LEVICK Weekly - Aug 31 2012
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Transcript of LEVICK Weekly - Aug 31 2012
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WeeklyAugusT 31, 2012
Tobacco Warriors Set Their Sights on the Grocery Store
Proxy Advisory Firms Don’t Have to Have the Last Word
Samsung: The Decisive Campaign is Yet to Come
Five Ways Defense Subcontractors Can Remain Relevant in the Sequestration Era
You Are Who You Fund: What Todd Akin Teaches Us About Campaign Contributions
What do tobacco and food labels have in
common? Not much, unless you consider
the successful attorneys who beat the tobac-
co industry a decade ago for record sums.
Now these very same plaintiffs’ attorneys--
indefatigable and brilliant--have zeroed in
on a new frontier: the grocery store aisles.
They smell liability over what’s labeled Ko-
sher, all natural, real fruit, or whole grain,
and they believe they have a compelling
case to make.
This summer, consumer activists have teamed
up with these powerful allies to launch an all-
out attack on product labels they believe to be
misleading and tantamount to false advertis-
ing, if not a crime. General Mills, for instance,
is facing a lawsuit from two California moth-
ers who have the Center for Science in the
Public Interest in their corner. They want the
“natural” label removed from the company’s
Nature Valley products because they contain
processed ingredients. The suit is only one of
25 cases that, according to the New York Times,
have been recently filed against companies
such as ConAgra, PepsiCo, and Heinz, over al-
legedly deceptive labels.
Plaintiffs’ attorney Don Barrett, who won
record settlements from Big Tobacco ten years
ago and is among a host of lawyers seeking
big paydays over the labeling issue, summed
up the activist position in just two sentences,
stating that mislabeling “is a crime” and
that “these products should be taken off the
shelves.” In what amounts to the most signifi
cant case to date, a federal court in California
has been asked to do just that by halting sales
of ConAgra products ranging from Pam cook-
ing spray to Hunt’s canned tomatoes.
What is perhaps most troubling in corporate
circles is that the fight isn’t limited to the food
industry. Just a few weeks ago, Pfizer Con-
sumer Healthcare agreed to discontinue claims
that its Centrum vitamin supplement products
support “breast health” and “colon health” af-
ter the Center for Science in the Public Interest
threatened another high-profile lawsuit.
At the same time, other activists are attacking
the product labeling issue from the other flank.
This November, California voters will consider
a ballot initiative that would require food
manufacturers to label products that contain
ingredients enhanced via biotechnology.
All the while, major news outlets are pay-
ing a lot of attention to these activist salvos,
which have been increasing in frequency over
the past three to four years and are just now
reaching critical mass. That’s because media
interest is a lynchpin in the activist strategy.
Consumer groups see high-profile lawsuits and
ballot initiatives as a way to force the issue into
the public spotlight and compel reforms with-
out having to rely on government regulators,
whom they see as too often colluding with big
corporations on labeling issues.
Traditionally, food and pharmaceutical com-
panies have worked with the Food and Drug
Administration (FDA) to reach compromises
on labeling rules that balance the need for ef-
fective marketing with concern for consumer
TObAccO WArrIOrs sET ThEIr sIghTs ON ThE
grOcEry sTOrErichard s. Levick, Esq.Originally Published on Fastcompany.com
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safety. The process is slow, as evidenced by the
fact that it took nearly a decade to reach final
agreement on the ingredient and nutrition
labels we now see on our beverage cans, pasta
sauce jars, cereal boxes, and just about every
other product we see on store shelves. Frus-
trated by both the length of the process and the
resulting rules, the activists are now stepping
up their activities in the courtroom, voting
booth, blogosphere, and newsroom.
Further complicating matter is the fact that
companies don’t always know what’s consti-
tutes compliance. “The FDA hasn’t set clear
enforcement standards for claims like ‘All
Natural,’ ‘100 percent Whole Grain,’ or ‘Made
with Real Fruit,’” says Richard Frank, a lead-
ing food labeling, advertising, inspection, and
safety attorney with Olsson Frank Weeda PC.
“As a result, we are seeing plaintiff class action
attorneys filling in the gap where clear stan-
dards don’t exist and ‘piling on’ where FDA has
issued a Warning Letter or taken other enforce-
ment action.”
