Financial Malfeasance Is Stickier Than Oil
BP’s standing in the business and public spheres will bounce back faster than Goldman Sachs’. Pro or con?
Pro: BP Had No Ill Intentions
Both BP (BP) and Goldman Sachs engage in complex, risk-prone businesses. Both must comply with numerous regulations. But BP had a terrible accident, and Goldman had its veil pierced in public when the Securities & Exchange Commission charged it with making misleading claims about one of its products to investors. BP has been quick and steadfast in presenting trusted company representatives to address the situation. Goldman stepped out only briefly to address the economic disaster in which it had a role and from which it profited nicely. Goldman made no attempts at humility whatsoever.
BP CEO Tony Hayward has been highly visible, providing frequent updates on efforts to contain the situation. Transparency, access, and accountability have long been part of BP’s PR strategy. In 2000, BP launched its "Beyond Petroleum" campaign to demonstrate substantive changes to its mission and culture by committing to social and environmental well-being and investments in alternative energy.
Goldman believes disasters are not its responsibility, despite its willful behavior and quick acceptance of $10 billion in taxpayer TARP money. Goldman may not lose droves of clients in the near term, but the cavalier attitude of Wall Street executives and calls for financial reform will keep it in the headlines and reinforce its reputation as the Rasputin of Wall Street, which may lessen its ability to recruit talent and compete for business.
Twenty-one years after the Valdez disaster, Exxon (XOM) is thriving despite its gross mishandling of communications during an easy-to-manage, pre-Internet news-cycle period. BP’s operational issue may take longer to resolve, but its past investments in its reputation and current commitment to managing it will make the company stronger. BP will be seeking forgiveness in the hopes that soccer moms and hockey dads don’t feel like they are supporting evil by buying BP fuel.
Con: The GS Problem Is More Easily Fixed
In the end, Goldman Sachs (GS) comes out with a cleaner reputation than BP, even though the company is the latest poster child for the reckless practices of Wall Street. Even under threat from the U.S. government, there appears to be unanimous support from U.S. and global corporate entities—the core of Goldman Sachs’ unrivaled industry success. If the future brings a guilty verdict, the worst possible outcome is Lloyd Blankfein gallantly falling on his golden sword as the scapegoat for the Teflon-branded Wall Street icon. We have witnessed many financial institutions stand up before Congress and continue on intact. Once the economy stabilizes, Wall Street’s problems will be long forgotten. That’s the American way.
On the other hand, BP can look no further than rival Exxon to fully comprehend what lies ahead. The Exxon Valdez disaster took place 20 years ago and the consequence of that spill is forever synonymous with its brand. The environmental catastrophe surrounding BP—the cause of which, an oil-rig explosion, killed 11 men—is unprecedented.
Every day, thousands of gallons of crude have been spewing into the Gulf of Mexico and have already negatively affected the lives of human residents and wildlife and the economies of every state in the region. If commercial shipping, energy production, and the commercial and recreational fishing industries grind to a halt—along with the crude blanketing every beach community from Key West to Galveston as the summer season approaches—the area still reeling from the effects of Hurricane Katrina could experience economic ruin.
Will this disaster financially hinder BP’s ability to make billions? Never! But because of the harm it’s caused to commerce and the ecosystems, BP will be forever branded as the facilitator of the worst environmental disaster, excluding Chernobyl, in history. No brand can shake that stigma.
In the end, Goldman Sachs receives a lashing but maintains an unscathed reputation and brand.
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