Any way you slice it, the New York Times story that General Electric paid no taxes in 2010 upon earning $5.1 billion in their US operations ($14.2 billion worldwide) and claiming a $3.2 billion tax credit is going to hurt GE's image.
Everyone knows that corporations and individuals do whatever they can to minimize their tax bill. If done legally, they have every right to do so. However, when that bill is zero at a time when many Americans are still hurting from the financial meltdown, the trust that exists between the public and any profitable public company that pays no income tax is going to be eroded. It is just one more story that fuels the skeptical view Americans have of "Corporate America" - even though that view may be inaccurate in numerous cases.
GE's PR meltdown comes on the heels of the "meltdown" of nuclear reactors in Japan that were designed by GE. If nothing else, the timing of the zero-tax story is going to further hurt the corporate image of the General Electric Company.
GE's PR Blunders
1. It hasn't been straight forward in acknowledging facts.
Numerous Twitter tweets from GE Public Affairs representatives treated the New York Times story as a "rumor" or falsehood maliciously spread by the Times. One example is a Twitter exchange between GE public affairs and Henry Blodget, CEO and Editor in Chief of Business Insider. During further fact checking by independent sources, it appears that the New York Times story is factually correct.
In fact, Anne Eisele, a spokeswoman for GE, said in an AFP article that "GE did not pay US federal taxes last year because we did not owe any." This seems to contradict what she told Mr. Blodget in his Business Insider story.
What GE should say: My advice to Ms. Eisele and all of the Public affairs people at GE is they should use the Fact Procedure since the zero-income tax story in the New York Times seems to be a verifiable fact. If you treat it as a rumor, your spinning is just drilling a bigger hole into which the trust between the public and your company will fall further into the abyss. If you want the marketplace to trust you, tell the believable truth.
2. Those that try to live by the Tweet can die by the Tweet
All businesses should learn an important lesson from this attempt by GE to spin their way out of the public relations nightmare they created by not paying any income tax. Just as you cannot fool Mother Nature, you cannot use Twitter to spin tall tales in an effort to mislead the public. Once you send a Tweet, it is in cyberspace for all to see forever. Not only that... smart people with access to facts and figures that have followings (and perhaps agendas) will retaliate and use Twitter to make a fool out of you -- generating their own negative word-of-mouth pyramids. Here are three examples:
- Former labor secretary in the Clinton Administration, Robert Reich, responded on Twitter @RBReich Robert Reich (16,018 followers). GE pays zero taxes, makes most of its $$ abroad, spends $200 m lobbying, and O appoints its CEO chair of jobs comm?
- @JustinKownacki Justin Kownacki (5,562 followers). How GE pays zero taxes and still gets money back from the govt. Genius, really: http://bit.ly/gFAlp7 by @theAtlanticWire
- @tedlieu Ted Lieu (1,185 followers). GE paid zero taxes despite massive profits. Obama should remove GE CEO #Immelt from his Council on Competitiveness. http://nyti.ms/h5M1wH
How do you think GE should have responded?
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Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). Follow him on Twitter.
image courtesy of flickr user, David Paul Ohmer