Omnicom's suit against stockholder John Chevedden is an instance of management wanting to protect its ability to know how stockholders are voting while deying that info to dissident groups.

OMC CEO John Wren and COO Randy Weisenburger, two of the highest paid ad execs  ($53.3M and $31.5M, respectively in 2012), are battling Chevedden’s quest  to keep management’s eyes from proxy votes until the annual meeting May 20.

Chevedden argues that confidential voting is needed not only at OMC but many other companies because, as a Yale Law School study found, “Management-sponsored proposals (the vast majority of which concern stock options or other bonus plans) are overwhelmingly more likely to win by a very small amount than lose by a very small amount to a degree that cannot occur by chance.”

“Wren,
Omnicom's Wren, Weisenberger
Chevedden and GMI Ratings, whose board includes Nell Minow, have criticized the pay packages of OMC executives. GMI has given OMC a "D" since 2005 on executive pay, governance practices, and length of service by directors. Six of the OMC directors as of 2012 were age 71 to 83 including 60% of the audit committee.

Management can see how a vote is going on a certain proposal and can start rounding up votes needed to defeat an unwanted proposal, says Chevedden. He is a shareholder activist who has locked horns with OMC and many other companies before.

The OMC lawsuit is grist for our mill since ethical vs. legal is a raging topic in PR these days. It’s obvious in this instance that management should not have an edge in information over the stockholders who actually own the company. It’s unethical.

What Actually Happens—Legal Swords

The OMC vs. Chevedden legal battle is an example of what actually happens in the business world despite all the talk about “ethics” and doing the “right thing.” Legal swords are unsheathed and “ethics” goes out the window.

”Senay”
Senay
The Council of PR Firms last year made ethics its chief concern, launching “Ethics as Culture.”  Dave Senay of FleishmanHillard, an OMC PR Firm, who is again chair in 2014, initiated the focus on ethics. He defined it as “be honest, don’t steal, be fair.”

Confidentiality of stockholder voting is a big issue not only at OMC but at many other companies including JPMorgan Chase.

Forty percent of stockholders of JPM voted in 2012 to strip Jamie Dimon of his chairman’s title, leaving him as CEO.

The dissidents had lost their right to see how votes were going on stockholder proposals while management kept this right. Stockholders cried “foul,” saying the bank had an “unfair advantage.”

Our experience with “legal” vs. “ethical” is that business and academics talk a lot about “ethics”  but in actual practice it is the legal card that is played. That can be a costly card for those without a big corporate bankroll. 

Chevedden is being sued in Federal courts rather than via the SEC where such actions are usually filed. The reason, say Chevedden and his supporters, is that OMC might stand a better chance in court because a court does not have the vast experience that the SEC has with shareholder proposals.

Will Ethics Experts Look at This?

It would seem that management having info that dissidents don’t have is ipso facto unfair and unethical.

“How to work with senior managers who defer to the legal function and the court of law rather than PR and the court of public opinion” was the subject of a panel  that included lawyers at the annual conference of PR Society of America Oct. 28, 2013.

Proving our point about legal trumping ethical, O’Dwyer reporters were not allowed to cover that session or any other conference sessions. We were illegally barred on the whim of Society staff and officers. No reasons were given for the boycott. Attempts to interview panelists later on what was said went nowhere.

Having struck out there, our hopes for a discussion of business ethics were buoyed when we saw six such experts quoted in a half-page feature in the Jan. 10, 2014 New York Times. Headline was, “In Life and Business, Learning to be Ethical.”

One proposal is that people who want to behave ethically should take “training” just like beginning pilots use flight simulators before actually piloting a plane. This, supposedly, will give them the guts to speak up when they see something wrong happening. Their courage will be “exercised.”

We’re trying to contact the six plus three other ethical experts to see if any of them can tell us what to do when legal trumps ethical.

They are:

Jonathan Haidt, Professor of Ethical Leadership, NYU.

Ann Tenbrunsel, Professor of Business Ethics, Notre Dame.

Philip Zimbardo, Professor Emeritus of Psychology, Stanford, a “pioneer in the study of social power for good or evil.”

Kristen Renwick Monroe, Professor of Political Science, Univ. of Cal./Irvine, who has long studied “why some people act righteously and others fail to.”

David DeSteno, Professor of Psychology, Northeastern, who tested the honesty of students (10% passed).

Brooke Deterline, CEO, Courageous Leadership, which conducts workshops on ethical situations.

James Holtje, who teaches “Communication Ethics, Law & Regulation, a required course for the NYU Master of Science in PR&CC. He is with MasterCard, Purchase, NY.

Bruce Weinstein, host of The Ethics Guy,” which focuses on the differences between ethical and legal. He writes for HuffPost and Bloomberg.

Alina Tugend of NYT, who conducts the “Shortcuts” column where the ethics feature appeared.

Thus far we have received a flat “No” from one of the above who is “too busy.” Weinstein has no visible address, e-mail or phone, which we think is an ethical abuse. A question was made in a “Comment” box on his website. E-mails and phone calls have been made to the others.

Fairness Issues Are Epidemic

Fairness issues dot the landscape including one of the biggest which is whether the distribution of income in the U.S. is “fair.” NYT’s Paul Krugman doubts whether many of the super-rich deserve their riches. His Jan. 20, 2014 column on “The Undeserving Rich” attacked the notion that poverty is the result of “character problems.”

Income disparity is a favorite topic of David Cay Johnston, author of The Fine Print: How Companies Use “Plain English”to Rob You Blind.

Johnston, president of Investigative Reporters & Editors, is also is a critic of consolidation trends in numerous industries including airlines, telephone/internet services, banks and railroads. He feels monopolies and near-monopolies raise prices and worsen the plight of those with low incomes.

He says the proposed $45 billion takeover of Time Warner Cable by Comcast  violates “basic economic theory” which calls for competition within industries.

Comcast is “mired in commercial conflicts of interest” because it not only distributes information but owns program creators such as NBCUniversal, the Golf Channel, E! network, various sports programs and the Philadelphia Flyers hockey team, he says. “It can force competitors through its cable contracts to subsidize its own programming,” he writes. Krugman wrote Feb. 17, “Say no to Comcast.”

Johnston Should Look at Ad/PR Congloms

Johnston needs to turn his sights on consolidation in ad/PR where there will soon be three giant companies -- Omnicom/Publicis, WPP Group and Interpublic -- that employ 280,000.

A handful of people have the power to decide which media live and which will die. Ad buyers have cut newspaper ads from $47 billion to $23 billion, decimating large parts of the industry as chronicled in the TV special, “Black & White and Dead All Over.”

Newspapers such as the Washington Post and Boston Globe have been sold for a fraction of their former valuations. Forbes not only sold its Faberge Eggs and its building on Fifth ave., but is moving to New Jersey. Advertising Age has been cut from a weekly to a bi-weekly publication.

How did the four conglomerates get so big? Partly because bankers funded them. Combined longterm debt of the four is $16 billion. Johnston, noting that Comcast was the seventh biggest D.C. lobbyist last year, paying $18.8 million to influence Congress and regulatory agencies, says it has “easy access to senators and representatives.”

Consumer lobbies, meanwhile, are “few in numbers, lightly funded and often snubbed by lawmakers,” he says.

Liberal-oriented publications and media have the same trouble. The Nation, Fairness & Accuracy in Reporting and PR Watch all begged for money  during the recent Holiday season.