What all of this means is that the companies in
the crosshairs—and those just outside them—
must think differently about labeling practices
and how they communicate with consumers
on a level above the customary marketing
relationship. They themselves must act like
consumer advocates, describing their labeling
practices and explaining their ingredients
with greater clarity and crediblity. Specifically,
they must:
Accept new levels of transparency.
With new levels of consumer aware-
ness around labeling issues comes a new level
of responsibility for food and pharmaceutical
manufacturers. If a claim on a label can’t be eas-
ily justified or substantiated, it is best not made
in an environment rife with intensified scrutiny.
Speak directly to consumers. Labeling
issues are no longer being settled behind
closed government doors; they are being debat-
ed under a glaring public spotlight. That means
what used to be a “grasstops” play has evolved
into a grassroots imperative. The issue is an
example of how the line between public affairs
and public relations is getting more blurry ev-
ery day. As such, food and pharmaceutical com-
panies need to make the most of social media
connections and optimized Web properties that
allow them to take back control of the conversa-
tion—even as they bypass the an increasingly
skeptical traditional media filter.
Understand that emotions trump science
on issues of health and safety. The FDA
seal of approval and the mountain of scientific ev-
idence that support companies’ labeling practices
aren’t enough to assuage fear and anxiety where
consumer health and safety are concerned. Emo-
tion, not logic, is what will win this debate. That
means companies can’t just tell consumers their
products are healthy and safe; they have to show
them with heavily optimized and engaging im-
ages, video, and stories that drive home the ways
their products contribute to healthy lifestyles,
something that can now be more easily done as
Google analytics increasingly optimize for the
spoken word.
Enlist third party support. In many
cases, the best third-party advocates hail
from the credibility-rich realms of academia,
government, or Washington D.C. think tanks.
This is not one of those cases. Consumers need
to hear from others among their ranks that
food and supplement products really are all
they are labeled to be.
Target California. The Golden State is
ground zero for movements such as
these, which often gain momentum among
friendly audiences out west and then spread
across the country. That means companies
need to emphasize California media and geo-
target their Search Engine Optimization (SEO)
and Marketing (SEM) campaigns for the region
as a means to nip the movement in the bud.
The fact that more than a dozen high-profile
attorneys that used to sue big tobacco are
migrating toward food and pharmaceutical
labeling issues speaks volumes about what lies
in store for the food industry. The sooner that
target companies—and those that will become
targets in the coming months—begin to con-
trol this highly threatening conversation, the
better positioned they will be to win in the
courtroom, the Court of Public Opinion, and
among regulators that are closely monitoring
the outcome of what could be an epic legal and
reputational battle.
Richard S. Levick, Esq., President and CEO of LEVICK,
represents countries and companies in the highest-stakes
global communications matters—from the Wall Street
crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.
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Kathleen WailesOriginally Published on LEVICK Daily
ProxyAdvisory Firmsdon’t HAve to HAve tHe LAst Word
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hard—with the backing of ISS—to gain seats on the AOL Board. It was soundly defeated. In a memo posted by the law firm Wachtell Lipton, attorney Martin Lipton noted that “The victory repre-sents a clear and powerful message that a well-articulated business strat-egy for long-term success will be sup-ported by investors notwithstanding activist generated criticism and ISS support.”
All of this leads to the conclusion that managements should take heart and
act assertively when challenged by proxy advisors. Do not hesitate to parry each objection and assertion forcefully so that your investors clearly understand management’s point of view. Follow Mr. Lipton’s advice, and spell out your strategy for building shareholder value. Don’t wait until ISS or Glass Lewis comes calling— get out in front of the issues and you will succeed.
Kathleen Wailes, Senior Vice President & Chair, Financial
Communications Practice
Rare is the corporation that has not paid close attention to the rec-ommendations of proxy advisory firms—those organizations that ad-vise investors how to vote on proxy issues. The two principal firms, Institutional Shareholder Services (ISS) and Glass Lewis, wield in-creasing power, with thousands of institutional clients that often fol-low their recommendations to vote against management’s proposals. The consequences of these votes can affect everything from a company’s independence to how its executives are paid. Increasingly, however, cor-porations are hitting back and chal-lenging the unbalanced influence these firms wield.
