anything and everything Wall Street, thanks to the Occupy movement? The JPMorgan losses has reignited some fury directed at big banks but it is about as misplaced as it can be as the only people who have a right to be angry at the situation are JPMorgan's shareholders. Who, it should be noted, are not nearly as incensed about the loss as the media and regulatory windbags who keep talking about it. It is not like JPMorgan is looking for a bailout, after all.
Undoubtedly this is a black eye for Dimon, considered by many to be the best managerial mind on Wall Street. Surely the kind of ego required to succeed in Dimon's world cannot make a public mea culpa an easy thing. But if he can take responsibility for the managerial malfeasance anyone can.
To be fair, JPMorgan has run some plays out of the old public relations playbook. Some heads have to roll, of course, such as the rogue London trader nicknamed the “London Whale” because of the large bets he made. Joining him will be Ina R. Drew, the bank’s Chief Investment Officer. They both will act as JPMorgan’s staffing penance to the world, and to be fair, both probably deserve to go. But it was Dimon who has accepted full responsibility. It would behoove the corporate world, which seems to have perfected the aforementioned blunder-ridden PR strategy, to realize the potential that accompanies America’s love for contrition and act on it. That goes double for the insurance industry.