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Meltdown of Bell Pottinger pushes peril of risky clients into view

Firms face balancing act as rich deals carry reputational risk.

For public-relations executives watching the implosion of UK PR firm Bell Pottinger in the wake of a questionable mandate, the message is simple: don’t become your own crisis manager.

Bell Pottinger’s downfall, brought about by its work for the Gupta family, highlights the risks consultants face when taking on controversial or unconventional individuals, organisations or regimes as clients.

Communications firms from the world’s biggest holding groups including WPP, Publicis Groupe and Omnicom Group currently assist the likes of Saudi Arabia, Qatar and Egypt with reputation management and lobbying in the West. While fraught with hazards, such contracts often come with a premium and potential add-on business, making them tough for the companies to ignore as the advertising side of their industry risks slowing. 

“Agencies will want to work for governments for the sheer power of the network and influence that comes from doing a good campaign — it will open all sorts of doors for them,” said Daniel Moss, a professor of public and corporate affairs at the University of Chester in England. “If they go badly wrong, as Bell Pottinger found, the fallout and consequences can be really profound.”

Turkey, Saudis

New York-based Burson-Marsteller, one of WPP’s subsidiaries, received $1.1 million for representing Turkey in the US last year, according to US government records. The services came as Turkish leader Recep Tayyip Erdogan locked up journalists and purged political opponents following an abortive coup.

“A limited number of our engagements are with public sector entities and sovereign governments,” Burson-Marsteller said in a statement. “As with any potential client, we consider each opportunity on its merits and against the potential client organisation’s broader objectives.”

By working with Turkey, Burson-Marsteller risked a similar public backlash as Bell Pottinger faced in South Africa that could have been triggered by a controversial incident, said University of Chester’s Moss.

“Risk-reward is an inherent part of business, whether it be in PR, public affairs or anything else,” Moss said. “The problem with this sort of area is that the risks and rewards are of a different order of magnitude.”

Hill & Knowlton Strategies, another WPP business, recently signed deals to represent Saudi Arabia and Egypt on Capitol Hill. Qorvis MSL Group, part of WPP rival Publicis, also has a long-standing relationship with Saudi Arabia. Human Rights Watch has criticised the kingdom for extensive use of the death penalty, arbitrary detention of dissidents and discrimination against women and ethnic minorities.

Omnicom agency Portland — whose past work includes representing the governments of Kazakhstan, Jordan and Morocco — has an ongoing relationship with Qatar, according to US government data. Portland received at least $360 000 in fees from the Qatari government for services last year, the filings show. Qatar has been accused of destabilising the Middle East through its ties to Islamist extremists, allegations that its government denies.

Portland declined to comment. Hill & Knowlton and Qorvis didn’t respond to requests for comment.

Causing ‘disrepute’

Bell Pottinger, which had hefty earnings of 11 million pounds ($14.6 million) on revenue of 33 million pounds in 2015, filed for administration this week after failing to find a buyer. The company’s Asia and Middle East practices will continue under a different name after separating from the UK parent.

Read: Bell Pottinger’s British business collapses after SA scandal

The firm was excluded from its industry body last week after an investigation found its work on behalf of the Guptas, a wealthy family with ties to President Jacob Zuma and his relatives, had stoked racial tensions. The company’s actions “brought the industry into disrepute,” the Public Relations and Communications Association said.

Read: Bell Pottinger dumped by PR association, HSBC, over SA campaign

A review by law firm Herbert Smith Freehills found that Bell Pottinger conducted a social-media campaign aimed at highlighting economic inequality in South Africa along racial grounds. While working for a certain client isn’t necessarily an issue, it’s the nature of the work that requires close scrutiny, said Moss.

“The acid test is would their family of employees and people be entirely comfortable with what they’re doing,” he said.

London-based Bell Pottinger has attracted attention in the past for taking on controversial clients like former Chilean dictator Augusto Pinochet’s foundation. According to a 2016 report by the Bureau of Investigative Journalism, a US-funded anti-al-Qaeda propaganda campaign that Bell Pottinger carried out in Iraq included fake insurgent videos used to track those who accessed them.

“There will always be a small segment of the industry that is willing to live with the reputational stain of associating with unctuous activity in exchange for financial upside,” the PR Council said in a blog post last week, responding to the Bell Pottinger scandal.

© 2017 Bloomberg 

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