Dear Barney Frank:
Thanks for lowering the boom on Northern Trust for its lavish PGA sponsorship. But is a letter from you enough to reform an entire industry's marketing mentality? I'm dubious.
Your letter to CEO Rick Waddell describes the foul deed:
"Your bank not only sponsored the Northern Trust tournament at the Riviera Country Club, but also hosted clients and employees at places like the Beverly Wilshire and Ritz Carlton hotels and gave away Tiffany souvenirs."
Yes, it's infuriating, but not for the reasons you might think. Whether the golf tournament was on my dime or not, it's poor management. This kind of marketing serves bank executives more than it delivers results to the bottom line. In essence, deals like the one you busted Northern Trust for fall into the same category as extravagant bonuses.
Bank executives will defend their sponsorship of auto racing and professional golf as a necessary business practice to attract new customers, as did Northern Trust. The truth is that fewer than 25 percent of sponsors in a recent survey were even clear on their return on investment for such spending. In the same survey nearly half spent nothing evaluating the appropriateness of such large-ticket investments. They are spending millions based on their gut. How is that good business? Now that the public is investing tax dollars, it makes us de facto shareholders. We have a right to question management practices.
Forgive my cynicism, but can we expect that every time one of these TARP-funded banks shells out millions for a golf tournament or auto racing sponsorship they can expect a letter of admonition from Barney Frank? You seem kind of busy. And if I may say so, these banking executives are demonstrable spendthrifts--corporate jets, fancy drapes, plush bonuses. It's a little like sending in a baby sitter to keep order in a maximum security ward. I salute your questioning Northern Trust, Mr. Frank. But who will get around to investigating Bank of America's pricey deals with NASCAR? And the next deal after that? This level of oversight could keep you corresponding like Dear Abby, that is, full-time and high profile.
Something meaningful must be done to change the culture of exploitation that exists in the financial services sector. It's time to give serious attention to policy with regard to how bailout recipients spend money, including how they invest their marketing dollars. For too long a patrician apathy toward the plight of the Average Joe has allowed financial markets to wheel and deal with concern for the common good. But now, the Average Joe is footing the bill for the clean up. So it's time that the people have some say in how banks operate. We now have our own investment to protect.
Expecting the public to trust banks stretches the bounds of prudence. Who could possibly trust the very perpetrators of the swindle that brought down global markets? You are correct, Mr. Frank, when you say in your letter to Northern Trust that, "Federal taxpayers should not and will not stand for such abuses." But in the next line, instead of landing a blow you wag your finger: "We will insist that any future Treasury support for Northern Trust be conditioned on a thorough reform of your company's policies and practices." Such as? This is Chicago. Where's the beef, sir? What specifically are you expecting the bank to do, now, and in the future?
On the matter of financial services firms, not to mention automakers, receiving bail out money, their use of sponsorship marketing dollars should be clearly spelled out:
1. A 20/20 policy whereby 20 percent of all sponsorship marketing dollars from bail-out recipients will be invested back into communities. Those events that draw people together help them learn new things, foster creativity and collaboration so that communities can thrive in an increasingly idea-driven economy should be standard, not voluntary. Imagine if the $30 million it takes to sponsor a NASCAR team could be invested directly into activities proven to drive economic development, rather than contributing to enlarging the carbon footprint.
2. Demand full transparency among TARP recipients about their sponsorship investments.
3. Keep separate the marketing dollars from philanthropic dollars. Years ago, many marketers began associating sponsorship with sports marketing as a way of distinguishing that spending from community good will gestures. Since then, many local zoos, aquariums, after-school activities for youth, public concert series and museums have developed more sophisticated sponsorship programs that deliver comparable return on investment for sponsors. Those should have equal presence in a TARP bank's portfolio.
4. Create a simple system of oversight. Online or offline, these investments can and should be reportable and simple to audit.
5. Reward good behavior. Some bank branches and auto dealerships have done great work in their local communities already--making this a shovel-ready idea! Creating policy that gets marketing dollars aimed in the direction of economic growth should carry with it a Presidential Award program for those companies fostering a culture of integrity and investment in social capital.
Handing more money over to banks to spend on golf tournaments is clearly not in anyone's interests, save a few elites who get a head rush from meeting Tiger Woods. But allowing one or two letters like the one you sent to Mr. Waddell over at Northern Trust to substitute for policy is a finger in the dyke. If we are going to change our country for the better, we need to sponsor the world we want to see. Not the one we've always had.