In a September 10, 2008 investor conference call, Ian Lowitt, Lehman Brother’s CFO, set forth a strategy to investors that he, along with other Lehman executives, believed would save the firm. During that call, Mr. Lowitt stated among the detail of the plan the following statement: “And even under the scenario of limited debt-issuing capacity in 2009, we anticipate that core Lehman will have ample cash capital to sustain its business activities.” Five days later, famed investment bank Lehman Brother’s filed for bankruptcy.


Did Mr. Lowitt fail to state some particular component of the strategy that may have been useful to investors? Maybe defining the length of time that the “ample cash capital” was going to last was only 5-days or maybe that there was perhaps only a 1 in 10 chance that this strategy would prove fruitful? Although Mr. Lowitt statements were most likely uttered with the utmost of sincerity, one could assume that they were couched to place the best spin on a dire situation. That is the difference between a journalist and public relations (“PR”) professional.


What is also striking about Mr. Lowitt’s statements is that details of Lehman’s critical strategic plan was not delivered by the CEO, Dick Fuld, but by Lehamn’s CFO. For financial firms, having the CFO as the lead speaker during investment conference calls is not uncommon, but during this critical juncture in the company’s history Lehman’s management chose for the bulk of the message to delivered by the CFO. In fact, of the 11 pages of prepared remarks, comments by Mr. Lowitt account for 8 of them! That means the CFO was talking over 70% of the time! The CFO also answered most responses to Analyst questions as well.


Arguably, this was a make it or break it call to convince investors to hold strong and push off the short sellers that led to the company’s demise. So why did the CFO take the lead in speaking for such a critical communication in Lehman’s history? Because, within an organization the CFO is the one person believed to be most able and willing to not compromise his/her ethical standards and provide outside stakeholders the insight they need to make decisions. In short, finance speaks the truth. But do we always tell the full truth, the whole truth and nothing but the truth?


Maybe that is why Lehman’s management chose to have its CFO explain its strategic plan or maybe it was just dumb luck. In any case, I do know that Mr. Lowitt was the one person in Lehman’s management that had the most credibility at that time (per se ethical capital) that could be used to convince others that their plan would work.


The Difference Between Journalist and Public Relations Professionals


In their purest form, journalists are seekers of truth. Although they are open to bias and can only interpret the actions of others through a clouded lens, their works is performed under the pretext of “objectivity and professional news value.” Overall, a journalist reports with sincerity. They are convinced that the way they perceive the world is correct, and therefore, what they are reporting is objective and accurate.


For this service, the public has bestowed on true journalists great honors. These people have included Walter Cronkite, Christiane Amanpour, Peter Jennings, Anna Politkovskaya and many others. Although some became extremely wealthy in their lives due to their work, arguably, they would have done it for free, for they believe exposing the truth is more important than the entertainment value or popularity that one news story may bring over another.


PR professionals are not that different from journalist with a few exceptions. A PR professional’s job is to control the message for the benefit of themselves or their employer. A PR professional can provide the exact same information as a journalist but in a way that makes it appear in a better or worse light. To do this, they may add superfluous information or leave out some other part of the story. The tone of the message may be changed, or the medium in which it is delivered. By “spinning” the message, they can even skirt the edge of truth and still deliver the message with sincerity.


So What Do Journalists and PR Professionals Have to do With Lehman Brothers?


I don’t question Mr Lowitt sincerity in delivering the strategic plan and uttering those comforting words on that fateful day, but I also don’t think he was acting as a journalist. Nor do I necessarily think that any CFO or financial leader needs to act in a journalistic capacity all the time when addressing external parties, but I do believe one should be aware in which capacity they are speaking when addressing external constituents.


If Mr. Lowitt did his job and ensured that the people that he relied upon to give him the information that he needed to make decisions were providing the truth without spin and he properly communicated that with journalistic integrity to the CEO and the Board, arguably, he did his job. Unfortunately, no one will ever know what truly transpired during those critical weeks before Lehman’s collapse.


All communication requires at least two parties, the one communicating and the one receiving. Both parties have duties to interpret the information in the way they see fit. Just as CFO’s and other company management have an incentive to control the financial message to the investing public. The investing public has an obligation to question management, just as any good citizen should question his/her government representative in a democratic society.


I am fortunate to have many friends that have chosen to be Wall Street Analysts and all, without exception, take everything said from a public company’s management with a grain of salt. They know that CFOs are acting as their company’s financial PR representative.


Understand The Context of the Message


Finance executives have historically been the proverbial “man-in-the-middle” acting as both company management and investor/stakeholder guardian. Whether it is tax, accounting, financial planning and analysis (FP&A) or even corporate development, they represent the company to the investment public, regulators and other stakeholders. Therefore, it is critical that in any business situation, a senior financial leader needs to ask these two questions:


  • Am I acting as a journalist or a PR professional? If so, why and does that make sense given the forum?
  • Is the person providing me information acting as a journalist or a PR professional?

If you work, or encourage, a culture where the messenger is always shot, people fear for their jobs or tyranny rules, than most likely, all information provided to you is not being told with the utmost of truth. For example, during the HealthSouth accounting scandal, Richard Scrushy, HealthSouth then CEO, claimed that he was unaware of the severity of the company’s financial problems because he never participated in closed-door meetings that financial leadership had in order to facilitate the complicated tactics required to hit earnings guidance targets. Instead, Mr. Scrushy used threats and cash to force the top executives to meet targets. Talk about the tail wagging the dog!


Through asking the above questions, business leaders will be better able to understand whether the information they are receiving, or giving, is told with journalistic integrity or PR Spin.

Kenneth Fick

President, CEO of and Senior Manager at MorganFranklin Consulting, Inc, Mr. Fick is senior finance leader that brings ideas from concept to execution. A frequent speaker and author on topics such as budgeting, forecasting planning, technical accounting, business improvement, and optimization.

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