Rating S&P’s Words

By | April 24, 2013

As practitioners of crisis communications, we regularly work closely with legal counsel to make sure that the communications strategy is closely aligned with the legal strategy.  Our objective is to help protect brands and while the lawyers look toward winning in the court of law, we public relations practitioners aim for success in the court of public opinion.  Words matter for each of us in arguing our case and we seek to be in sync in legal filings and corporate messaging.  Yet, there are some times when friction can emerge between the road the lawyers are taking and what we believe may be best for our client’s reputation.

That rub is now being played out in fabulous fashion in a civil fraud lawsuit filed by the United States Department of Justice against Standard & Poors Ratings Service regarding S&P’s ratings and the 2008 financial meltdown.  As The Wall Street Journal reporter Jeannette Newman points out in her excellent April 23 story on the case, S&P has long focused on the words “independent” and “objective” in selling itself as the grand arbiter of the quality and safety of corporate debt and a host of financial instruments.  “Independent” and “objective” went hand in hand with “Standard” and “Poors” in how the Company described itself to investors and sold its expertise for very big bucks to its clients.  The words are ubiquitous in the materials produced by S&P’s marketing and public relations teams and frequently repeated by company executives.

But facing the DOJ in court, S&P’s lawyers are now saying those words are just “puffery” and were never meant to be taken at face value.  The company’s legal team, which includes First Amendment super-lawyer Floyd Abrams, cites recent Federal court rulings that call into question whether S&P’s watch words can really be depended on.  Or as Ms. Newman recounts, the lawyers’ point is that “S&P’s ratings were objective, independent and uninfluenced by conflicts of interest. That, however, is beside the point.”

Whether this legal strategy will win in the court of law is yet to be seen but it looks like a very shaky argument in the court of public opinion.  Ms. Newman’s quote in the story from Duke Law professor Samuel Buell sums up the issue quite well. He states that “Even if it’s a viable legal argument, it’s a pretty unattractive argument for S&P to be putting forward since they’re basically in the business of charging clients for their reputation.  What they’re saying here is, ‘When we’re talking to investors about our own reputation, we’re engaging in meaningless puffery.'”

Now I do not know how and if S&P’s communicators were involved in litigation support, but this is a pretty big hole for the company to dig itself out of reputation-wise, especially when it is the subject of a front page WSJ article.  Lawyers have their job to do and public relations professionals have their job to do.  In the realm of litigation support, we must not be shy to argue our case to executives/boards and make sure they know all the potential ramifications of the legal strategy and words counsel are using.  What may win the day in court could lose in the court of public opinion and impact business and the bottom line.  That is why, particularly in the digital age when legal documents are more accessible than ever, it is important to review court filings from a brand and reputation perspective and provide communications counsel to executives/boards.  At the end of the day, it is up to them to decide which way to go when lawyer words and brand messages conflict but a seat at the table when those decisions are made is crucial.  Time will tell if S&P made the right decision.




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