Industry Perception, Optical Delusion
In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story or incident comes across to the public at large. For example, when a presidential candidate makes a speech on camera, there’s a full team of image handlers making sure that, policy implications aside, the whole event looks and sounds right. The backdrop of flags, the blend of folksiness and credibility, the focus on sound bites—it’s all about optics.
The financial services industry has terrible optics. Even with massive lobbying efforts and armies of PR specialists, the stories that dominate the news and capture the public imagination—in effect, go viral—seem calculated to portray the worst stereotypes.
The most recent entry to this dubious gallery is surely Maurice R. “Hank” Greenberg, former chairman of AIG, the recipient of a massive government bailout a few years ago. Mr. Greenberg now heads Starr International Co., which was once a major AIG shareholder and is now pursuing a lawsuit against the very same government that rescued the corporation. The reason: the terms of the bailout were apparently too onerous. Starr wants about $25 billion in restitution.
To be fair, AIG—which has been publicly thanking the nation for the bailout—eventually declined to participate in the suit. However, the very fact that such a move was under consideration, not to mention Starr’s ongoing litigation, has unsurprisingly sparked a barrage of criticism from across the media and blogosphere. Even tastemaker Jon Stewart devoted a lengthy segment of ‘The Daily Show’ to the subject.
Also in Stewart’s crosshairs was HSBC, another star in the Hall of Shame. That storied corporation has earned infamy for its recent exploits, which apparently included dealings with a host of shady characters and institutions across the notoriety spectrum. The company agreed to pay massive fines last year for alleged money laundering, and is now part of a proposed mortgage settlement alongside such marquee names as Goldman Sachs and Morgan Stanley.
As documented here recently, HSBC is a prime example of the ‘too big to jail’ phenomenon—companies that don’t face even harsher penalties because that might destabilize other parts of the industry, or even the economy at large. This aspect in particular arouses the ire of many credible industry critics, and at some point the patience will surely run out.
Because of these and other noteworthy problems—think everything from credit-default swaps to LIBOR—criticism of the industry is now coming from a broader audience than ever before. Writers at such distinctly non-leftist outlets as Forbes and Harvard Business Review, among many others, have piled on with harsh words. For the record, these issues do have nuance, and the Wall Street Journal, among others, has pointed out the subtleties in the AIG issue. But none of that gets away from the optics—it all looks really bad, and that will have consequences.
It’s not as if every other industry gets away clean. The energy sector had many perception problems even before the British Petroleum oil spill, cable companies get savaged for bad customer service and airlines take it on the chin every time a flight is delayed or a bag gets lost. But the financial services industry is about, well, finance, and that’s a very different issue. People are funny about money, and that affects how we go about our business.
There’s no panacea here. Corporations large and small will occasionally make mistakes or behave badly, and those errors will reflect on everyone else in the business. Our job in the trenches is to provide great service to our customers, and if we do that everything else will take care of itself. Looking at the year ahead, however, the industry’s representatives in the capital and the media would be wise to worry about the optics.