>Goldman adds bad press to list of business risks
Goldman writes, “The financial crisis and the current political and public sentiment regarding financial institutions has resulted in a significant amount of adverse press coverage, as well as adverse statements or charges by regulators or elected officials. Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials or in lawsuits. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceeding, is time consuming and expensive and can divert the time and effort of our senior management from our business.”
See the section entitled, “We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity” in the 10-K at the bottom of page 34. The section on reputation risk is number 17 of 24 material risks identified by Goldman.
Goldman is correct to draw a clear link between what is reported in the media and what happens on Capitol Hill. The risk that incomplete or erroneous media coverage results in unnecessary or harmful legislation is real. Just think about all the fuss about short selling.
Goldman Sachs’ PR problems have been getting a lot of attention recently. Goldman Sachs recently hired a lobbying and PR firm founded by Dan Bartlett and Mark McKinnon, former message masters from the George W. Bush White House. Even Goldman’s PR chief has become the object of media coverage.
I suspect that much of the criticism of Goldman will fade into the background with time, especially if the banking industry recovers relatively quickly (and that’s a big if). Fundamentally, financial institutions need to pick their battles and fight to win when they choose to engage with media. For example, executive compensation is not a good battle to fight in the press. I don’t think that banks can win.
However, ongoing misinformation in the media about market mechanics and trading activity, like negative press about hedge funds shorting Greek sovereign debt, is another matter. That the media don’t acknowledge that there are two sides to every trade continues to boggle my mind.
If anyone knows of any other public companies or banks citing reputation risk in SEC filings, please let me know.