It’s important to know that corpora-tions can fight and win when ISS or Glass Lewis is wrong. Major compa-nies are taking on the proxy advisory duopoly and holding it accountable for its statements and actions—and such challenges to both the proxy ad-visory firms’ objectivity and accuracy are succeeding.
Recently, ISS took heat from com-panies regarding its recommenda-tions on executive compensation. The companies believe that ISS is choosing inappropriate peer groups against which to compare pay. Since 25 percent to 35 percent of institu-
tions follow ISS voting direction, this is no small matter. The consulting firm Semler Brossy reported in May that 52 companies had filed supplemental proxy materials this year—about dou-ble the rate in 2011—and half of that activity stemmed from disputes over peer groups.
Marriott International was a promi-nent example, since ISS suggested that Marriott’s compensation rates should be compared with those of companies outside the hospitality industry—com-panies such as Penske Automotive Group and Icahn Enterprises. As these so-called peers were wildly inappropri-ate, Marriott won the day. In March, the Center on Executive Compensation, which had called for greater account-ability on the part of proxy advisors, applauded the establishment of an ISS “Feedback Review Board” that would afford issuers and investors the oppor-tunity to rebut ISS positions. The Cen-ter previously had brought to light the conflicts of interest in firm structures and inaccuracies in reporting by both ISS and Glass Lewis.
Regulators also have stepped up their attention to proxy advisory firms, with new rules expected for the in-dustry this year. Executive pay is not the only area in which ISS and Glass Lewis wield considerable clout. The hedge fund Starboard Value LP tried
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sAmsungtHe decisive cAmPAign is yet to comerichard s. Levick, Esq.Originally Published on Forbes.com
Question: what might Samsung have in com-
mon with both the Prophet Mohammed and
Chairman Mao?
Think “retreat.” In 622 AD, Mohammed fled
from Mecca to the city of Medina and, as a
result of that tactical withdrawal, one of the
world’s five great religions was born. Just over
thirteen hundred years later, Mao and his
cohorts took flight on the Long March. Only
around 10% of them finished the trek but,
at day’s end, Mao was firmly in control and
would stay that way.
The point is that the most arduous retreat is
by no means a decisive defeat and can even
sow the seeds of historic success. True, one can
call the August 24 jury verdict against Sam-
sung a defeat in the sense that the company
was found to have willfully infringed multiple
Apple patents, including the rectangular shape
and rounded edges of the iPhone and Apple’s
pinch-to-zoom image magnifier. Pending ap-
peal, Samsung must pay $1.05 billion.
On the face of it, it looks like an unequivo-
cal triumph for Apple, which may now have
enough legal weaponry to discourage all com-
panies from manufacturing products that use
Google’s Android operating system. But there
is a sub-text here that speaks to the fundamen-
tal brand identities of both the winner and
loser—so much so that, if played right, Sam-
sung can use its position as courtroom loser
to great advantage, emerge as a marketplace
winner, and hopefully serve the interests of the
consumer in the process.
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It is a definitive precept of “litigation commu-
nications” that legal outcomes and business
outcomes are not necessarily congruent.
Never mind its mighty size and global reach,
Samsung can turn retreat into triumph be-
cause, like Mohammed and Mao, it has found
itself cast as an underdog, pitted here against
a company now viewed as a borderline mo-
nopolist. The concomitant message is that
innovation itself depends on such underdogs
having enough free range to invent and manu-
facture products unencumbered by the mere
technicalities of patent law. The August 24 jury
verdict, according to this narrative, fed on such
technicalities at the expense of the spirit of the
law, which is supposed to be all about encour-
aging innovation.
Of course there can be no innovation without
the protections that that law provides, but
here the intellectual property regime in effect
turned on itself, squelching the very creativity
it was designed to safeguard. We take no posi-
tion on whether the verdict itself was equitable
and reasonable. What’s important from our
perspective is a general (if not unanimous) per-
ception that the decision was neither equitable
nor reasonable.
