Goldman Sachs hires PR firm
Big profits and big bonuses have made the investment bank so unpopular, they've turned to a PR firm for damage control.
By Jim Woods, InvestorPlace.com
PR firm Public Strategies knows a thing or two about damage control. One of its headline clients in recent years was President George W. Bush, who saw his approval rating stumble to a historic low of 22% during the course of his presidency.
Now, the Texas PR giant has a new client that's as dubious as Dubya ever was -- much-maligned investment bank Goldman Sachs (GS). Record profits and billion-dollar bonuses at the Wall Street firm have really rubbed some folks the wrong way, and the company is concerned that its image problem could cause serious trouble if not addressed.
Part of the irony is that Goldman's trouble comes from being too successful. While many businesses are still suffering, GS posted a record $4.79 billion profit for the fourth quarter. In any other environment, that would be great news.
Another other interesting point is that Goldman has to hire a politically connected PR firm to help polish its image, even after many of its past executives have held influential jobs in government. Most recently, we saw former Goldman bigwigs Robert Rubin and Henry Paulson at the helm of the Treasury Department. Yet it's likely the close knit ties between Goldman and the government are why the 140-year-old investment-banking titan needs to repair its damaged image. After profiting from its unseemly role in the AIG bailout and raking in bailout money from former Treasury Secretary (and former Goldman exec) Hank Paulson, the company has been frequently referred to as "Government Sachs" by angry voters and politicians.
Adding fuel to the fire recently are the big profits made by Goldman while the rest of America is suffering,and the big bonuses planned for employees of the investment bank. To his credit, Goldman CEO Lloyd Blankfein took a relatively modest bonus to the tune of $9 million -- a mere pittance when compared to his $68 million bonus in 2007. This level of bonus restraint, if one could call $9 million restraint, came alongside Goldman's decision to reduce its bonus pool to approximately $16.2 billion from what could have been a pool of $23 billion. But the typical American finds it very difficult to sympathize with these "small" merit rewards.
No matter how you look at it, the bottom line here with Goldman's decision to hire a PR firm is, in fact, the bottom line. Blankfein knows that continued bad press is likely to hurt Goldman's earnings, and that will hurt shareholder value. Public Strategies now has the unenviable task of making sure Goldman Sachs stays successful but doesn't look greedy in the eyes of average Americans.
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