Q&A: Why Eric Dezenhall Thinks Goldman Sachs' Apology May Be a Waste of Time and Money

Goldman Sachs (GS) apologized for its role in the financial crisis this week and announced it would invest $500 million in small businesses as a mea culpa. But corporate reputation expert Eric Dezenhall believes the move may be an expensive and pointless kabuki show for the unwashed masses who don't understand how the firm really works.

Goldman's move is widely seen as a PR gesture after a series of high-profile flubs that followed its role as a recipient of public bailout money and a nearly $13 billion windfall from the unwinding of positions in AIG â€" another company that was only able to stay solvent with taxpayers' cash.

Those flubs include CEO Lloyd Blankfein claiming his firm is "doing God's work," and the securing of H1N1 vaccine for its employees when the drug was hard to find for others (a move which inspired a merciless SNL sketch).

The public has come to regard Goldman as a type of conspiracy â€" its thousands of employees are wealthy beyond most Americans' wildest dreams, and its former staffers tread the halls of power as if the government were their own private shopping mall. The two previous Treasury secretaries were ex-Goldman execs, and the current one's chief of staff is a former Goldman lobbyist, for instance.

BNET asked Dezenhall, author of Damage Control: Why Everything You Know About Crisis Management is Wrong, for his take on Goldman's image problems. Dezenhall is known for his aggressive defense of less-than popular clients, and for his belief that traditional pr tactics -- such as the one employed by Goldman this week -- are often wrongheaded. His firm, Dezenhall Resources, has been connected with Enron, Michael Jackson and Exxon. BNET: Goldman Sachs doesn't deal with the ordinary consumers who are angry at it, and its clients and investors know exactly what it is, so why should it care about its image? DEZENHALL: They need to care about political risk. They need to care about there being so much political outrage that there is political pressure to punish them. But they don't have to care necessarily that the public needs to understand or appreciate them. In crisis management the goal is to deprive people of the power to attack you effectively. For a company like Goldman the object is not to get people to like you, it's to get those in a position of power to attack you less. The issue is not that reputation doesn't matter, it's that it doesn't always matter.

BNET: How do you do that? DEZENHALL: If you look at Microsoft and its antitrust battle, Microsoft never succeeded in getting people to love the company but they did succeed to get the government and courts to believe it was not in the interest of the country to destroy that company. There were a lot of silly games early on, such as "let's have Bill Gates wear a sweater and be folksy." Ultimately I think what happened was very high-end audiences were convinced that maybe Gates was an SOB but he's an SOB who rescued the American economy. So bringing it to Goldman, if Goldman can demonstrate that they do things that will be pivotal in the ongoing health of the American economy they become a less appealing target for attack.

BNET: What about Blankfein's interview with the London Times. He tried to explain how important Goldman was for the economy but the headlines quoted him saying he was "doing god's work." DEZENHALL: Goldman can't really get away with saying things like that. When Google several years ago bought a Boeing 757 and said, "We did it because it's good for the world," the culture didn't fall on the floor and laugh their heads off because the high-tech industry is largely held exempt from the whiff of rapaciousness. Why? Because we like gadgets. We like being able to sit at our computers and learn anything we want. I don't think your average person sees Goldman as providing them personally with anything of material or social value. So that type of statement about "doing god's work" is likely to be incendiary because it doesn't have narrative fidelity. It doesn't ring true that people who individually make millions of dollars a year are doing god's work.

BNET: What else could Goldman do to change its image? Advertising? Charity? Give the bonuses back? DEZENHALL: Anything they could do would have to be over the long haul. I'm a real skeptic that short-term PR stunts really do anything. If they gave up their bonuses â€" maybe if they gave up all their bonuses â€" it's not like if they write a check to the United Negro College Fund tomorrow people will feel good about them. If they do what Bill Gates eventually did with a systematic campaign to demonstrate some degree of social value, they may have some long-term success from dissuading people from attacking them. Never in history has anyone succeeded in getting people to feel good about capitalism in the most extreme form.

BNET: Do companies ask for long-term image strategies when they get into trouble? DEZENHALL: Everybody wants 7-Eleven redemption. They want to drive in, get a Slurpee, get redemption, and get out. There's any number of PR people who'll tell them that's possible. What we need to push back is an alternative narrative to the one being prosecuted. At Wendy's, when there was a finger found in the chili, it took about a month but when the company was able to show a grifter did it, not that the company had bad hygiene, the crisis was solved. Short-term charity work may pay some dividends in terms of cessation of attacks. But I don't see any evidence that it leads to the type of cessation that clients hope.

BNET: Have any similar companies have been in this area? DEZENHALL: BP. They spent hundreds of millions of dollars on a campaign to portray them as something other than an oil company. And the media and environmentalists were furious. It may have helped them with shareholders and employees, but it did not succeed in convincing the environmental movement and the news media that they were anything other than an oil company. The ad campaign inflamed them to the point of digging into the personal life of the CEO.

BNET: Do you think that most Goldman executives understand their image problem? These guys are working 14 hours a day in their offices in Manhattan. They're probably not spending a lot of time with Joe Sixpack at the local diner. DEZENHALL: I think, generally speaking, high-level management in nonconsumer companies views the whole PR function with a certain amount of disdain. And they may not be wrong. If you are Blankfein, you're saying give me a business reason why I should care about our image, and the business reason I would tell him has nothing to do with consumers. It would be if you continue paying out billions in bonuses that is perceived to be exploiting the taxpayer you are going to be on the receiving end of punishing legislation. The object is to protect their freedom to operate.

BNET: If you were the CEO of Goldman, what would you do regarding its image? DEZENHALL: I would be saying, show me what I need to do that has a direct business implication to our freedom to operate, and I would say I don't want to her about reputation in the abstract because it means nothing, I don't want to her about consumers because I don't care. I want to know what you can do to protect us from being attacked in a way that restricts our freedom to operate. Not these loosey-goosey, silly concepts like reputation. The PR industry lives on it but to this day I still don't know what that means. Sometimes the answer is boring old muddling through.