In the accounting world, being compared to Bernie Madoff is basically the equivalent of a five-alarm fire. That’s the situation General Electric found itself in last week, as Harry Markopolos – the man who exposed Madoff – is now raising concerns about GE’s accounting practices and future solvency.
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So it’s not surprising that GE would hit back hard. And they have, calling Markopolos’s analysis “market manipulation” and issuing a point-by-point rebuttal of his claims.
Unfortunately for GE, the company did not make a convincing case that puts this story to bed. Instead, they let their emotions get the best of them, which prolonged the story and increased the stakes.
It is completely understandable for the executives to have an emotional reaction to Markopolos’s accusations. After all, the allegations themselves stir strong emotions. And so there is every reason to fight back hard, set the record straight, and defend the business. But to fight back hard, they should have fought back smart.
What these executives — and many others in similar situations — miss is that emotional defenses and detailed responses can backfire. Yes, the financial markets and shareholders will ultimately need all the facts, but emotions and facts alone can ultimately do more harm than good, for three reasons.
- First, their response didn’t reassure anyone that GE is really okay. By solely focusing on and defending past actions, rather than setting up future commitments or shared goals, we are only looking backward. They created a debate about what happened and whose facts to believe. And that’s not a debate the company is likely to win. They should have instead focused on how they will address the concerns going forward. For example, instead of saying “we have been upfront and transparent about our long-term liabilities,” – a contestable claim – GE could have shifted the conversation by telling its audience and the media that “we’ll be transparent with our data and how it disproves Mr. Markopolos’s claims.”
- Second, the facts did not tell their story. We see this all the time. Our clients will say, “if investors only knew the facts they would be on our side.” Not true. The facts will almost always get lost in these situations. Anything GE executives say will get reduced to soundbites, and that means the most emotional language will be replayed the most. When words like “manipulation” and “misleading” are in the headlines, the company has lost. Better, instead, to focus on acknowledging criticisms and take their questions seriously.
- Finally, companies are viewed as the bad guys. As a result, emotional language is always going to be interpreted negatively. Executives might think a strong rebuttal makes them seem more human, or more credible, but oftentimes it has the exact opposite effect. Namely, that the company has a lot to hide and would rather cut down its critics than tell its own story.
There is every reason for executives to be emotional lately. After all, they’re under pressure from all sides to be more socially responsible, deliver more value, and have the perfect response to critics. But they can’t forget that in this environment their investors are emotional too. In increasingly volatile markets, every word from executives is scrutinized.
And when someone with the background of Harry Markopolos speaks up, investors will notice and get nervous. But that makes a more measured, less emotional response even more important. Raising the stakes don’t reassure investors, it makes them wonder what else you have to hide.
Lee Carter is president of maslansky + partners, a language strategist, public opinion expert and author of the forthcoming book "Persuasion: Convincing Others When Facts Don't Seem to Matter."
Clint Sievers is Senior Vice President of maslansky + partners and consults Fortune 100 and 500 companies, trade associations, and non-profits in the U.S. and globally. He specializes in crisis response, reputation management, and thorny communication challenges.