ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, September 10, 1996 TAG: 9609100075
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: The New York Times
CALL IT AN HMO FOR companies needing capable media damage-control in a pinch. Deductible: Only $50,000.
For political candidates, hiring a shrewd image consultant is sometimes likened to taking out an insurance policy. For corporate executives, hiring one can now actually be part of an insurance policy.
National Union Fire Insurance Co. has become the United States' first insurance company to cover the costs of hiring a ``crisis-management'' public-relations firm. Think of it as first aid, as provided by spin doctors.
As part of its corporate liability policy, National Union said it would pay policyholders up to $50,000 for the emergency hiring of one of six approved firms that help manage public-relations disasters ranging from oil spills and plane crashes to embezzlement by executives.
While $50,000 may seem a pittance in a world where lawyers and investment bankers pocket millions of dollars in fees, it can tide over a company for the first 24 to 48 hours, when a crisis explodes onto the evening news or the front page.
``More top executives are paying attention to crisis communications,'' said Robert Dilenschneider, the chairman of the Dilenschneider Group, a public-relations firm that is not on National Union's list.
``It's moved beyond the explosion or the bank failure or the embezzling executive,'' said Dilenschneider, who sees such insurance as an inevitable sign of the corporate times.
With names like Abernathy, Kekst and Sard, the six firms may not have the public name recognition of political specialists such as Carville, Rollins or Morris. But in the cutthroat world of corporate takeovers and executive shake-ups, they are every bit as well known as their political counterparts.
And as well connected: By mining their Rolodexes for influential people in the media, they can get a client's message heard in the crucial first hours after a plane crashes, a tobacco jury sides with the plaintiff or a top executive is indicted.
``The way a negative event is announced enormously affects its impact on the stock price,'' said Greg Flood, president of the management liability division of National Union, which announced the new policy last week.
National Union, the nation's largest provider of insurance to protect corporate directors and executives against shareholder lawsuits, is a unit of the American International Group.
A swift public response to a crisis, Flood said, is often a company's best hope for limiting the damage to its stock price. That, in turn, may reduce the damages shareholders could collect in subsequent lawsuits.
Flood said a National Union policyholder would have the option of using a public-relations firm not on National Union's roster. But to get the $50,000 payout, the company would first have to apply for permission to use an unlisted firm.
National Union's six-firm list functions almost as an HMO for spin doctors: A company can go to any of them without prior approval. The firms are Abernathy Scanlon Group, Kekst & Co., Robinson Lerer & Montgomery, Sard Verbinnen & Co., and Kroll Associates, all of New York, and Sitrick & Co. of Los Angeles.
Several of the consultants on National Union's list were eager Monday to put their spin on the rise of spin in corporate America.
``With news moving at lightning speed, and with the number of news outlets expanding geometrically, you have to get ahead of the curve on a crisis,'' said Kenneth Lerer, the president of Robison Lerer & Montgomery, whose clients include Viacom, NBC and Microsoft.
``You want to get your solution into the same news cycle as your problem,'' said Lerer, who used to work for the New York political consultant David Garth.
Lerer put his political experience to work in advising Viacom's chairman, Sumner Redstone, when he abruptly dismissed the company's well-regarded chief executive, Frank Biondi, in January. Viacom's stock plunged.
But as Redstone took Lerer's advice and publicly pledged to run Viacom more aggressively - implicitly criticizing Biondi's approach - Viacom's stock quickly recovered much of its loss.
Consumer-product companies have also been increasingly using ``crisis'' public-relations firms to counteract the flood of product-liability lawsuits, most notably in the tobacco industry. By trying to cultivate a positive image for a company, these firms can sometimes blunt a legal challenge over a product.
Most industry executives date the birth of the ``crisis'' public-relations business to the Tylenol case in 1982, when Johnson & Johnson faced a coast-to-coast panic after cyanide turned up in some Tylenol capsules. Burson Marsteller, which advised Johnson & Johnson, won praise for its strategy of full and fast disclosure.
LENGTH: Medium: 88 linesby CNB