Much of the response to the verdict has, in
fact, put patent law itself on trial, castigating a
stiflingly arcane system that has become “dys-
functional,” as the New York Times opined,
adding that, “By one estimate, as many as
250,000 patents can be used to claim owner-
ship of some technical or design element in
a smartphone. Each patent is potentially a
license to sue.” In such a litigious quagmire,
there can be no meaningfully determinative
fact-finding, as even some of our finest mag-
istrates agree. Thus did Judge Richard Posner,
in the recent Apple and Motorola case, deplore
the misuse of patents governing smartphones
and, in no uncertain terms, chastise both sides
as he dismissed their respective claims.
To be sure, Samsung may be appealing the
verdict for many years to come, and it can
hardly be happy with a decision the jury spent
merely three days to reach. There are further
risks ahead as the judge could treble damages
and grant an injunction to prevent Samsung
from selling its wares in the United States.
Samsung’s communications strategy should
continue to support its specific legal position in
the case until the last possible appeal is denied.
“ Concern over the impact of the case on innovation was quickly voiced throughout the technology industry, which means that Samsung has the enviable advantage of simply seizing on what people are thinking anyway. ”
Yet those specific issues of the case comprise
a separate narrative from a broader brand-
enhancement potential that Samsung has
already begun to mine. In this corollary com-
munications campaign, Samsung plays its
underdog role to the hilt, underscoring its own
innovativeness, bloodied but not bowed by a
legal process that top courts like Posner’s have
themselves decried.
Given this climate of opinion, an aggressive
communications campaign can even highlight
specific products. As has been pointed out,
some of Samsung’s older products (Galaxy S1
and S2) were cited in the lawsuit; others were
not (Galaxy S3 and Galaxy Tablet). Connect the
narrative dots: “This jury verdict threatens in-
novation. We who lost the case (and are there-
fore innovative) still produce new products.
When you support those products, you support
innovation and yourselves.”
Samsung’s opportunity is all the more signifi-
cant because it is responding to a public senti-
ment that exists independently of any efforts
by the company to foster such sentiment. Con-
cern over the impact of the case on innovation
was quickly voiced throughout the technology
industry, which means that Samsung has the
enviable advantage of simply seizing on what
people are thinking anyway. There’s no need
for spin. Whatever Samsung has to say on
the subject, consumers will naturally want to
hear it, especially since, as the high-authority
bloggers have duly noted, Samsung was al-
ready well on the way to revamping its mobile
products. The company is thus a credible voice
in the cause of innovation.
Richard S. Levick, Esq., President and CEO of LEVICK,
represents countries and companies in the highest-stakes
global communications matters—from the Wall Street
crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.
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Five WAys deFense subcontrActors cAn remAin reLevAnt in tHe sequestrAtion erA
richard s. Levick, Esq.Originally Published on LEVICK Daily
Already, we’ve seen proposals put forth by
Congress and White House that would slash
core Department of Defense (DoD) spending
by as much as $5.2 billion. Unfortunately, even
that figure falls well short of the cuts called for
in 2011’s Budget Control Act (BCA), which re-
quires Congress to identify $1.2 trillion in fed-
eral deficit reductions over the next ten years.
If Congress fails to pass a FY2013 budget in line
with the BCA (an increasingly likely scenario
in this polarized political environment), the
worst case scenario kicks in as sequestration is
triggered and DoD procurement is slashed by
as $600 billion.
That’s bad news for defense contractors—and
it’s even worse for the subcontractors at the
mercy of their customers’ ability to win and
maintain lucrative Pentagon procurement
deals. All in all, as many as one million jobs
have been estimated to be at risk.
How can defense subcontractors compete and
remain relevant as critical national security
priorities take a back seat to widespread calls
for fiscal restraint?
In order to take advantage of the radical
change in the marketplace, defense subcon-
tractors need to think differently about their
communications and marketing initiatives.
Their brands matter more than ever—and as
such, they need to expand their spheres of
influence by engaging not only policy makers
and primes, but the constituencies these audi-
ences listen to as well.
Not since the aftermath of World War II has the U.S. defense industry seen such a precipitous shrinking of its marketplace. In the years following 9/11, dual wars in Iraq and Afghanistan and a worldwide effort to curb terrorism essentially amounted to a full employment contract for those companies that support U.S. foreign policy objectives at home and abroad. Here in 2012, those wars aren’t just winding down; they are doing so at a time when budget deficits have reached crisis proportions and introduced the very real possibility of sequestration across the federal government.
