When truth hurts

They must have been some pretty strongly worded memos.

A few months back, the word came down from the corporate HQs of several marketing communications conglomerates to their affiliate ad and promotion agencies around the country that under no circumstances were the firms to share their statistical data with the business press. Under the Sarbanes-Oxley accounting reform law passed in late 2002 (according to the urban legends that began circulating immediately), executives at publicly held companies could do jail time for revealing unaudited details from a company’s balance sheet. There might be financial penalties extracted. At the very least, they’d lose their expense accounts!

Alright, enough with the italic melodrama. The fact is, the Sarbanes-Oxley Act, passed by the U.S. Congress in the wake of accounting scandals at Enron, WorldCom and others, does not forbid any publicly held company from sharing financial data with the press or the general public. What it does preclude is the hyping of such data in language that misstates or misleads. According to the Act (yes, I actually read it), no report, press release or other communique shall “contain an untrue statement of a material fact….” Well, what’s so tough about telling the truth?

A lot, especially if you’re a public media corporation with ad agency properties whose revenues nose-dived in 2002. Sure, your p.r. and promotion groups may have done okay, but your prestige, your corporate brand is tied up in the ad side of your business. If you have to release quarterly reports to your stockholders, at least you can gloss over those poor individual performances in a general corporate statement. If you let your more successful companies tip off the press about their positive revenue results, it takes only simple math to figure out where that great sucking sound is coming from.

But alas for the censored promotion and marketing agencies in such families! Many of them did pretty well in 2002, but few have been allowed to talk about their successes. And the presidents of such subsidiaries, who know how heavily brand managers use the PROMO 100 rankings (which begin on p. 43) when issuing RFPs, are caught in a classic Catch-22. And if fewer RFPs come, what will the corporate revenue performance be next year?

Okay, sometimes the truth hurts. But sometimes it is fiscally savvy.

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