It was bad enough that sales for Ault Inc.’s power conversion equipment had slowed and that the $85 million Minneapolis-based company would have to cut 21 percent of its staff. But for CFO Donald Henry, there was one more issue to deal with: the scrutiny of the media.
Henry was the front line of defense for the firm when reporters from local newspapers came calling, since Ault CEO Fred Green was out of town when the news broke. Henry was prepared, however, because the executive team had spent a full week prior to the announcement deciding not only who and what to cut, but how to explain it. Press release in hand, Henry discussed why the layoffs were occurring, which locations would be affected, and what benefits were expected to emerge. “Spending time on the release really helped organize our thinking, which made it easier to talk to people,” he says. And the ensuing media coverage, he believes, was “fair, and very focused on the business issues.”
Henry is not the only finance chief being tapped to deliver tough news these days. When JDS Uniphase had to announce a $1.29 billion earnings shortfall and 5,000 layoffs mid-quarter, CFO Tony Muller was the primary source quoted in major newspapers. Likewise Heidi Kunz on Gap’s sagging sales this spring and Gateway’s Joseph Burke on the PC maker’s restated, lowered 2000 earnings. “As the pragmatic voice of an organization, the CFO lends credence to the numbers,” says Marilyn Pittman, a San Franciscobased media coach for executives.
It’s little wonder, then, that finance executives are crafting press releases in tandem with strategies, and turning to coaches like Pittman to hone their PR skills. “A media interview is slightly riskier than an analyst call, because you can reach a broader audience and have a bigger impact,” says Norm Hartman, a former television journalist who has coached hundreds of finance executives on media skills. “If you do a good job, it gives you the chance to advance your own career and your company; if you blow it, it can sink you.”
And there are plenty of ways to blow it. For one, because investors often rely on mainstream media as well as analyst reports, inaccurate or incomplete disclosures may leave a firm vulnerable to shareholder claims. There’s some relief in knowing the media is an approved outlet for Reg FD compliance, but feeding news to a publication of limited circulation may still leave some investors feeling slighted. Plus, “there really isn’t an effective legal remedy” for poor press, beyond corrective statements, which readers often bypass, says Theodore Sonde, a partner at Washington, D.C.-based Dechert, Price & Rhoads and a former Securities and Exchange Commission official.
On the other hand, press coverage can help with marketing efforts and community relations. “As a newly public company in a brand-new industry, it’s important to get the story out,” says Reagan Y. Sakai, CFO of Crossroads Systems Inc., a data storage provider in Austin, Texas. “We see interviews as a way to educate the market.” In a similar vein, Dick Forsythe, CFO of Eggers Industries, based in Two Rivers, Wisconsin, hosts local reporters up to 10 times a year to let the small town know about company initiatives ranging from an ERP launch to employees’ community-service projects. “It’s not just good for our egos, it helps when we’re looking for new employees,” he says. “That’s our advertising.”