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1. Articulate your unique selling proposition.
Subcontractors exist because they can do some-
thing that primary contractors cannot. What is
it that makes your company stand out and your
services absolutely necessary to achieving mis-
sion objectives? Are you the top provider
of cyber-security services? Do you excel in
on-the-ground training? Perhaps most impor-
tant, have you identified efficiencies that keep
costs down?
When defense subcontractors infuse their
business-to-business outreach efforts with
specialization messages, they provide primes
with reason to tell the Pentagon “we need these
guys on board.” When the same messages are
disseminated beyond the B2B audience, they
condition procurement officials to agree with
that assessment.
2. tell your story in videos.
Defense contractors possess a unique commu-
nicative advantage in the Digital Age because
their work produces such compelling image
and video opportunities. Here, subcontractors
can take a valuable cue from the very compa-
nies they need to reach. Northrup Grumman,
for instance, maintains its own branded You-
Tube channel by which it highlights the ways
its products and services protect and enrich-
the lives of brave servicemen and women.
Northrup Grumman’s videos stand out not only
because they are more engaging than the writ-
ten word; but because Google and other search
engines are putting more and more emphasis
on pushing the spoken word.
Most important, the videos reach audiences on
an emotional level—and whether the emotions
conveyed are pride, security, or even fear, they
drive buying decisions in ways that appeals to
logic simply can’t.
3. recruit influential allies.
When the companies that stand to lose money
from defense cuts speak out about the dangers
of sequestration, it’s one thing. When respected
and relatively disinterested third parties do
the same, the message is far more powerful.
The American Enterprise Institute, the Heri-
tage Foundation, and the Center for American
Progress have all voiced serious concerns about
what deep cuts to the defense industry would
mean to the national economy.
By teaming up with such a politically diverse
and intellectually credible array of potential
allies—and the similarly-aligned unions as
well—defense subcontractors can help ensure
that the jobs message rings out in and beyond
Washington D.C. corridors of power.
4. geo-target your efforts.
For maximum impact, defense subcontractors
need to aim their communicative efforts at
two targets; the home districts of the Congres-
sional members who can still be influenced
on defense budget issues; and the districts that
stand to lose the most economically should
sequestration come to pass.
Constituents in these communities need to be
reminded of the jobs that defense contracting
creates; the security threats that still loom at
home and abroad (even though the prior Ad-
ministration’s arguably overplaying of threat
issues may slightly diminish those messages’
impact); and the often irreplaceable role that
defense contractors play in keeping America
safe. That means aggressively reaching out to
local media in these districts. And it means di-
recting online optimization efforts toward the
local communities that can make a difference
on Capitol Hill.
5. dominate social and digital media
And just what are online optimization efforts?
They are strategies to ensure that companies’
online properties (websites, social media pro-
files, etc.) are highly-ranked by Google and the
other search engines that dominate the
informational landscape today. Via Search En-
gine Optimization (SEO) and Marketing (SEM)
initiatives, contractors can control the con-
versations surrounding their brands and the
issues impacting their industries; elevate the
visibility of their products and services; and
—as mentioned above—target these outreach
efforts to the local communities with the power
to influence defense budget decisions.
Of course, contractor social and digital media
strategy is more than just optimization. It is
reaching out to the blogs that influence defense
industry perceptions. It is engaging the social
media space to build awareness of, and affin-
ity for, your products and services. And it is a
strong investment in LinkedIn, which has be-
come the marquee social media venue for B2B
and B2G communicators and marketers today.
In the era of sequestration, the defense sub-
contractors that take their communications to
the next level will not only protect their slice
of the Pentagon procurement pie; the will also
find themselves well-positioned to dominate
the market when the budget pendulum
inevitably swings back toward national
security priorities.
Richard S. Levick, Esq., President and CEO of LEVICK,
represents countries and companies in the highest-stakes
global communications matters—from the Wall Street
crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.
to tHAt end, Here Are Five stePs tHAt WiLL HeLP deFense subcontrActors demonstrAte vALue At time WHen notHing is more imPortAnt to tHeir Future ProsPects.
