Blog:  Disconnected: CEOs and Online Reputation Risks

CEOs and Online Reputation Risks

“It seems that just about every day a chief executive, politician or other prominent figure is apologizing for something,” Aaron Sorkin observed in a Dealbook post announcing his new “Apology Watch” coverage and hashtag, which we mentioned a couple weeks ago. This “personal and public exploration of the authentic apology,” as Sorkin’s collaborator Dov Seidman describes it, will be a fascinating project to follow. They’ve decided to focus on the “apologizing,” but that’s only half of the equation. The other half is the “something” that made an apology necessary.

Behind the stream of apologies that Sorkin references are statements and actions that expose some CEOs and other leaders as out of touch with the opinions—and feelings—of the people their companies target as consumers. Tweeting about venture capitalist Tom Perkins’ much-criticized Wall Street Journal letter, economist Justin Wolfers describes this problem as the “rich-dude bubble.”

Perkins, a Silicon Valley pioneer who commissioned the world’s largest private sailing yacht and authored a romance novel titled Sex and the Single Zillionaire, has continued to defend his letter, but that’s a perilous position for many other leaders.

The human element

Take AOL CEO Tim Armstrong, for example. In linking changes in AOL’s 401(k) plan to the health care costs of “two AOL-ers that had distressed babies,” Armstrong focused on the bottom line while overlooking the important human element, which was later described in detail by Deanna Fei, one of the babies’ mothers. And last year Armstrong faced extensive criticism for firing an employee during a conference call while around 1,000 others listened. Sorkin’s “Apology Watch” analysis found the CEO’s most recent apology to be sincere. His article’s concluded with a quote from Fei. “I think it’s legitimate and necessary to have a public discussion about health care expenditures, but this has to be done with sensitivity and mindfulness of the human lives at stake,” she said.

Echoing Sorkin, Bloomberg.com’s Jeff Green says Armstrong “is on a long list of corporate bosses who put their trust in an apology to contain fallout from an embarrassing public statement.” Green offers a list of similarly problematic episodes. They included AIG CEO Robert Menmosche “equating congressional criticism of the insurer’s bonuses during the financial crisis with lynchings in the Deep South.”And Google’s Eric Schmidt, who suggested “that people who worried Google Street view was invading their privacy by taking pictures of their homes should ‘just move.’” Fortune’s Claire Zillman observes that business executives seem to be replacing politicians as “the ones who seem to be truly disconnected from everyday Americans,” citing astronomical executive pay and how wealth can distort one’s outlook as the likely cause.

Fallout

“If the CEO is getting mostly negative publicity, it is very hard to get positive coverage on the organization as a whole,” according to a study by the Institute for Public Relations. Given that connection, today’s CEOs may be well advised to cultivate an outlook that addresses the values and concerns of the broader public. In stark contrast to Tom Perkins, for instance, venture capitalist and early Amazon investor Nick Hanauer has advocated for raising the minimum wage. And, in Zillman’s Fortune article, Harry Kraemer, clinical professor of management and strategy at Northwestern University’s Kellogg School of Management, offers some practical advice for staying grounded: “You better have a few people—a spouse, best friend, or sibling—who won’t let you forget who you really are and where you came from.”