GOOGLE ERROR A BIG TIME PRNIGHTMARE FOR R.R. DONNELLEY
By Richard E. Nicolazzo
Talk about a major PR headache.
Imagine what it must have been like in the corporate communications department at R.R. Donnelley & Sons when the Chicago-based company mistakenly filed Google’s quarterly earnings report three hours ahead of time.
Wherever he was at the time, you can bet CEO Thomas J. Quinlan III got on the horn and said something like “…We did what? You’ve got to be kidding.”
Unfortunately for R.R. Donnelley, it was no joke. Nor will it be a laughing matter for the unfortunate souls at the company who are likely to get their walking papers.
When the initial story hit the AP wire, Google’s stock had already fallen 9 percent before trading was halted to give investors a chance to digest what would turn out to be a disappointing earnings report. At one point, R.R. Donnelley’s stock even dropped 5 percent, but bounced back later in the day.
While R.R. Donnelley has some major, internal soul searching to do with regard to its operations, the company deserves some initial credit for taking responsibility. The first statement from Google read: “Earlier this morning, the financial printer informed us that they had filed our draft 8K earnings statement without authorization.”
In the period that followed, R.R. Donnelley said very little, leaving one to wonder just how something so egregious could happen. Hours after the flare-up, the company finally released a statement that was less than forthcoming. It read: “We are fully engaged in an investigation to determine how this event took place and are pursuing our first obligation – which is to serve our valued customers.”
To make matters worse, the press release sent to the SEC was a draft, saying “PENDING LARRY QUOTE,” which presumably referred to Google CEO Larry Page. In a move that had to be embarrassing to all parties, the Wall Street Journal posted a screenshot of the release.
Not much came from Google, other than Page saying on the earnings conference call “…I’m sorry for the scramble earlier today.” Page had his own problems explaining why profit slid 20 percent from a year earlier.
In my 35-plus years in the PR business, I can’t remember this ever happening. Google should have never allowed the release to go to a third-party vendor until all quotes and content were “FINAL.”
In my view, there is no excuse for this on a couple of fronts. First, Google’s PR or IR departments were careless. I wouldn’t be surprised if the SEC did an investigation to find out how a draft was transmitted. Who at Google sent a document that wasn’t final and who at R.R. Donnelley transmitted it to the Edgar system?
Second, R.R. Donnelley should be fired by Google for a mistake of this magnitude. For this segment of their business, distributing a final version of an earnings press release is the most important thing they do. To some extent, we all live in fear of mistakenly pushing the “send” button too soon, but you don’t get a second chance on something like this.
During my career, I’ve issued hundreds of press releases in the queue the day of (and even day before) distribution, but only after final copy was agreed upon and markets were closed. Despite being multi-billion companies, Google and R.R. Donnelley made amateurish blunders.
At this point, it’s unclear if R.R. Donnelley has any liability in the matter. Despite a missing a quote from the CEO, the numbers in the press release were accurate. Google can thank its finance chief that “draft numbers” weren’t sent as well.
James Plumb, a longtime electronic filing agent in Massachusetts, told the New York Times, he knew of one case in which an agent had to pay for its error. “Could you get sued? Sure,” he said. “The way I look at it, yes, if I make a mistake, I’m responsible.”
For R.R. Donnelley, the mistake was not likely a material event and thus did not require a formal press release. Filing documents on the electronic system called Edgar is only a fraction of Donnelley’s massive printing business – providing about $225 million in revenue out of $10.5 billion. Its main business is printing catalogs, mailers, textbooks and magazines.
Still, R.R. Donnelley could have been more apologetic and posted a brief press release on its website.
Given the size and importance of Google to the stock market, R.R. Donnelley may suffer some reputational damage. To protect its market share, the company should (at a minimum) send a letter to every customer that uses its filing service.
The letter should explain (to the extent possible) what happened, why it happened, and what steps are being taken to ensure that it never happens again. The company may also need to reassure customers involved in other parts of its business. Every R.R. Donnelley customer – whether it’s someone printing a catalog, filing an IPO, or releasing earnings – is entitled to basic security and protection of their data and intellectual property.
Also, if he hasn’t already done so, the CEO of R.R. Donnelley should call Larry Page and apologize. It may seem trivial, but in the grand scheme of things Page will always remember the call.
In our crazed communications society, everything has become almost too easy. As one wag said recently, “…technology is great: it allows everyone to make big mistakes faster!”
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