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you Are WHo you Fund: WHAt todd Akin teAcHes us About cAmPAign contributions
When we examine the Todd Akin saga from
a crisis communications perspective, the
lessons are as obvious as they are numerous.
Avoid inflammatory messaging. Do what’s
necessary to keep allies by your side. Under-
stand that sacrifice is often necessary if you
want to fight another day. And so on.
As Mr. Akin has seen his party funding run dry
and his party brethren run for cover (when
they are not turning against him), many have
asked about a crisis response. Other than
spending what remains in his war chest on
ads expressing his remorse, what else can Mr.
Akin do? Much as those outside his state may
not like it, the congressman is playing it exactly
right--staying within Missouri. His opponent,
Senator Claire McCaskill, is barely acknowledg-
ing the controversy in her campaign because it
has barely moved Missouri voters. For what-
ever else Congressman Akin may not know, he
knows that all politics are local.
He also knows that he has long held these
views and has been elected to six terms in
Congress. Further, it was Missouri Republicans
who chose him in the Senate primary—and if
he believes they agree with his pro-life stance,
even if they are appalled by the way he articu-
lated it, there is every reason to also believe
that the grassroots will support him, even if the
“grasstops” will not.
At the end of the day, Mr. Akin still thinks he
can win. And as such, this is not as much a
story about the dos and don’ts of crisis commu-
nications as it is about the careful calculations
businesses and labor unions must make in the
Citizens United era—when contributions are
as unlimited as the transparency with which
they are made.
Our primary system has devolved into a
race to the fringes, resulting in general elec-
tion candidates whose views are as far from
the center as any we’ve seen (Todd Akin is far
from the only example, and they exist on
both sides of the political spectrum). At the
same time, the Citizens United decision has
opened the floodgates for big corporations and
small businesses to funnel unlimited sums of
money to the candidates that will further their
policy objectives.
This dichotomy has created a dynamic by
which businesses and business leaders don’t
have to be as outspoken as Whole Foods CEO
John Mackey to arouse the ire of those who
might not agree with them. Their dollars
speak as loudly as their words—and when the
candidates they support espouse increasingly
extreme views, they risk alienating at least
half of the consumers, investors, and other
stakeholders who won’t hesitate to find them
guilty by association.
Given that direct donations are a matter of pub-
lic record, some companies may believe that
Political Action Committees may provide some
cover. But we’ve already seen examples where
that hasn’t been the case. With intensified me-
dia and blogger attention to campaign finance
issues, the potential exists for any political
donation to be subjected to a harsh spotlight.
richard s. Levick, Esq.Originally Published on Fastcompany.com
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Citizens United provided business and labor
with the right to make unlimited political dona-
tions, but with that right comes new levels of
responsibility. Gone are the days when political
contributions were made in smoke-filled rooms
that provided a modicum of anonymity. Today,
everything is transparent. That means corpo-
rate donors can and will be held accountable
for the comments of their candidates.
So what is the business community to do?
Companies’ public policy interests demand that
they involve themselves in the political process.
But in this polarized environment, how can
they avoid being wedded to candidates whose
views may create embarrassment or worse?
Balance is the key. Most companies used to
give to both sides as means of hedging their
bets. Today, some companies still do—and
while it may seem counterproductive, that
strategy is one that can help protect donors
from being perceived as wedded to potentially
uncomfortable statements or policy positions.
By donating horizontally (to both sides) and
vertically (to local, state, and federal can-
didates), companies not only expand their
sphere of influence; they prevent any single
donation from standing out amongst the pack.
At the same time, they provide themselves with
more allies to provide cover should one of their
donations be criticized.
Questions may arise as to why a business
entity is playing both sides of the fence; but if
they do, companies can fall back on messages
about encouraging lively debate, supporting
public officials, ensuring all that all sides are
heard, and, most important, ensuring that all
sides hear the company as well.
As Target, Amway, and others have learned in
the past—and as more are certain to learn in
this charged political environment—any politi-
cal donation has the potential to create unfore-
seen business problems. But when companies
infuse balance into their donation strategies,
they help themselves steer clear of the extrem-
ism permeating today’s political discourse.
Richard S. Levick, Esq., President and CEO of LEVICK,
represents countries and companies in the highest-stakes
global communications matters—from the Wall Street
crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.
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