Spare A Thought for Burson-Marsteller
Apr 15th, 2008 by John Stodder
When Sen. Hillary Clinton’s chief strategist, Mark Penn, stepped down from that role (but didn’t really go anywhere) because the PR firm he chairs, Burson-Marsteller, brought him to a meeting with its client, the Colombian government, the news analysis focused strictly on how Penn’s actions affected Clinton.
Politics is the screen through which we tend to process all news. Colombia negotiated a free-trade deal with the Bush Administration that needs congressional approval. Clinton and Obama oppose the deal, oppose all trade deals now, so Penn’s appearance at a meeting with Colombian officials was a political gaffe.
But what if we pretend for a moment that Burson-Marsteller (BM), one of the five biggest PR agencies in the world, is the center of the news universe instead of Hillary Clinton? What was a bad story for the candidate looks like a disaster for a company that, a year ago, was probably counting on the Clinton connection for a big payoff beginning in 2009.
Let’s look at Robert Novak’s column on the matter:
WASHINGTON — Immediately after Mark Penn resigned as Hillary Clinton’s chief strategist a week ago, he was on the phone with at least two prominent Democrats to assure them that nothing had changed. He said that — though lacking a title now — he still was polling and crafting her message, adding that he had just participated in a top-level conference call. De facto retention of Penn signified a desire to defeat Barack Obama at any cost.
Whether you think Penn adds to or subtracts from the Clinton campaign, how does it help BM’s credibility if its chairman is seen participating in such a nakedly dishonest gambit? BM execs are out there pitching new business every day. How do they answer client questions about the Colombia matter? “Will you apologize for representing us, too?”
One day later, word was spread in Democratic circles that Geoff Garin, hired as a pollster by Sen. Clinton last month, had supplanted Penn as chief strategist. An experienced political practitioner renowned for ethical standards more than imagination or daring, Garin in charge reassured the party faithful. It was interpreted as ruling out an eleventh-hour assault on Obama that would have less chance of nominating Clinton than wrecking the party.
Nice. Pollsters apparently come in two flavors, ethical and unethical. The chairman of BM is the kind who launches “eleventh-hour assaults” and “wrecks the party.” Thanks, boss.
Is Penn deceiving friends about his real status just to save face? Or is Garin merely a figurehead to take the heat off Clinton while she still relies on the contentious Penn?
Neither proposition is wholly true. Garin values his reputation too much to take a sham job lacking in authority. Penn’s firm (Penn, Schoen & Berland Associates) continues to poll for Clinton, adding to the enormous debt the candidate owes it.
No question, Penn’s firm has banked a lot of money from the Clinton campaign, but at this point, the firm, which is owned by BM’s parent company WPP Group, is looking at a massive write-off. WPP is a public company. Are shareholders concerned? (More on this below.)
Penn remains seated at the table but is not chairing the meetings.
As it enters its probable final days, Clinton’s campaign appears as dysfunctional as it was last year when her nomination seemed inevitable. Penn’s strategic decisions are blamed by Clinton’s friends and foes for her fall, but that was not the reason given for his resignation.
It’s not a good thing if the most famous PR executive in the country is famous for (at least as of now) blowing a sure thing. Hillary Clinton was the “inevitable” nominee at least until January 2008, as you recall.
It was the discovery by outraged union leaders that Penn was helping the Colombian government seek congressional approval of the free trade agreement, which is opposed by labor and Clinton. That enabled Penn’s exit without admitting his strategic errors.
Does anyone care about BM’s client? Colombia was represented by BM for a year, paying hundreds of thousands of dollars in fees. Now, whatever messages the government paid BM to promulgate are drowned out by the controversy between their PR company and labor unions. Were the Colombians warned this could happen? It can’t have been Colombia’s intention to become the poster child for labor’s rage at the global economy; nor to pay for the privilege. Keep in mind, it was only after Penn’s embarassment that House Speaker Nancy Pelosi felt sufficiently emboldened to cancel a promised vote on the deal.
Whatever was the real reason for sacking Penn, Democrats who are interested in preventing the struggle for the nomination from destroying the party sighed in relief. Garin looks to a post-Hillary political life and does not want to be seen conducting a berserk attack with little chances for success. In contrast, Penn might be willing to fly a kamikaze mission in what is likely to be his last political campaign. Thus, it is critical that Penn still plays a major role in the campaign.
“Berserk.” “Kamikaze.” ‘Little chance for success.” Words to warm stockholders’ hearts. And, hey, catnip for new business.
Penn’s business conglomerate remains entwined in Clinton’s campaign. Three weeks ago, the campaign hired as chief operating officer Howard Paster, who heads the London-based global advertising giant WPP. Penn is CEO of the public relations and lobbying company Burson-Marsteller Worldwide, which is owned by WPP.
I guess WPP has decided “in for a penny, in for a pound.” It’s conventional wisdom that Clinton’s chances of securing the Democratic nomination are slim, though perhaps slightly improved in the wake of Barack Obama’s inartful attack on rural voters.
Penn and Paster won the admiration and devotion of the Clintons by running Bill Clinton’s 1996 presidential campaign.
That’s one possible explanation. Another might be that Paster has parachuted into Clintonland to rescue WPP’s assets from further damage. Penn’s high-profile role with Clinton has drawn much unwanted attention to BM’s business which, like most big PR firms, includes a handful of horrifying clients. It’ll be interesting to see how Paster fights his way out of the morass BM’s CEO has created.
Beyond loyalty, Penn is welded to the 2008 Clinton campaign by financial ties. A source who has had close connections with Penn got word to me that he believes the Clinton campaign is $10 million in debt to Penn, Schoen & Berland, which is owned by Burson-Marsteller. The campaign’s March report to the Federal Election Commission recorded indebtedness to the company of nearly $2.5 million (with its expenses for the month listed at $3.1 million).
My sources suggest that Clinton’s full indebtedness may be revealed only gradually. This money link helps explain why Penn is still around after organized labor demanded his scalp last summer and he is blamed inside the campaign for failing to perceive the public’s demand for “change.”
Just how much money Clinton owes Penn can cause major difficulties in the future. If not repaid promptly, would it constitute an illegal financial contribution? Because the British WPP owns Burson-Marsteller, would that debt constitute an illegal foreign contribution?
Not much to add to this. Novak did some great reporting, even though he buried his best stuff. That’s the nut of the business story right there. In a less politics-obsessed world, WPP and BM’s exposure to potential violations of law would be a bigger part of the story. Because, let’s assume Novak’s source is correct and Clinton does owe Penn’s firm $10 million. There’s still at least another six weeks of campaigning ahead, six weeks of do or die, all-out, no holding back. How big will her debts be then?
If Sen. Clinton doesn’t pull out a miraculous win, she will have a very hard time raising the immense amounts of money required to repay BM and Penn’s firm. She can’t go back to previous donors if they’ve “maxed out.” But WPP’s family of firms can’t just forgive the debts without opening up a legal chasm that could grievously damage the business.
Over the last week, I talked to 10 superdelegates (including two U.S. senators) who are committed to Clinton. Each claimed he would stick with her, but none could see how she could be nominated. In such a frame of mind, they would prefer a Geoff Garin-style soft landing to conclude the campaign. With Mark Penn still around, they could get a far more dramatic endgame.
Novak probably has few sources in the PR/advertising world, but a good business reporter might want to follow up with 10 WPP board members to get their side of this story. I can’t imagine they are feeling calm right now.
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